The Impact Of Bank Failure In Nigeria Economy A Case Study Of Savannah Bank Of Nigeria Plc

The Impact Of Bank Failure In Nigeria Economy A Case Study Of Savannah Bank Of Nigeria Plc

ABSTRACT

The end of this exploration study is to dissect and ascertain the extent to which fraud and poor operation contributed to bank failure through a careful analysis of banking assiduity with a particular reference to the presently denuclearized Savannah Bank of NigeriaPlc. whose operating license was lately abandoned.

Chapter one examined the literal development of banking in Nigeria, feting the catalytic places of the business of banking in the frugality, together with other introductory analysis on the extent of bank failure and fraud and their effect on the development of banking business in Nigeria.

In chapter two, an overview of bank failure in Nigeria frugality was made. Emphasis were laid on their birth, caused( fraud and poor operation), control issues involved in bank failure operation. Particular attention was drawn on the impact of banking business in the overall development of the people, and frugality and the counteraccusations of its failure. The contestation girding the cancellation of the operating license of Savannah Bank Plc and the prospects of banking business were also treated.

In chapter three, the exploration recited how the colorful data for this study were collected and which informations were used with a view to realizing the objects of the study.

In chapter four, tables of probabilities were used to present and dissect the data collected and which information were used with a new to realizing the ideal of the study.

In chapter four, tables of probabilities were used to present in dissect the data collected while chi-square system was used to test the supposed thesis.

Eventually, in chapter five, a critical analysis of the exploration study revealed that bank failure in Nigeria are attributable basically to fraud, poor operation platoon and adverse profitable conditions among other institutional and non- institutional factors. still, it was recommended among other effects that due to the peculiar and strategic position of the banking diligence and their synergistic goods of change arising. thus government should nearly cover the conditioning of bands through their agencies nonsupervisory authorities without inescapably politicizing their accreditation Banks should inversely strengthen their internal control measure. also, if the nonsupervisory authority defile with the responsibility of managing assiduity keep an eagle in the assiduity’s conditioning, it’ll stem the drift to bank meddling with the fortunes of depositors shareholders and other interested parties and forth overall benefit of the frugality. This is in view of the catalytic part of banking business in the profitable confidence in the banking public. farther exploration on veritably applicable linked area of the exploration content was also suggested by the exploration. This is in view of the energy, and inexhaustibility of the content of study.

Chapter One

Preface

Background Of The Study

One of the indicators for measuring the development of an frugality is the size, maturity and safety of its banking assiduity. This is because the banking assiduity plays a veritably important part in the rallying and application of investible coffers( fiscal) in the frugality. It acts as the central units of the country through a process of “ fiscalinter-mediation ”. The absence of a request for which can greatly reduce the growth of profitable conditioning; its business conditioning are catalysts for profitable development.

The Nigeria banking assiduity at the movement appears to be the verge of collapse. The banking public seems to have bring confidence in banking and chances are that this corrosion of confidence may not be reversed unless the nonsupervisory agencies. The central Bank of Nigeria( CBN) and the Nigerian Deposit Insurance Corporation( NDIC) rise up to the challenge.

It was the belief by the government that the banking extremity of the 1990s was caused substantially by fraud that to the promulgation of the failed banks( Recovery of Debts) and fiscal malpractice’s in Banks Decree Number 18 of 1994( failed banks Decree). It’s still delicate to justify the draconian nature of the failed bank Decree and its implicit supposition that fraud was a major cause of the banking extremity licenses withdrawn by theC.B.N ON account of sharp practices. In other words while it’s true that the monumental growth in the number o registered banks may have led to increased fraud, it’s doubtful that it was the sole cause of the posterior banking failures. There’s no mistrustfulness that fraud has exasperated a hopeless situation in the Nigeria Banking sectors. Fraud and embezzlement aren’t wide. Both the government and the central Bank are unturned in the fraud and heads spree. likewise, fraud in itself may not be a sufficient condition for a banking extremity. The experimenter submits that extremely bad operation may not prove fatal to a bank until adverse profitable conditions led to unanticipated capital exoduses or loan losses. therefore indeed if every bank which failed is judged to have suffered from mismanagement or fraud, or operated in a over populated banking request, it may well be the case that adverse profitable conditions will be the proximate causes of numerous bank failure.

