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EFFECTS
OF BANK FAILURE IN NIGERIAN ECONOMY
ABSTRACT
The aim of the project is to provide
information to the public on the “effect of bank failure in Nigeria” it is
geared towards bringing to light some of the activities or services rendered by
the banking industry bank failure causes and the effect to it. The
project is made up of five chapters.
The chapter deal with the interaction,
this takes about the background information about the evolution of the banking
system and bank failure.
The seconding chapter deals with review
of related literature in this topic high lighting different writing opinion
concerning bank failure causes and bank depositors it also discusses the roles
of banks in Nigeria economic development.
More so the third chapter deals with
the procedure and sources include background information population and sample
construction of instrument the statistical method used in the analysis of the
various data etc.
The further chapter discusses the date
analysis and interpretation it also spiffed the responses of the respondents
from the various research questions.
Finally chapter five provides the
summary of the whole study recommendation conclusions and also area of further
research.
TABLE OF CONTENTS
CHAPTER ONE
1.0 Introduction
1.1
Objective of study
1.2
Statement of problem
1.3
Significance of study
1.4
Statement of hypothesis
1.5
Scope of the study
1.6
Limitation of the study
1.7
Definition of terms
CHAPTER TWO
2.0
Review of related literature
2.1
Concept of banking
2.2
The role of bank in Nigeria economic development
2.3
Causes of bank failure
2.4
Effect of bank failure
2.5
Regulatory effects in meeting the challenge of bank failure
2.6
Conclusion
CHAPTER THREE
3.0
Research design and methodology
3.1
Sources of data
3.2
Simple used
3.3
Method of investigation
CHAPTER FOUR
4.0
Data presentation and analysis
4.1 Data presentation and
analysis
4.2
Test of hypothesis
CHAPTER FIVE
5.0 Summary of finding,
conclusion and recommendation
5.1
Findings
5.2
Conclusion
5.3
Recommendation
Bibliography
Appendix
questionnaires
CHAPTER ONE
1.0
INTRODUCTION
1.0 BACKGROUND
OF STUDY
Failure as a word means to be
unsuccessful in attempts at achieving any the objectives or aspirations.
Another variance to the inability, refusal fault or weakness which prevent the
achievement of any set objectives or aspiration.
Both of these draw
attention to the operative world” unsuccessful inability refusal fault and
weakness “therefore bank failure is the inability of a bank to meet its
objection to it customers, owners and the economy occasional by fault or
weakness in its operation which had wand it illiquid and later insolvent.
There is not doubt that fraud has exasperated to desperate situation in the
Nigeria Banking sectors. Fraud and embezzlement are not widespread. Both
are unturned in the fraud crises jamboree. Furthermore, fraud in its
itself may not widespread. Bank are unturned in the fraud crisis may not
be a sufficient condition for a banking crisis. The researcher submits
that extremely bad management until adverse economic conditions led to
unexpected capital on flows or loan losses. Thus even if every bank which
failed is judged to have suffered from mismanagement or fraud, or operated in a
over populated banking market, it may well be the case that adverse, it may
well be case that adverse economic conditions will be the proximate cause of
many bank failure.
Employees as well as clients of firms in all industries engage in fraudulent
practices all over the world. Whilst if cannot, strictly speaking be said
to be an ordinarily expected human behaviour, including the socialist societies
world make one state that is an inhuman behaviour. Although the existence
of frauds in banks it not an uncommon or unexpected phenomenon, Ogwuma, P.
(1985:21) says it is worrying because of all the various problems confronting
the Nigerian banking industry today, that of fraud is easily the most
intractable. The banking industry worries more about fraud because of the
rather obvious damaging consequences of the acts on the health and existence of
the institutions.
Frequent occurrence of fraud ultimately distracts the attention of the
management and leads to increase running costs. Time and emergies that
would have spend improving customer services would be experienced on preventing
fraud. Moonies that also would have gone into service improvement
activities would be expended in setting fraud control procedures systems.
Banking industry, like others worries about fraud because it varies widely in
nature, character and methodology. Moreover, the control of an identified
specie seems to give birth to another that is invariably more sophisticated and
complex. Thus each case can be seen to be a variant of another and
undoubtedly on instrument study in human negative use of ingenuity and
endowant.
According to Crosse on Hampel (1973:2420), five major types of frauds are
perpetrated in bank,
They include:
a.
Borrowing a few naira which are returned overtime, the sums involved incrase
and the willingness and ability to “repay’ declines.
b.
Forgeries of customer’s signature to with draw from his /her accounts.
c.
Granting of loans to fictions borrowers and
d.
Granting of loans without adequate security and information from the customers.
