The Effect Of Deregulation In Banking Industry On Nigeria Economy (A Case Study Of Intercontinental Bank Plc, Igbona Branch, Oshogbo)

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The Effect Of Deregulation In Banking Industry On Nigeria Economy (A Case Study Of Intercontinental Bank Plc, Igbona Branch, Oshogbo)


Chapter One


1.0 Introduction

In July 2004, the new governor of the central bank of Nigeria (CBN), professor Charles Soludo announced that the new minimum capitalization for bank in Nigeria is N25 billion (approximately) all bank are expected to comply by this direction by December 2005.

This announcement struck the banking section like a storm on a dark night. And its has left in its wake a heated debate on its appropriateness in relation to Nigeria banks and the current state of the economy. It is undeniable that this announcement brought with it a number of consequences.

As a result of the central bank of Nigeria (CBN) policy, banks across the nation have to strive for survival. Along the way, some banks liquidated, while some were acquired and others got merged.

Banking as a discipline and a profession has assumed a multi-skilled dimension due to its perceived dynamism in the word economic and social development.

In Nigeria, first bank ordinance was enacted in 1952 this to part an end to the mass features of banks witnessed between 1892 when African banking corporation (now first bank Nigeria) debated as the first established banking industry has become the most regulated sector despite the much – vaunted deregulation now prevalent in many countries of the word and Nigeria inclusion.

The intercontinental bank plc is our focus under this study.


1.1 Background of the Study:

Given the magnitude of banks problems which confronted Nigeria banking industries especially since the early 1990s, stagnant banks growth inadequate cash to meet their current obligation, giving loan to uncertified persons, militating the right of their customers (interest) and not fiduciary in managing the affairs of their customers, the importance of banking industries reform become paramount.

Therefore, there was need to remove policy distortion which had stalled banks progress. In particular, policy makers began to recognition more visibly the adverse effect of exclusive reliance in the set of policy instrument being enforced through cumbersome administrative control and regulation. It was rightly considered that failure to initiate reforms which would stress deregulation. If existing policy instrument would seriously jeopardize the long term growth and development prospects of Nigeria banks

Bank deregulation which involves appropriate realignment in capital structure, management, factors determine granting of the public and interest rate on loan policies (Base lending rate) was viewed as a tool for reducing undue Nigeria intervention in banking activities and providing relevant structure of incentives that would put the banking industries on the path of recovery and growth.


1.2 Statement of the Problem

The problem of this study is that despite deregulation in banking sector, banking in Nigeria are still to ascertain some objective of the deregulation, like levity handling of affairs of their customer, giving loan to uncertified person automated teller machine fraudulent act (ATM) and how there will be talked with aim of develop Nigeria economy. Hence, the watch word of this study is to pinpoint the factors that initiating the hall mark of the deregulation in banking industries not yet to be achieve.


1.3 Research Question

For the purpose of this study five (5) hypothesis are stated and tested.

  1. Is it the aims of deregulation in banking industry is to develop Nigeria economy?
  2. Does deregulation really contributed to the development of Nigeria economy
  3. What is the problem militating against deregulation in banking industries?
  4. Has deregulation in Banking Industries concern loan granted to individuals and corporate body?
  5. Do benefit from this deregulation?

1.4 Research Hypothesis

The above questions are required to test the following hypothesis.

  • Ho: there is no significant relationship between and development of Nigeria Economy and deregulation in banking industries.
  • Hi: there is no significant relationship between the development of Nigeria economy and deregulation in banking industries.

1.5 The Purpose of the Study

The study is carried out to reveal the effect of deregulation in banking industries in Nigeria economy. It’s also made it possible to know the effect that banking institute is having no economy whether it is development effect or its economy still stagnant. It bring rise in national income of Nigerians between 1930 and 1948, there was crying for more banks on part of Nigeria to complete with the expatriates in banking operation business.
Another reason for the massive banking development was purely economic.

