The study examines the effect of deregulation of banking system on profitability of bank using (UBA) as a case study. In this study, prior literature as it relates to the subject matter were reviewed. Data was collected through administering of constructed questions. A number of persons were selected to represent the sample size of the study. Data were analyzed using the simple percentage method and the test of hypothesis was done using the chi-square statistical tool for data testing, the results revealed that the banking system is recording more profits. It was concluded that banking system was reactive to deregulation from different sources as explained and the nominal profit as shown in the account did not mean that the real profit has increased. The effect of deregulation of the banking system I the profitability of banks was the major discovery of this project work and it is recommended that commercial banks should be careful and prudent in loan disbursement    












Title Page                                                         i

Certification                                                     ii

Dedication                                                       iii

Acknowledgements                                          iv

Abstract                                                           v

Table of Contents                                             vi

Chapter One: Introduction 

1.1      Background of the Study                                 1

1.2      Statement of the Problem                                5

1.3      Objectives of the Study                                    6

1.4      Significance of the Study                                 7

1.5      Scope and Limitation of the Study                   8

1.6      Statement of Hypothesis                                  8

1.7      Definition of Terms                                          9


Chapter Two: Literature Review

2.1      Introduction                                                     11

2.2      Origin, Aim, Nature and Process of Deregulation  14

2.3      Different Dimension of Deregulation                        18

2.4      Reforms and Deregulation of the Banking

Sector                                                              19

2.5      The Effect of Deregulation of UBA Profitability         22

2.6      Summary                                                                 23


Chapter Three: Research Design, Methodology and Findings

3.1      Introduction                                                     24

3.2      Research Deign                                                        25

3.3      Sample and Sample Selection Procedure                 26

3.4      Questionnaire Design                                      26

3.5      Data Collection Method and Analysis              28

3.6      Summary                                                                 28


Chapter Four: Data Presentation, Analysis and Findings

4.1      Introduction                                                     30

4.2      Data Presentation                                            30

4.3      Data Analysis                                                   33

4.4      Test of Hypothesis                                           35

4.5   Summary                                                                 41


Chapter Five: Summary, Conclusion and Recommendations

5.1      Summary of Findings                                      42

5.2      Conclusion                                                      43

5.3      Recommendations                                           44

References                                                       46

Appendix  I                                                      47

Appendix ii                                                      48








1.8      Background of the Study

Given the magnitude of economic problems that confronts Nigeria especially since the early 1980s such a stagement growth, rising inflation, unemployment, food shortage and mounting external debt the necessity for economic reforms become paramount. It was considered that failure to initiate reforms which would seriously jeopardize the long term growth and development prospects of the Nigeria economic. This step was the major policy moved by government in soothing the poor economic situation which was resulted in poor allocation of scare resources. Poor returns to investment and low productivity etc since the emergence of the structural adjustment program (SAP).

In 1980, most sectors of the Nigeria economy have continually be deregulated. Deregulation forms one the major policy strategies for revamping Nigeria economy. It will however lead to stimulating investment, increase in efficiency allocation of resources and decrease in wastage in productivity process. One sector that has to be greatly affected by deregulation is the banking industry. The banking sector stand as one of the major engines of growth in the economy of nation and has been used as one of the main stimulants of exchange in the Nigeria economy. According to Oyelan (1988) bank and other financial institutions are the bedrock to revamping the Nigeria economy adding that “banks” have a crucial role to play in the programs, against the back drop of the most fundamental changes in the nations economy, courtesy of infrastructural adjustment program SAP as further stated by Falae (1990) “Banking and finance are both the handmaid and mid-wife of the economy”. In recognition of the above certain key areas of banking have been affected by deregulation to stimulate economy transformation and growth, these are as follows:

1.          Deregulation of the interest rate structure allow it to be determined by market forces and sometimes fixing margin within which it can fluctuate all these is to stimulate saving and investment in the economy.

2.          Deregulation of the foreign exchange are bought and sold by the banks and determined for the purpose of having realistic exchange with which would removed the existing distribution and disequilibrium in the economy.

3.          Deregulation is registration of new banks that is free entry of bank with a view of increasing competition and efficiency.

4.          Equity participation in other companies by the banks thereby encouraging wholesaler banking and stimulating industries growth and investment.

5.          Deregulation of credit and monetary control order which the cost and availability of credit and determined through the financial market, these step indirect approach to monetary control. This is to generate more investment in the economy and promote growth.

6.          Deregulation sectorial allocation of credit, consequently all allowing the market to determine the allocation of credit in the economy.