THE EFFECTS OF BANK
FAILURE IN NIGERIA
Fraud in banks are caused by two sources, the internal and external sources
though distinguishable in theory, Adewuni (1986:2) posits that “these sources
are very often not separable in practice “that is to say a unintentional (ie due
to carelessness or error of judgment of an insider a bank employee0. Indeed it
was affirmed by Soneye, O. O. (1985:3) that “the public believes and rightly
too that most fraud in banks are with the active connivance of bank staff
otherwise. How doe any boy explain for example, how a cheque drawn in favour of
the federal government of Nigeria is paid into some private ones explain how a
completed different institution or individual collects a draft, prepared in the
name of an institution or individual? This is not an exception of the rules, it
is a frequent occurrence”. The source of frauds in bank can be classified
into institutional factors/ lapses.
A.
Institutional Factors/ Lapses: Are causes that can
be traced to the internal environment of the organization and are to a great
extent, within the control of the management of the bank. The major
institutional causes of fraud are “poor management”. This is often
manifested in the following ways as identified by Adewuni (1986:3).
-
Lack of adequate supervision;
-
Inadequate control in the form of effective policies, procedure and systems.
-
Lack of adequate experience leading to lumintentional fraud;
-
Understaffing of branches leading to compromise of standards.
-
Overstaffing by employees on a particular schedule.
-
Poor salaries and conditions of services
-
Frustration and
-
High inter-dependence of extended family units in the nation” to buttress this,
Ogwuma P. (1985:6) says, “but the pity of it is that many ordinarily honesty
staff have become fraudster because of the demand and expectations of their
relations and society in general while other have fallen victions of inter
desire to “live up to the jobless” .
B.
Societal and environment factors/ lapses are factors in the environment
in which banks operate. The bank is an integral part of societal and not
an is land. The following have been identified as the societal element
that causes frauds in banks.
-
Misplacement of social values as what.
-
Society appreciate and generally worships in money.
-
Society’s voerstation of bank staff and the desire of those live up to the
standard of such a wrong images?
-
Inability of law enforcement agents to detect fraud.
-
Inadequate punishment of perpetors of frau to serve as deterrent and
-
Encouragement of bank staff by outsiders.
-
Individuals and fraud syndicates. There is equally widespread concern about
computer fraud mainly because of difficulty in detection until losses have
reached a large scale.
1.2 STATEMENT
OF THE PROBLEMS
Every country attempts how to maintain
a healthy financial system because of its importance in economic growth and
development of the bank failure in the society.
From the beginning of banking in Nigeria there have been serious crisis of bank
failure in the industry. This no doubt constitutes a set bank in our quest for
economic growth and development. Such a situation should not be allowed
to continue. To this causes of bank failure as the logical step towards
formulating realistic policy to arrest the trend.
1.3.1
PURPOSE OF THE STUDY
The purpose of this study is to focus
attention on the effect of bank failure in Nigeria which is threatening to
hamper growth and development of the Nigeria economy. To this effect the
major objective of this study is to:
i.
Identify the causes of bank failure in Nigeria.
ii.
Formulate a model to identify failed banks.
iii.
Provide policy suggestions to minimize the occurrence of bank failure in the
country.
1.4 RESEARCH
QUESTIONS
1.
Can they central bank of Nigeria and deposit insurance corporation
help to review some failed banks.
2.
Has the liquidity of the bank depositors been impaired bank failure.
3.
Does bank failure lead to loss of confidence by depositors on the banks?
4.
There is massive retrenchment and unemployment as a result of bank failure.
5.
Does bank failure effect the magnetization of the economy.
1.5
RESEARCH HYPOTHESIS
H0:
There
no effect of bank failure in economic development of Nigeria.
H1:
There
effect of bank failure in economic development of Nigeria.
H0:
Government contributes to the failure of some banks.
H2:
Government do not contribute to the failure of some banks.
H0:
There is no solution to bank failure in Nigeria economy.
H3:
There is solution to bank failure in Nigeria economy.
H0:
There is massive retrenchment as result of bank failure.
H4:
There is no massive retrenchment as result of bank failure.
1.6
SIGNIFICANCE OF THE STUDY
The significance of this study is to
achieve a great success in contributing the little the researcher can, if not a
great deal in solving the bank failure problem in Nigeria which will in turn
being about an immense change in the Nigeria banking sector with practical
reference to standard trust bank Enugu.
It
is a well hope that this research work will definitely enlightening the staff
an management of banks especially Standard Trust Bank Enugu. In additional
it will bring about more profitably contribution and improvement to every other
bank nationwide to know their problem and locations, furthermore, this study
will serve as means to tackle most of the inherent problems effectively.
Again it will help the society on large in the evens or to be as favourably
side of the failures syndrome on Nigeria banks is eradicated completed.
Finally, through the researcher restricted the study to Enugu State and
Standard Trust Bank the result of findings will be of immense benefit to all
banks in Nigeria as well as students conducting similar research on the same
topic or related one.
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