The NDIC implicitly agree with the below submission in a indirect dealing party with current banking heads in Nigeria. It concluded, “ the reanimation of the banking system would number strong political will that should allow for the relinquishment of the applicable failure resolution option, grounded on the specialized judgment of the controllers. Eventually and most importantly, a successful restructuring of the banking system would number a troopmacro-economic terrain with little relative price deformations that would insure a sustainable growth for the frugality ”. Macro profitable insecurity in itself energiesfraud.However, persons are more likely to get hopeless the perpetrate fraud, If the future is perceived as uncertain for case. It should also be noted that general profitable stress isn’t limited to the banking sector. Inconsistent government programs, high affectation, and the ever depreciating original currency have made planning insolvable across utmost profitable sectors further rooting stress. The profitable and social programs of government thus play a high part in the creation of a stable business terrain in all profitable sectors, including banking. The policy conduct that can effectively attack bank failure in Nigeria must thus look beyond the banks.

It’s the experimenter’s submission that in addition to its traditional part of fiscalinter-mediation, the Nigeria Banking assiduity has a major part to play in the development of the Nigerian frugality. therefore challenging this exploration work for purposes of this study, the term banks failure and bank torments are to be usedinter-changeably.

Statement Of The Problem

In recent times, the volume and frequence of heads in the Nigerian banking assiduity has been on the increase. According to NDIC, the position of reported fraud in Nigeria banks rose from N804m in 1990, N3, 199m involved in fraud rose from 3 percent in 1990 to 22 percent in 1998. maybe the loftiest fraud ever reported in any particular time by a Nigeria bank passed in 1998 when united Bank for African Plc wrote off N786m on account of fraud. One would be tempted to consider the curious mind as to necessity, and indeed imperativeness of the banking assiduity in Nigeria profitable developments commission as mate in progress. Could Nigeria not have continued to do without these banks, as in fact she had done prior to their arrival?

Other problems acts to be bandied in this paper include

Bank failures mimical to profitable growth are development. The strategic position of bank has negatively wide counteraccusations on the fate of depositor, workers shareholders and the entire crowd. The banking image is thus grossly distorted with the result that not important has been achieved in barring heads and restoring confidence of the banking public.

Judging from the data available in respect of major frauds executed in the history and considering their astounding success. Apparent careful planning and the boldness with which they were executed one can not but honestly, albeit sorrowfully, admit that fraud is an forthcoming sector of the unnoticeable yet forceful( is it important?) assiduity called crime. examinations are urgently demanded to unravel their different forms.

Away of fraud, extremely poor operation and adverse profitable conditions lead to bank and failure due to unanticipated capital out overflows or loan losses. therefore, it may well be the case that adverse profitable conditions will be the proscrimate cause of numerous bank failures. This is apparent in situations of spillover of political misgivings and political pressure.

Regulatory authorities aren’t responsive to challenges of administering introductory lows relating to bank heads and fraud. This is maybe the more worrisome. For case, NDIC decree of 1998 needed ensured bank to render yearly returns of frauds, phonies or outright theft including a detailed report of similar events. Unfortunately, utmost banks don’t observe these simple nile. The questions of course are how numerous banks appreciate the significance of this statutory conditions both for themselves and the entire assiduity and why are nonsupervisory authorizes not responsive to these challenges?

e. The failed bank decree was supposed to represent an attempt by the Nigeria military government to help parties from escaping judges by exploiting the oddities, inefficiencies and loopholes in the legal system. The bench has exclusive governance over all ancillary matters, including remand, bail and any other primary issues connected with an off governance. With all these power lawbreakers of bank failure who have met with these bench have noway served as deterrents for intending perpetrators.

Regulatory agencies need to do more practical work to encourage banking at all position, than just revolving operating designee and paying N50,000.00 to every depositor. numerous depositors believe that government has not done enough to cover their finances since numerous will cry fowl, as there are chances of further banks collapsing. NDIC Act should be reviewed to accept N100,000.00 as payment for ensured deposits. These issues and views form the central focus of this work, which the paper addresses too.

