STAFF PERCEPTION OF THE IMPACT OF THE TWENTY-FIVE BILLION NAIRA RECAPITALIZATION POLICY IN NIGERIAN BANKING INDUSTRY. A CASE STUDY OF SELECTED BANKS

ABSTRACT

This study investigated the staff perception of the impact of the N25 billion minimum capital base on Nigerian banking system using case study of some selected banks namely; First Bank of Nigeria Plc, Union Bank of Nigeria Plc and United Bank for Africa Plc. The research was geared towards finding both the positive and negative impacts of the N25 minimum capital base on Nigerian banking system, the impacts of the N25 billion minimum capital base on bank workers/bankers e.t.c. To achieve this, relevant literatures were reviewed. Also using the selected banks, the researcher employed both primary and secondary sources of data collection for the analysis. The primary sources of data collection employed include questionnaires, oral interview and observations while the secondary sources of data collection employed include textbooks, newspapers, journals and seminar papers. Statistical tools like tabulations and Chi-square were used to analyze the data collected. From the analysis done, the following findings were made; the N25b minimum capital base has significant impacts on the Nigerian banking system, the N25b minimum capital base has not significantly improved the competitive efficiency of the Nigerian banks, the N25b minimum capital base has not led to retrenchment of many bankers and N25b minimum capital base has led to mergers and acquisition within the banking industry which may of course lead to more strong and reliable but few banks. The study equally concluded that the exercise posed some problems on the regulatory authorities. Finally, the researcher recommended that; the banks’ capital base should be stratified into investment and universal bank categories with each having a capital base according to the services it renders and its risk profile, necessary policy framework should be established to improve on the quality of bank management and the general security network.

CHAPTER ONE
INTRODUCTION
1.1     BACKGROUND OF THE STUDY
Banking institutions occupy a central position in the financial system of any nation and are essential agents in the development process of market economies. They are particularly relied on for the promotion of financial integration of the various parts of a country; bringing about improvement in the mobilization and utilization of funds for increased capital formation. It is obvious that banks must be viable and healthy and its stability and soundness provided for.
Based on this, the industry is usually heavily supervised and regulated by government or her agencies. The soundness and stability of the banking industry promote public confidence and provides liquidity and safety of shareholders funds. This is one of the reasons why government or her agencies demand reforms of the industry.

On this ground, the Nigerian Banking Industry had undergone remarkable changes over the years, in terms of the number of institutions, ownership structure as well as depth and breadth of operations. The industry has been witnessing prudential regulation and control in an attempt to address the backdrop of banking crisis due to highly under-capitalization, deposit taking banks, weakness in the regulatory and supervisory framework; weak management practices, and the tolerance of deficiencies in the corporate government behaviour of banks. Banking crisis usually starts with inability of the bank to meet its financial obligations to its stakeholder. This, in most cases, precipitates ruins on banks, the banks and their customers engages in massive credit recalls and withdrawals, which sometimes necessitate Central Bank liquidity support to the affected banks.

In respect of this, at the 273rd meeting of the Nigerian Bankers’ Committee held at the Central Bank of Nigeria’s headquarters in Abuja on July 6th 2004, the then newly appointed governor of the Central Bank, Charles Soludo in his maiden address, announced a 13 – point reform program for the Nigerian Banks. Among these reforms, is the requirement of Nigerian Commercial Banks to shore up their minimum capital base to N25 billion (through injection of fresh capital and/or mergers & acquisition) each with full compliance as at 31st December, 2005.
The primary objective of the reforms is to guarantee, an efficient and sound financial system. They are designed to enable the banking system develop the required flexibility to support the economic development of the nation by efficiently performing inter-mediation (Lemo, 2005). Thus, the reforms were to ensure a diversified, strong and reliable banking industry where there is safety of depositors’ money and position banks to play active developmental roles in the Nigerian economy.

Capitalization is an important component of reforms in the Nigerian banking industry owing to the fact that a bank with a strong capital base has the ability to absolve losses arising from non-performing liabilities. It resulted from deliberate policy response to correct perceived or impending banking sector crises and subsequent failures.

According to Soludo (2004), the banks have not played the expected role in the development of the economy because of weak capital base and as such, the decision to raise the capital base of banks was with the aim of strengthening and consolidating the banking system. He further explained that the “strengthening and consolidation of the banking system will constitute the first phase of reforms designed to ensure a diversified, strong and reliable banking sector that will ensure the safety of depositors’ money, play active development roles in the Nigerian economy, and be competent and competitive players in the regional and global financial system. The goal of the reform is to help banks become stronger players, and in a manner that will ensure longitivity and hence higher returns to shareholders over the time and greater impacts on the Nigerian economy. We strongly believe that the ultimate beneficiaries of the policy shift would be; the ordinary men and women who can put their deposits in the banks and have a restful sleep, the entrepreneurial Nigerians who can now have a strong financial system to finance their businesses, and the Nigerian economy which will benefit from internationally connected and competitive banks that would also mobilize international capital for Nigerian development”. Besides, it will stem the systemic distress that has continued to rock the system.


The call for recapitalization in the banking industry raised much argument among the bank regulators, promoters and depositors as if shoring up of bank’s capital base is a new phenomenon in Nigeria. The Banking ordinance of 1952 prescribed an operating licence and emphasized on minimum equity capital for all banks (Onoh, 2002: 321). Since then, raising of bank capital base has become the hallmark response policy of the Nigerian Monetary Authorities......

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Item Type: Project Material  |  Attribute: 92 pages  |  Chapters: 1-5
Format: MS Word  |  Price: N3,000  |  Delivery: Within 30Mins.
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