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THE IMPLICATION OF RECAPITALIZATION POLICY ON THE
PERFORMANCE OF UNITED BANK FOR AFRICA [UBA]
ABSTRACT
This
study examines the current banking sector reforms and repositioning through
recapitalization for competitive advantage with a particular reference to
United Bank for Africa. The study further
discovered that the fragile banking system in Nigeria create a number of problems
in the country. This includes lost of depositor’s money, loss of jobs, loss of
confidence in the banking system, major financial crises resulting in failure
and distress banking syndrome, and inability of the banks to contribute in any
significant ways to national development. Finally, the study discovers that in
order for United Bank for Africa to
strategically reposition itself fro competitive advantage in the post
recapitalization era. More emphasis are needed in areas of marketing,
information technology, customer services quality of personnel and technology.
TABLE OF CONTENTS
Title
page - - - - - - - - - i
Declaration - - - - - - - - ii
Approval
page - - - - - - - - iii
Dedication - - - - - - - - - iv
Acknowledgment - - - - - - - v
Abstract - - - - - - - - - vii
Table
of Contents - - - - - - - viii
CHAPTER ONE
INTRODUCTION
1.0 Background of the Study - - - - - 1
1.1 Statement of the Problem - - - - - 4
1.2 Objective of the Study - - - - - - 6
1.3 Research Questions - - - - - - 6
1.4 Significance of the Study - - - - - 7
1.5 Scope of the Study - - - - - - 9
1.6 Limitation of the Study - - - - - 9
1.7 Definition of Terms - - - - - - 10
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction - - - - - - - 12
2.2 The Concept of Recapitalization - - - - 13
2.3 Recapitalization in Developed Countries - - 16
2.5 Trend
of Recapitalization in Nigerian Banks - - 26
2.6 Recapitalization
and Banks Performance - - 9
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction - - - - - - - 34
3.1 Area of the Study - - - - - - 35
3.2 Research Design - - - - - - 35
3.3 Population of the Study - - - - - 35
3.4 Sample Size and Sampling Finding - - - 36
3.5 Data Collection Instrument - - - - 36
3.6 Administration of Instrument - - - - 36
3.7 Method used in Analysis of this Study - - - 37
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 Introduction - - - - - - - 38
4.2 Customers Questionnaire - - - - - 50
CHAPTER FIVE
SUMMARY, CONCLUSION AND
RECOMMENDATION
5.0 Introduction - - - - - - - 57
5.1 Summary of Findings - - - - - - 57
5.2 Conclusion - - - - - - - - 60
5.3 Recommendations - - - - - - 62
Reference - - - - - - - - 65
CHAPTER ONE
INTRODUCTION
1.0 Background
of the Study
The
Nigerian banking industry has witnessed tremendous changes and expansion since
the mid 1980s. Unfortunately the growth and expansion in the sector are not the
manifestation of a sound or vibrant banking system known anywhere in the world.
Most banks in Nigeria
are characterized by inadequate capital base, poor services, hug rate of
bankruptcy, lack of management expertise, bad debt syndrome and greater
exposure to fraud. In addition, many have poor database and lack of reliable
information on which sound policy decision can be take by Board of Directors.
This is a fragile banking system which is waiting to explode from the contagion
effect of the liquidation of over eleven banks which are technically considered
distressed. Currently there are 89 banks in operation in Nigeria, with
79 being considered marginal or fringe players and with over 1,036 – fraud case
in banks in 2003 while N9.3 billion was lost through fraudulent activities.
A
poor banking system of this nature creates unquantifiable problems and crisis
in the economy which could result in thousands of people losing their jobs,
lost of depositors’ money, lost of confidence in the banking system and above
all the banks can have little contribution to the economic development of the
country. Essentially, the objectives of the new, banking sector reform though
recapitalization of N25 billion for each bank intends among other things to
take proactive steps to prevent an imminent systematic crisis and collapse of
the banking industry, create a sound banking system that depositors can trust,
create banks that investors can rely upon to finance investment in the economy
to drive down the cost structure of banks and make them more competitive and
development oriented and to ensure Nigeria meets minimum requirements for
regional financial system integration, effectively, positioned to be a key.
African regional and global player.
Taking
this steps is imperative for the survival of the fragile banking system in Nigeria
and to be at per with the global trend. Generally speaking, the current average
capitalization of banks in Nigeria
is less than $10 million or N1.3 billion and with the largest bank in Nigeria having
$298 million compared with the smallest Malaysian bank with $526 million. This
is an important indices for an understanding of the unique, nature of the Nigeria
banking system among developing economies.
In
the study an attempt has been made by examining the fragile banking system of Nigeria, the need for recapitalization, the
various strategies by Commercial Banks to meet the recapitalization
requirements and how recapitalization can enhance repositioning of Commercial
Banks in competitive marketing environment of Nigeria. Although the full policy
implementation of recapitalization takes effect from December 2005, this study
provides an insight into the anticipated challenges of post-recapitalization
era. These challenges as evident in the current mergers and acquisitions by
smaller banks provide input for academic research and analysis. However, it is
also the intention of this study to outline the various repositioning
strategies of United Bank for Africa towards
meeting the challenges of the Banking Sector reforms in maintaining a leading
position among new generation banks in meeting the CBN recapitalization
requirement deadline.
It
is hope that the finding of this research study would provide a pioneering blue-print
for commercial banks in Nigeria
to adequately cope with post-recapitalization challenges of the marketing
scenario.