7.          The removal of the central bank from the orbit of the finance and it acquisition of autonomance satus with retorting responsibility direct to the persidence as enhance its operational efficiency.

The above policy measures stated have affected the banking industry greatly even the so called big three that is United Bank for Africa (UBA) Plc, First Bank of Nigeria Plc, Union Bank of Nigeria Plc since the policy moved geared towards affecting bank credit and deposit directly as defined by the Central Bank of Nigeria (CBN) in the banking policy guidelines publication and since profit maximization is one of the main stays of the existence of banks, authors investigation how the policy measures has affected profit ability of banks, through the credit and deposit flow, with particular reference to the United Bank of Africa (UBA). United Bank of Africa (UBA) Plc is one of the oldest Nigeria banks and of the Africa leading financial institution was established in 1949. the bank merged with former standard trust bank during the consolidation exercise which commenced in July, 2004 through December, 2005. the bank offers banking services to more than 7 million customers across 750 employees (as at 2009) and over 2000 Automated Teller Machines (ATMs) it has its presence in New York, London, Paris, among others UBA is connecting people and business across Africa and beyond through retail and co-operate banking innovative across border payment, trade finance and investment banking. The bank has a deposit base of N1.29 trillion as at the end of year 2010, thus making it the third largest bank in Nigeria in terms of deposit and ranked 513 in the world in 2011 edition of top 1000 banks int eh world by the banker magazine.                

1.9      Statement of the Problem

1.          Has deregulation of banks has any affect on their profit?

2.          Are banks making more profits due to deregulation?

3.          Has banking deregulation led to increase in competition for customer?

4.          Are banks more careful and prudent in loan disbursement to borrowers?

5.          Have banks become more careless due to deregulation?

6.          Are there enough internal procedure in place in the banks?  

1.10 Objectives of the Study

The author want to ascertain the effect of deregulation of the banking sector with regards to profitability in so doing the author hope to discover whether deregulation has made the banks worse of or better off since efficience returns to the investment is one of the basis armed to use United Bank for Africa as base or empirical study, since the bank is one of the few bank that has been properly rooted before the process of deregulation and act present has one of the highest amount of deposit and greater of the credit in Nigeria economy. the study deals as rents with the various operation component of banking operation which deregulation has effects which resulted in the level of banking profitability, this study deals towards findings out how efficient rate has to reflect in the profitability.  

1.11 Significance of the Study

In this study we are trying o examine the performance of banks and it effect on profitability in a deregulated economy so as to be able to determined how banks can enhance their profits. The banking industry has to learn to adopt to the rapid changes taking place in the Nigeria economy because the source or failure of any bank would depends on its ability to adopt to changes. The Nigeria economy for once has been undergoing a great deal of changes which has affected the performance of banks. It is necessary therefore, for bank to lear from their collective experience so as to better equipped for the up and down of the economy there must be an understanding of the factors governing there was indirect monetary control by the central banks whereby banks were allowed to fix the interest rate, there was a tendency to retain increase in interest rate structure as a way of stimulating investment and growth. As part of the structural adjustment program (SAP) financial linearization of experts and the open market of banks.  

1.12 Scope and Limitation of the Study

The areas covered by this study are the main areas of banking operation affected by deregulation and subsequently the profitability of banks from the genesis of deregulation the activities of the supervise and regulatory authorities and their agencies the period will be examine and how the different levels of deregulation have affected profitability banking operation will be examined also. 

1.13 Statement of Hypothesis

Hypothesis I

Ho:  The deregulation of bank has no effect on bank profit.

HI:    The deregulation of banks has effect on bank profit.

Hypothesis II

Ho:  Banks are not more careful and prudent in loan disbursement to borrowers.  

HI;    Banks are more careful and prudent in loan disbursement to borrowers.  

1.14 Definition of Terms

1.          Bank: Is a financial institution where money and valuable are kept, and it include commercial banks, discount house, acceptance house and financial institution.

2.          Bankers: Any person who carries on banking business partner or owner of a joint stock.

3.          Banking: Is the act of collecting, saving of money and assisting people in terms of facilitating their financial transaction.

4.          Money: Any thing which is generally acceptance in exchange of settlement of debt.

5.          Loan and advance: Is a form of lending by banks base on interest for the purpose of making profit.

6.          Deposit: Is money/cash paid into the bank for safe keeping it includes fixed amount or any form.

7.          Deregulation: To restrict control by rule or to stop adjustment so as to make accurate.

8.          Pre-deregulation: Is the period or time before deregulation that is period which control by rules was still effective.

9.          Post-deregulation: Is the period deregulation was effected the time after di rect control by rules was restricted.            

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