The banking boom of 1947 to 1952 concealed with the period of activity of nationalists movement in Nigeria. They made the call that the major reason for under development of the country was her economy that was subjected to the British economic. It had the businessman to think of business in banking so as to replace the monopoly of the expatriates in the banking industries.


1.6 The Scope of the Study

The research work of this study includes the primary information from bank (intercontinental bank plc, Oshogbo, Igbona branch), the senior and junior workers of intercontinental bank plc Oshogbo, Igbona branch, coupled with the discussion on the underlying factors of the system of account, liquidity, profitability and visibility factors that can help economy of Nigeria to be developed, but most of the required data were restricted to certain point. The study will also describe the function and achievement of Nigeria banks after the deregulation of the banking industries.


1.7 Limitation of the Study

In the course of the study, we were faced with a lot of problems, which takes long time together the information required.

It took a lot of time before we can get co-operation of the staff in the banks.

It also takes a lot of time and stress to convey them that the information required; it’s not to spy out secret of the business.

They felt reluctant to respond and ignored certain question in the process.

The financial and time factor are also impeded the process.


1.8 Significance of the Study

In the aim of this study, the research work attempt to highlight the effect of deregulation in Banking Industries and how far it has been affecting their operations.


1.9 Definition of Terms

a. Monetary Policy:

Is a major economic stabilization weapon which involves measure designed to regulate and control the volume, cost and availability and direction of money.

b. Economy:

This is the financial unit or state of a country.

c. Banking Ordinance:

Was the first law banking system. It defined banking business also provide license for the bank they can start business operation.

d. Bureau De Change:

Is non- financial institution but it has been classified to deregulation foreign exchange also it’s to provide money or currency to small users.

e. Indigenous Banking:

Are bank owned by the Nigerian citizen. It was started with the National bank in 1933 and the bank was characterized by unhealthy competition.

f. Bank Liquidity:

This refers to the cost reserves or balance held by banks to make-up with their customer requirement.

g. Liquidation:

Means the term used to signify the process of winding up a company and thereby bringing to an end.

h. Profitability:

This is money gained on a business or advantages gained for some action lastly it are the different between cost of purpose or production and selling prize.

i. Convenience:

Bank services should be provide to customer without much regour or difficulties in other words, customers should enjoy banking services with ease.

j. Dealing Member:

This comprise those individual firms or corporate bodies licensed by the council of the exchange to stock, shares and others securities.

k. Promissory Note:

Is an unconditional promise in writing made by one person to another signed by the makers, engaging to pay on demand or after fixed or determinable future time a sum certain in money, to or to the order of a specified person or to bearer.

l. Role:

It is the importance or usefulness of something

m. Financial Institution:

This is the institution that use its fund chiefly to purchase financial asset deposit, loans, bonds and debentures as opposed to tangible assets.

n. Investment:

This is the purchase of security that offers safety of principal and satisfactory equal to risk.

o. Securities:

This is an income validity documentary by which the claim of holder is specialized property is secured.

p. Financial Intermediaries:

These are the people that act in the business transaction between the financial institution and the customers.

q. Capital:

This is the amount of money that is used to commence a business.

r. Industries Financing:

This is the raising of capital for farm through bank issues of loans and advance for the purpose of working capital expansion.


Chapter Five


Summary, Conclusion and Recommendation

5.1 Summary

The study sought to examine the deregulation of Nigerian economy with special reference to banking sector from 1994-2004. The definitions that are essentially involved in performing banking function like accepting deposits, trading, foreign services etc.

The research study tried to discuss about the establishment (origin) at banking institution in Nigeria dated to 1894 when bank of British West Africa later known as the standard bank limited later the emergence of first bank of Nigeria limited till 1917 when the colonial bank, Barclays bank how union bank of Nigeria opened branch in Nigeria.
However as regard the deregulation of Nigeria economy, the study discussed the genesis of Nigeria Economy crises having discussed about the deregulation of economy as those fiscal and monetary policy measures which seek to remove regulatory control on the activities of economic factors in order to enhance competitiveness in the market.

