ASSESSMENT OF BANK SERVICES AND ECONOMIC DEVELOPMENT IN NIGERIA: THE CHALLENGES

CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF THE STUDY

Banking is a commercial business in Nigeria’s economy and effective circulation of flow of capital (money) through the given economic units. It is meant to encourage economic growth and development in the Nigerian economy. Historically, the idea of banking in Nigeria dates back to the olden days when money was introduced in different forms as the means of exchange especially precious metals (Igweike, 2005).

People who deposited their precious metals with goldsmiths realize that not all the money deposited with him is withdrawn at the same time. Therefore they, decided to put all surplus money at his disposal into use to earn return in addition to the cost charged for safe keeping (Hoggson,1926). This idea of banking continued into the earlier period of colonial administration in Nigeria.

Indeed, it is confirmed that it was during the free-banking era that the three biggest foreign banks and two indigenous banks were established. These were;

-The Bank of British West Africa Limited (BBWA)

-The Barclays Bank Dominion Colonial and Overseas

-The British and French Bank.

The Africa continental Bank limited was established in Lagos in 1894 and took over the Africa banking corporation established two years earlier in 1892. The Bank of British West Africa therefore was the first surviving banks in Nigeria and remained the only bank in the country until it was joined by Barclays Bank, eighteen (18) years later in 1912. Also, Barclays bank became part of the Barclays group of bank in 1925. The first Nigerian owned bank was established in 1929, the industrial and commercial bank of Nigeria (Igweike, 2005). The bank however, went into liquidation a year later after it was established because of bad financial management, inadequate capital and wave of economic depression, which affected the whole world at that time.       Two years later, the Nigerian mercantile bank was formed in 1931, and in 1936, it also went into voluntary liquidation for the same reason. Before 1952, many indigenous banks were established but collapsed one after the other leaving the National Bank of Nigeria, Wema Bank and the Africa Centripetal bank as the only surviving banks. The failure of these banks led to the first banking legislation known as the 1952 Banking Ordinance

       In order to create a shift to rural areas, the Central Bank of Nigeria proposed a programme of Rural Banking in 1977 with a primary objective of extending banking facilities to the rural areas. Under this scheme, the commercial banks were required to establish new branches in the rural areas of the country.

Each of the banks was allocated to specific geographical areas of this purpose.  With regard to the title of the study, “problem of Banking services among commercial banks in Nigeria”, a case study of First Bank Plc, Abak road, Uyo, the aim of carrying out this research work will not be far fetched knowing fully well that our commercial banks are being called upon to leave up to expectation by the society; one therefore wonders what must be responsible for this low performance by the commercial banks.  Having viewed the whole situation critically for the improvement of their services to the society, we should first and foremost identify their problems. Moreso, it should be noted here that banking is an industry and that they all have some identical problem. What union bank plc suffers can be applicable to Afri-bank plc.

Finally, bad financial management, inadequate capital in the country can lead to the stunted growth of an economy, if commercial banks do not offer better banking services to the general public.

1.2  STATEMENT OF THE PROBLEM

Most banks do not consider the importance of their customer welfare and this have affected the banker/customer relationship.

Most commercial banks are encountering numerous problems and the researcher’s bank is not an exception.

The problems that banks encounter are:      Poor loan advances, under capitalization, government regulation, liquidity problem, inadequate modern banking technologies, lack of qualified personnel.

1.3  OBJECTIVES OF THE STUDY

The major objective of the study is to “Assess Bank Services On Economic Development In Nigeria: The Challenges”.

Other specific objectives include:

1.  To assess bank services on economic development in Nigeria.

2.  To help discover the challenges facing commercial banks.

3.  This study also seeks to find out the positive impact these bank services relates to daily performance of banks.                     

1.4  RESEARCH QUESTIONS  

       The following research questions are raised to guide the study in assessing bank services on economic development in Nigeria.

1.  How can we assess the performance of bank services on Nigeria economy?

2.  What are the possible contributions of bank services in Nigeria economy?

3.  What are bank services offered to customers in your environment, are they beneficial to the economy?

1.5  STATEMENT OF HYPOTHESIS

Ho:     Commercial banks in Nigeria are not efficient in granting of loans and advances to customers.

H1:  Commercial banks in Nigeria are efficient in granting of loans and advances to customers.

Ho:  There are no issues and challenges facing bank services in the economic development of Nigeria.

H1:  There are issues and challenges facing bank services in the economic development of Nigeria.

1.6  SIGNIFICANCE OF THE STUDY

This research study will be immense help to the bankers, and bank managements, etc. The fact is that through this study, problems and prospects of banking services among commercial banks in Nigeria will be assessed and further recommendations will be given to solve the challenges. This would help the commercial banks on how to improve on their day to day running of bank activities.

       In addition, this study will also serve as a guide to research students carrying out research study on similar or related topic. Finally, the recommendations advanced by this study will go a long way in providing appropriate measures to be taken with regards to bank services on economic development in Nigeria.

1.7  SCOPE OF THE STUDY

       This study covers the “Assessment of bank services on economic development in Nigeria” a case study of First Bank Plc, Abak Road, Uyo. 

1.8  LIMITATION OF THE STUDY

Considering the few months in which the project work has to be carried out simultaneously with our usual class work, time and money, which are really limited factors.

Thus, this would be constrained by lack of time, money and date.

1.9  DEFINITION OF SPECIFIC TERMS

Central Bank of Nigeria (CBN): It control all the banking activities in Nigeria, it also gives advice to government. (Onoh, 2005).

Nigeria Deposit Insurance Corporation (NDIC):  This is an independent agency of federal government of Nigeria. The objective of the deposit insurance system is to protect depositors and guarantee payment of insured funds in the event of failure of insured institutions. (Igweike, 2005).

Bank and Other Financial Institution (BOFID): The banks and other financial institutions (Act No, 25 of 1991) regulate banks and other financial institutions and their operations in Nigeria.

Short Term Loans: Loans lent to individual borrowers with maturity period less than one year. (Igweike, 2005).

Medium Term Loans:  Loans lent to individual borrowers with maturity period 3 – 5 years.  (Igweike, 2005)

Long Term Loans: Loans lent to individual borrowers with maturity period of 5 years and above.  (Igweike, 2005).

Liquidity Ratio: Bank ratio between their deposits with the CBN to its total deposit liabilities.  (Igweike, 2005).

Portfolio:  A collection of assets held by an institution or private individual, and investors.