Government Regulation And The Development Of Banking Industry In Nigeria
This study is aimed at exploring and analyzing critically the structure of the Nigeria banking system and see how government regulation has contributed towards the development of the banking industry in Nigeria. A total of 134 respondents were selected from the population figure out of which the sample size was determined. The primary source of data collected was mainly the use of a structured questionnaire which was designed to elicit information on government regulation. The secondary sources of data were selected banks in Abuja metropolis, FCT, Nigeria. The data collected will be analyzed using frequency table, percentage and mean score analysis while the nonparametric statistical test (Chi-square) was used to test the formulated hypothesis using SPSS (statistical package for social sciences). The findings of this study suggest that the banking regulatory structure currently being used in Nigeria should be slightly modified. The institutionalized CBSA to which all banking supervisory authorities (including the Central Bank of Nigeria, the Nigeria Deposit Insurance Corporation and the designate of the licensed banks amongst others) should be empowered to stipulate minimum prudential standards ranging from entry requirements, thresholds for illiquidity and insolvency, to failure resolution options.
1.1 Background to the Study
As a result of the relative prominence accorded to the banking industry, no mention made of the economical development of any country (Nigeria not excepted) without reference to the banking sector, Thus, an attempt is made here (with respect to the principal purposes which this study is meant to serve) to bring to light a major determining factor (government regulation) worthy of consideration when a thought is given to the development of the banking industry.
Government regulation has helped tremendously to the development of the banking industry in Nigeria in the past decade to this present day, and it has also ensure towards building a good operational structure in the banking activities, especially as closely connected with the rate or degree of economic advancement of the country.
Moreover, in order to know how government regulation has enhanced the development of the banking sector, a brief highlight will be given to the Bank and other financial institution decree of 1991,among other regulations enacted by the government to control the banking system in the county. Therefore the main concern of this study will be based on the particular decree mentioned above.
1.2 Statement of Problem
The fundamental purpose of this study is to show how government regulation has contributed towards the development of the banking industry within the context of the Nigeria economy. In other-words, the study strives to explore and analyze critically the structure of the Nigeria banking system and see how government regulation has enhanced development in the sector.
1.3 Research Questions
For proper guidance and in-depth investigations of the research work, the researcher presented research questions which form major problems of the investigation these questions includes:
- Does government policy affect the banking industries?
- Do the relevance of government regulation affect the operation of the policies of the bank towards a positive direction?
- Are there other factors that enable banks to evaluate the best policy for banking development?
1.4 Objectives of the Study
The objectives of this study are:
- Government policy affects the banking industries.
- The relevance of government regulation affect the operation of the policies of the bank towards a positive direction.
- There are other factors that enable banks to evaluate the best policy for banking development.
1.5 Statement of Hypothesis
This research project is based on the null hypothesis (Ho) and the alternative hypothesis (Hi).
- Ho: Government policy does not affect the banking industries.
Hi: Government policy affects the banking industries.
- Ho: Changes in government policy does not affect the banking industries.
Hi: Changes in government policy affects the banking industries.
1.6 Significance of the Study
This study is very relevant or significant in that:
- It affords anybody who reads this project the opportunity of appreciating banking as an integral part of any nation’s economy.
- It will enable any banking business to consider government regulation as a determining factor of the banking industry development.
- It will give any prospective venture of banking business the opportunity of knowing the legal frame work of banking undertaking.
1.7 Scope of the Study
This study covers government regulation as it affects and banking in the Nigeria economic atmosphere. Thus, no attempt is made in its entirety to go outside the Nigeria situation.
1.8 Limitation of study
Some of the seemingly insurmountable problems encountered during the course of conduction of these researches are as follows:
Due to tight time schedule posed by the limited time interval as allowed by the school calendar for the academic session, there was virtually insufficient time to carry out an exhaustive or comprehensive study, particularly such as would enable for the collection of the required data from various (especially external) source.
Inadequate finance was another limitation posed on this research work. I really needed to invest enough amount of money for transport fares, good quality typing and binding etc.
Inadequate reference materials:
The consistent of reference materials are relevant or useful, textbook, journals, magazines etc. from which secondary data (which was the basic source of data for this study) are obtainable, however, some of this materials were not readily available in the school’s library.
1.9 Definition of Terms
This is the business of receiving deposit in current account, savings account or other similar account.
This is the business of receiving from the public on current account money which is to be repayable on demand by cheque and of making advances to customers
Conclusion and Recommendation
The Nigeria banking sector like in many other nations is being regulated. A principal rationale has been to ensure the safety and soundness of the banking system. The future holds a lot of opportunities and challenges for the nation’s banking system, especially with the emergence of globalized financial system made possible by modern information technology. In this regard, there is a strong need to have a sound regulatory system. While some school of thought opine that regulation is not a guarantee against bank failure, there is the need to quickly add that good regulation and supervision are necessary in order to minimize the adverse impact of moral hazard and relative price shocks on the banking system, thus decreasing the likelihood of bank failures and banking system distress
Based on the findings of this study, the banking regulatory structure currently being used in Nigeria should be slightly modified.
The modification which I propose is the establishment of a committee of Banking Supervisory Authorities (CBSA). The Institutionalized CBSA to which all banking supervisory authorities (including the Central Bank of Nigeria, the Nigeria Deposit Insurance Corporation and the designate of the licensed banks amongst others) should be empowered to stipulate minimum prudential standards ranging from entry requirements, thresholds for illiquidity and insolvency, to failure resolution options.
Also, banking laws, rules and Regulations should be harmonized by the CBSA for adoption and execution by all licensed banking institutions. The CBSA which should have an administrative secretariat should meet quarterly, if not more frequently.
The existence of the CBSA in line with the consolidation initiative would relate with the regulatory authorities of other nations in West Africa (as a take-off initiative) and this would ease cross border growth of banks within the sub-region. Requirements for cross-border mergers and acquisitions would be stipulated by CBSA in conjunction with the monetary authorities of other West African member states. Any bank in a member state should be able to establish branches or subsidiaries or associates provided they offer banking services within the sub-region. Other recommendations include:
- The enforcement of effective monitoring of bank returns.
- Enforcement of stringent minimum standards for the ownership and management of banking institutions.
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