The brief history of Nigeria economy during the oil boom in the 1970s, how Nigeria was turn own of the time as a result of not utilizing the “wind fall” from oil boom to diversity the base of measures adopted as far from 1994-2004 to find lasting solution to the external imbalance and indebtedness. Some of these measures include: adoption of the structural adjustment programme (SAP) during the second half of the year (1986) which is aimed at restructuring and diversity the production base of the economy in order to reduce dependence on the oil secret and on imports. To restore and achieve fiscal and balance of payment liability over the period. The adoption of a realistic exchange rate policy coupled with the liberalization on the external trade and payment system etc.

The study also examined another measure the second tier foreign exchange market (SFEM) now foreign exchange market (FEM) as at 1994, which took off on 26th September, 1986 as (SFEM). The main aim is to evolve a realistic market determined exchange rate of the naira in order to achieve the reduction on the balance of payments, effect national resource allocation eliminate the pervasive distortion in the production of domestic substitutes and exports and pave ways to move reliant and sustainable growth.


5.2 Conclusion

The economy and lay a solid foundation for self sustaining growth.

The research gives insight to all core element of deregulatory process which include interest rate deregulation trade and exchange rate liberation regimes, privatization of public enterprises and commercialization of public utilities. How practitioners have in a dynamic way become highly responsive to the altering full between demand and supply schedules in the market and the remarkably high physical expansion in the banking system and the typical probing search light on the industry, access to information (both by the owners and users of investible funds) have improved substantially which led to demand for attractive deposited rate which in turn have become competitive tools among banks.

More so, easy accessibility by the importers of liberalized foreign exchange which serves as advantages of the liberalized disbursement process. The areas where deregulation had indirect impact banking system which is privatization and how on the balance. The deregulation of foreign exchange is a positive development in the economic history of Nigeria. The provision in the 1988 budget as presented by the federal government.

However, the research study also it has been shown that deregulation is highly cherished by banking practitioners. This is natural for every being in full appreciation of relative freedom. At the same time, we fully appreciate the fact that no economy in the world can afford to leave its financial system. This is especially so in less developed countries like Nigeria with exceptionally high incidence of imperfections.

Therefore essential that an effective and prudential supervisory frame work be in place to police the ver growing banking outlets. The group repeats that such supervisors needs not be contradictory to the broad framework of deregulation. And to avoid such conflict requires a dissemble, feasible and workable macro economic model through such a model, policy markers could effect the required macro-economic stability under which prescription tested elsewhere could be applied it will also enhance the ability of policy makers to remain steadfast to preferred options because of our conviction that half-hearted programmes always fall short of optimal expectations. Nigeria government between 1994-2004 has helped the economy and can still do better if executed or implemented as the following positive results can be achieved.

  • Self reliability
  • Growth of economy
  • Business growth
  • Balance of trade that is large export and less imports
  • Increase in employment reducing the dependant rations
  • Foreign exchange market has brought as in balance of market determined exchange rate as the rates solving demand and supply problem.
  • Both structural adjustment programme (SAP) and second tier foreign exchange market (SFEM) have enhanced administration and allocative efficiency of government as access to foreign exchange by industries and other users.

On the other hand, attempt is made to look at the adverse of SAP which can bring about inflational pressure generated by the high cost of foreign exchange. The prices of inputs and finished good hand inevitably increased in response to increase exchange rates.

Finally, the measure (both SAP and SFEM) if well executed and honestly implemented will see Nigeria out pf her critical economic situation.

The genesis of the Nigeria economic problems in banking institutions did not occur over night, it took a long gestation period before it eventually surface or was recognized by the authority. Any efforts directed to arrest the situation should therefore, have a long run perspective. It is easier to destroy a house than to build a new one.


The Effect Of Deregulation In Banking Industry On Nigeria Economy (A Case Study Of Intercontinental Bank Plc, Igbona Branch, Oshogbo)


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The Effect Of Deregulation In Banking Industry On Nigeria Economy (A Case Study Of Intercontinental Bank Plc, Igbona Branch, Oshogbo)


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