Ideal Of The Study

It’s argued that nonsupervisory authorities have been unfit it arrest the unattractive causes of frequentness of bank failure in the world over irrespective of the strategies applies. The rare of frauds in our banking system has for occasionally assured an intimidating proportion similar that it has come a matter of concern to the operation of our banks. It would be said that in Nigeria, they’ve contributed to the living structural and profitable imbalances playing the country by neglecting most important profitable sector through the attention offered to it.

The end of this study in the light of the below is to dissect the aspects and complications of the problems of bank failures, the benefactions of fraud, poor operation and other causes in order to suggest realistic results to arrest them. Specifically thus, this study seeks to

Examine the functions of banks an assess their impacts as catalysts for profitable development of Nigeria;

Identify the elaboration, dimension and degree of bank failure in Nigeria;

Examine the extent to which frauds, poor arrangement or both have contributed to the prevalence of bank failure.

Identify other caused of bank failure

supplicate the ways and means in which the nonsupervisory authorities and banks have discomfited this unattractive monster;

Identify the problem militating against the effective prosecutions of similar measures employed.

Examine the principles of banking business, the performance of banks so far and their unborn prospects; and

Highlight measure for bridling frauds and bank failures in Nigeria.

The author hopes that by the end of his exploration, these objects would have been fulfilled in line with multitudinous dubieties girding the effective capability of banks to deliver the asked tips without cutting short the life of the institutions.

Significance Of The Study

The choice of the content of study by the experimenter was grounded on tone- interest and the need to ameliorate the state of the Nigeria frugality in the wake of the deplorable banking terrain and ceaseless bank failure. The study will be of great mentioned for the colorful reasons indicated-

A. The banking assiduity will be better bettered by perfecting the findings and recommendations from the study in stemming down the prevalence of bank failure arising from fraud or poor operation.

B. The profitable policy makers will use the result of the study in restoring the safety and soundness of the banking system. Far- reaching negative goods on the public profitable well- being caused by bank torture of similar as loss of job, strangulation of sources of finance for government and the populace, loss of deposits, pullout of fiscal security/ protectionetc. could be minimized from the study.

C. A great deal of effect has been made by the nonsupervisory authorities to finance legal reform programs aimed at empowering them to deal further expeditiously and decisively with problems of torture in the fiscal institutions. The counteraccusations , which are of consummate significance in aiding to promote the survival and stability of the banking system, will be addressed by this study.

likewise, computer frauds in critical particularly in the Nigeria banking terrain where little or nothing is known about this electronic device until lately. This study seeks to unravel measures for stalling the negative affects of this technology on the internal control systems of banks.

Eventually, the general public will profit from this study immensely. It’ll help n resolving their hunt for profitable break- through in putting in place a redoubtable, system, which in substance will lead to ameliorate standard of living, and the restoration of the Nigeria’s battered image.

Exploration Question

In the cause of this study, the following exploration question will be used

a. What are the sources of bank failure?

Do banks fail as result of fraud alone?

Can bank heads be attributed to poor operation?

d. What are the goods of bank failure?

Can bank fraud be contained as a consequence of poor operation structure of a bank?

f. What are the approaches to the minimization of bank fraud?

g. What are the benefactions of nonsupervisory authorities in arresting or worsening bank heads in Nigeria?

Do banks serve as catalysts for profitable growth and development in Nigeria?

i. How effective are the law enforcement agencies in handling bank heads lawbreakers?

Does the NDIC Act on insured deposit give acceptable agreement/ cover for depositors in a failed bank?

k. What factors militate against the responsiveness of the nonsupervisory arbiter to their ever- adding challenges?

l. What are the performance of the banks so far and their prospects in the future?

Expression Of Thesis

Grounded on the data collected, the following suppositions would be stated and tested for validity in the posterior chapters.

Ho1 Bank failure has no relationship with fraud.

H02 Bank failure has no relationship with poor operation platoon.