1.1 Statement
of the Problem
The
rising incidence of bankruptcy and distress syndrome in the Nigerian baking
system caused by poor capital base, lack of management expertise, bad debt
syndrome corrupt practices and fraud among other have created serious concern
to depositors, investors and the rational economy. The need to address this
issue has brought the need for redefining the capital base of commercial banks
in Nigeria
to make the banking sector strong. Dependable and viable with minimal distress
and meaningful contribution to the growth of the Nigerian economy. The
recapitalization of N25 billion makes it imperative for Commercial Banks to
seek for investors and to merge into meet the December 31st 2005
deadline.
The
banks that meet up the recapitalization targets may be fewer in number,
stronger in capital base, well positioned to carry out full the main challenges
before the competing banks is to evolve effective marketing strategies to
attract customers to patronize their services and to maintain a leading
position in the industry.
United
Bank for Africa as a successful emerging bank under the new recapitalization
policy has a well designed, modern financial marketing network, better
positioned for the post-recapitalization competitive marketing of financial
services in Nigeria.
This
study makes a critical analysis and examination of the marketing activities of
United Bank for Africa Plc, Abuja
designed to achieve competitive advantage. It is hope that the finding of this
study would provide an important blue-print for effective modern marketing of
banking services in Nigeria.
1.2 Objective
of the Study
The
main important objective of this study is to examine positioning strategies for
competitive advantage through recapitalization in the banking industry with a
special reference to United Bank for Africa, Kaduna. The study is specifically design to
achieve the following objectives:
a)
To present the various shortcomings
of the current banking system, of Nigeria
b)
To provide the rational behind the
CBN recapitalization policy for commercial banking in Nigeria
c)
To identify the challenges facing
commercial banks towards the dateline for recapitalization
d)
To find out the vicarious plans of
action or strategies for competitive advantage at post-recapitalization epoch
e)
To provide recommendation and
solutions identified by the study
1.3 Research
Questions
This
research study intends to address the following research questions:
a)
Why should the minimum capital base
for commercial banks in Nigeria
be raised to N25 billion?
b)
Can recapitalization of the banks
result in the desired positive change for the Nigerian economy?
c)
What are the implications of the
reform on the existing job situation in the country include the job security in
the banking industry?
d)
What will happen to customer accounts
(loans and deposits) for banks that cannot meet the requirement?
e)
If a bank acquired or goes into
mergers in the existing consolidation process, what does this imply for bank’s
existing customer that do not fall within its redefined target market?
f)
Beyond the N25 billion are there
further increases in the capital requirement for banks in future?
1.4 Significance
of the Study
The
significance of this study has essentially on the important contributions made
by the study to individuals commercial banks, investors, financial analyst and
other interested in the genuine development of the Nigerian banking system
through recapitalization.
First
and foremost, the management of United Bank for Africa
would find this study very compressive in presenting the clear picture of the
crisis and conflicts in the Nigerian banking system, including strategies to
meet the CBN recapitalization through various mergers and consolidation
strategies. In addition, the views of seasoned bankers researchers and
financial analysts on the future of the Nigerian banking system under the
recapitalization policy would by providing to make it easier for the bank to
discern area of threats as well as opportunities in the years ahead.
Secondly,
recapitalization being a new concept in the baking industry and even in
academia, thus research project would provide an important reference material
for people from all walks of life, including students, bankers, investors and
the general public. Finally, it is also hope that the various suggestions and
recommendation presented in this study would serve as effective strategies in
meeting the post-recapitalization marketing activities of commercial banks in Nigeria.
1.5 Scope
of the Study
This
research study focuses on the marketing activities of United Bank for Africa, Kaduna. Though data
collection might be centrally to be done through the head office in Kaduna but the analysis and interpretation of findings may
cover all the state branches in Kaduna.
1.6 Limitation
of the Study
a)
Uncooperative Attitude of
Respondents: The bank used as case study
initially did not cooperate with the researcher due to the fact that in the
current competitive environment, an organization regards any persons who comes
for an enquiry as a spy on the activities who used by their competitors to undo
them in the market place. This explains the uncooperative attitude of the bank
that was visited initially.
b)
Time Factor: this project work was written when academic
activities was at the highest peak particularly for us the final year students.
Therefore, little time was set aside for this important task.
c)
Financial Constraints:
This project work was much tasking as it was not easy to obtain materials, the
cost involved in typing, photocopying and binding as a student of this level.
d)
Lecturers are also expected to
lecture and at the same time supervise a good number of projects, lecturing,
which is the main task of every lecturer tend to limit the frequency of
project, supervision. Despite these constraints, the main objectives set for
this study has been fully achieved.
1.7 Definition
of Terms
The
following terms and abbreviations used in this study are explained as follows:
·
Syndrome:
A
group concurrent symptoms of a disease.
·
Management:
The art of getting things done through and with people in a formally organized
way. It is the aid of creating an environment in which people cooperate towards
the attainment of group objectives.
·
Service:
A service is an intangible offering or benefit that cannot be seen, felt,
heard, tasted or smelled before being purchased.
·
Fraud:
An act of deliberate deception with the intention of securing something
monetary gained by taking an unfair advantage over another person
·
Bank
Failure: This is where a bank becomes insolvent or whose
total property (assets) and intangible right (securities) are insufficient to
pay all its debts obligation
·
CBN:
Central Bank of Nigeria
·
NDIC:
Nigeria Deposit Insurance Corporation
·
Capital:
Paid-up capital and reserves unpaired by losses
·
Reserves:
Surplus resulting from revaluation in the course of consolidation
Paid-up-capital: Ordinary shares plus
non-redeemable preference shares
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