CRISIS MANAGEMENT IN THE BANKING INDUSTRY

CHAPTER ONE

THE BACKGROUND OF STUDY

The Nigeria banking are undergoing a major dept crisis. The most serious in its histories incorporation into the world capital system at the turn of this country. As with other third world countries, the Nigeria dept crisis is part of a wilder crisis of accumulation

The dept crisis of the 1980 is not the first in the country history, indeed, soon after the Nigeria independence in 1960, the country experience some level of economic crisis and incurred some external dept. thus, Nigeria external dept which stood at about 82.4 million in 1960 rose to 435.2 million Naira in 1965 and by 1970 was put to some 400,89 million Naira. The dept consist mainly of long-term loan from the World Bank.

Further more, during Shagari, his administration went ahead in 1983 to put the central bank under increased pressure to open letter of credit at very short notice for such federal government agencies as the Nigeria police. The constituencies was that further compounding of the dept crisis.

STATEMENT OF THE PROBLEM

In the right of the vital role, which banks should play in the development of the national economy in their capacity as vector of fund, we point out that the Nigeria banking system in all its advancement has not succeeded yet ineffectively archiving this mission. The reason is not just one of the facts that some bank has failed, but there are other problems associated with them that the research seeks to address

1.     The lose of public confidence in the banking industry due to crisis in the sector ( Ekezie, 1994).

2.     The short comings of the regulatory and supervisory authorities ij handling the crisis (Ehbokgha, 1993)

3.     How the ownership structure of the distressed bank contribute to their predicament (Ojih, 1998)

There are numerous problems that are arising and which constitute crisis on the banking industry and this work will attempt to solve them.

OBJECTIVE OF THE STUDY

Crisis in the banking industry is a serious problem, which is like table drops in a pool of water affect every aspect of the economy

1.     To examine the increase in rate as deposition ask for higher rate of return for passive higher chances of bank failure and consequence risk of financial lose

2.     To find out the cause of crisis in the banking industry. This crisis has leaded the unemployment, which leads to fail in aggregate demand and consequently a reduction in the production level.

3.     To reveal how the deposit run cause crisis in the banking industry.

To find out how the bank are central to an efficient and effective payment system in any country. With bank failure, the payment system will become precarious as the link between the real and the financial sector including the international settlement will be greatly impaired.