H03 Poor banks operation don’t affect in failure of banks

Compass And Limitations Of The Study

This exploration work is a florilegium of fraud and poor operation as caused of bank failures in the whole world with particular reference to “ Savannah Bank of Nigeria Plc ”, its effect on the depositors, staff, shareholders, frugality and the public image abroad. The discipline allocate out to perpetrators of fraud to be acceptable to serve as interference to others, the unborn prospects of banking business and the present state of the confidence in the banking public.

Conducting a exploration entails a lot of stress and can occasionally be enervating and problematic. It involves an lot of touring and tactfulness, and being a one- man affairs, my lead to some short- coming especially in a country as vast as Nigeria.

The failings in this case are in the form of uncooperative station of some repliers in sensitive motifs and fraud and bank failure. Dearth of secondary data owing to reluctance of banks to bag their pending action on fraud entered in view of the cost and time involved, conking of utmost Nigeria breweries. fiscal problems in terms of transportation, cost of photocopying applicable accoutrements , time constraints, departmental specifications and the general profitable condition with respects to cost of accoutrements and other appurtenant costs.

Another serious limitation good of note is the incapability of the legal system to interpret and discipline malefactors in the true spirit of the Act Decree establishing them. This presupposes that judgements aren’t in practice carried out to the after to enable the author make a conclusive opinion on the extent of compliance.

Description Of Terms

Bank For the purpose of this work, the oxford Advanced Learner’s Dictionary’s description of the terms will be most applicable. The wordbook defined banks as “ an association or a place that provides a fiscal service in terms of acceptance of deposit’s and payment on demand ”. Banking thus is the business conditioning of banks.

Failure The same wordbook defined failure as “ the state or an case of being shy or of not performing as is anticipated or needed. Banking business as needed.

Catalyst This could be seen as notoriety or commodity that helps or brings about a change by abetting or speeding up the process. It’s a “ doing ” process.

profitable This is an adjective form of frugality. Thompson’s Dictionary of Banking defined frugality as “ The administration of the concern’s and coffers of the any community or establishment with a view to orderly conduct and effectiveness ”. It entails the art and wisdom of similar administration. It’s also seen by Oxford Dictionary as “ the theoretical wisdom dealing with the laws that regulate the product and distribution of the wealth. ”

torture According of Oxford Advanced Learner’s wordbook, a torture position portends ’ a situation caused by lack of plutocrat to meet critical need ”. A bank is thus seen to be in torture if it’s unfit to meet with the bank examination standing system known as CAMEL ”. This is the height of habitual liquidity and bankruptcy.

Officer This is defined Oxford Advance Learner’s wordbook as “ a Person with a position of authority or trust ”. An officer of a bank going from this description is a staff of a bank who’s in a position to maker commitment of on the bank.

Bankruptcy According to the same Dictionary, bankruptcy indicates “ a condition or situation of incapability to pay bones debts ”. A bank is declared insolvent if it’s unfit to redeem or maker good its debts( both short and long term).

NSE Nigeria stock Exchange.

Fraud For the purpose of this work, Adetanye’s description would be most applicable. According to him “ fraud is defined as a conscious, predetermined action of a person or group of persons with the intention of attending the verity and/ or fact for selfish particular financial gain. It involves generally, the use of trick and dishonesty. The action, which takes the form of phony , falsification of documents, unauthorized signatories and outright theft ”.

operation/ Poor Management Management’s is defined by Oxford Advanced Learner’s wordbook as “ the people who control a business or analogous association ”. discoursing further; it boils down to the fact that poor operation means the control of a business by inexperienced and unskilled set of people.

Reference

Adelman,I.( 1961) propositions of Economic Growth and Development, Californian Standard University press.

Aneke,U.( 2001) exploration and design Methodology Enugu perfection printers.

Shindig,R.( 1976) Bankers in West African London Hutchinson press.

Federal Republic of Nigeria( 1995) Failed bank( Recovery of depts.) and fiscal Malpractices in banks DecreeNo. 18 Lagos Government press.

Hornby,A.S.( 1963) Oxford Advanced Learners Dictionary of current English London Oxford University press.