Study Of The Impact Of Universal Banking In Nigeria Financial System
The study of the impact of universal Banking is one of the critical for banks Nigeria to attain greater light. This borders most no the effect of the New concept in Nigeria banking system that tends to remove the functional barriers between commercial and Merchant banks, and consequently empowers the bank to undertake part from their conventional banking business, capital market operations and insurance services.
The chapter I stresses on the introduction. It equally deals with the background of study statement of problems, the objective of was based on exhuming the overall performance of the Nigeria banking system prior to the introduction of universal banking, research questions, significance and hypothesis to test.
On chapter 2, the literate review was highlighted.
Chapter three (3) deals with the research design and the primary and secondary data.
Chapter four (4) stressed on the presentation of data and analysis. While chapter 5 compresses of the condition with the above procedures, the research copies to carry out the research work successfully.
1.1 Background of the Study
The performance of the Nigeria banking sector has been a serious concern to the generality of Nigeria. Such Nigerians includes but are not restricted to politicians, the military, the academic community , industrialist , traders, and even the peasant community. As one reflects on the present state of the sector, one cannot but come to the sad conclusion that all is not well.
Actually, the method of expressing the dissentient within the banking sector may be varied but there is umainity in feedings. These feelings have one interpretation, which can be described in a polite language as bewilderment at the modes of operation of banks.
The questions that readily comes to mind is encapsulated in one sentence; what is wrong with our banking sector ? other questions fact draws from this includes.
- Is the problems that of management ?
- Is the problem that of poor regulatory policy by the controlling authorities ?
- Is the Nigeria banking environment inherently defective ?
Whatever the reasons that can be adduced for the unimpressed performance of this subsection, one thing is crystal clear, the banking sector is sick and may have lapsed into comma, therefore a serious surgical operations may be required to revitalize and sanitize it.
Furthermore, inspite of drastic changes that took place in the Nigeria Banking sector within the last decade in the area of institutional framework, legal and regulatory financial, the overall performance of this industry can be said to be grotesque, absend and in congruous with the expectation of Nigerians. (Emekewue, 2003) .
With the ever – increasing deregulation and liberalization of the financial system and the revolution in information technology, the Nigeria economy cannot but be affected by the globalization of the world economy. It will be faced with foreign competition for it is handily position for Nigeria to benefit from position result this phenomenon, such as capital flows, it mater have a health and sound financial system and institution with the capacity to play the global gave efficiently and effectively (CBN) Ballion 2003
Moreover, within the context of globalization, deregulation and liberalization, the preference will before a system that permits unfettered choice which is a vote for the universal banking, where the financial bankers between banks are removed and scope and operation of banks enhanced.
This, the concept of universal banking will allow banks the authority to decide on its portfolio of business, select appropriate delivery channels and faculties within an appropriate and applicable regulatory framework. The distinction between money, capital market and insurance business is survived, and the emergence of large financial conglomerates and banking group will be encourage.
1.2 Statement of the Problem
The banking crisis that gives rise to the failure of may banks has brought the venerability of the banking sector to constant focus. The failure may banks in fail country has not only posed integrity question but has greatly reduced the confidence, which is the greatest assets of banks.
This the researcher intends to study and examine the impact of the universal banking in Nigeria financial system and to make appropriate recommendation for optimum performance
1.3 Purpose / Objective of the Study
The strategic importance of the financial system cannot be over emphasized in every economy. (Anyanwu Okoro, 2003) . This continuos emphasis stern from very sensitive nature of the financial which control a substantial interest in the system..
Hence, the objectives of the research are :-
- To examine the overall performance of the Nigeria banking system prior to the introduction of the universal banking as a foundation in justifying its relevance to the nations financial system.
- To find the problems that will be faced by the other participants in the financial system (Capital Market operators and the insurance industry )
- To find the problem that will confront the regulatory and supervisory authorities in performing their statutory duties.
- To find the short carryings associated with the concept of universal banking in the Nigeria financial system.
- To find the benefit that will come from the introduction of the universal banking to the financial sector.
- Finally to recommend the application or not of the concept of universal banking in the Nigeria financial system.
1.4 Research Questions
The researcher has formulated the underlets questions which according to he will provide the basis of carrying the research in line with the objective of the study.
- What is the overall performance of the banking industry prior to the introduction of the universal banking.
- What are the problems that will confront the regulatory and supervisory authorities under the universal banking system?
- What are the problems that will be faced by the other participant in the nations financial system ?
- What are the benefits as associated with universal banking ?
- What are the shortcomings associated with universal banking ?
1.5 Research Hypothesis
The following research hypothesis formulated by the research in the course of the investigation .
- H0: The performance of Nigeria banking industry prior to the introduction of universal banking is not encouraging .
H1: The performance of Nigeria banking industry prior to the introduction of universal banking is encouraging .
- H0: The introduction of universal banking can not create problem of competition among the other service providers in the Nigeria financial system.
H1: The introduction of universal banking can create problem of competitions among the other service providers in the Nigeria financial system.
- H0: The emergence of universal ably will not pose serious regulatory and supervisory problems to the authorities concerned.
H1: The emergence of universal will not pose serious regulatory and supervisory problems to the authorities concerned.
- H0: Nigerian financial system cannot benefit greatly from the application of universal banking system.
H1: Nigeria financial system can banking greatly from the application of universal banking system.
1.6 Significance of the Study
Following the approved in principle of the adoption of the concept of universal banking in Nigeria, eminent Nigerians, policy make participants and the operators in the nations financial market and the general public have been engaged in series of covering and diverging views concerning the suitability or otherwise of the universal banking system in the nations financial system. Hence the research work will be of immense benefit to the banking industry where the concept in question will b noted. Also capital market and insurance operators will benefit from the research work immensely (in no small ways).
Moreover, the nations regulatory and supervisor authorities will equally benefits greatly from this wok. Finally the students, other researchers and the interested public can benefit from this wok.
1.7 Scope, Limitation and Delimitations of the Study
As stated earlier the importance of sound and a stable financial system can not be overemphasize as a diving force in any progressive economy. Moreover the banking system being the most sensitive subsection in any financial system can also not be ignored. Hence, the research was intended to limits its analysis on the study of the impact of universal banking in the nations financial system with financial attachment to First Bank Nig PLC within Enugu, (First Bank Nig PLC, Officers of regulatory and supervisor authorities etc.)
In carrying out the research, the researcher encountered numerous problems that militated in smooth and sound operation of the work.. Notably among the was finance and time constraints. However, the researcher was of the opinion that this limitations will not have a significant in; influence in the findings of the work.
In embanking on this research work, and bearing in mind the component of Nigerian financial system, the researcher suffers the following delimitation:-
(i) None response:
Many people that would have supplied valuable information could not be researched due to some logistics problems.
(ii) Administrative bottleneck:
The researcher could not get the required information from the concerned people due to the fact that such information were said to be conformed to official consumption only.
1.8 Definition of Terms
The researcher in anticipation of the importance of the work to non – banking and Finance based disciplines has therefore undertaking the explanation of some related terms and terminology as it issued in the work. The undertaking of the terms will afford the interested parties the opportunity to understand the work in all its ramifications.
1. Banking System:
This is the aggregate of the banking establishment in an economy. In this was the term should apply to commercial and merchant bank only.
2. Financial System:
This is the aggregate of all the banking system, insurance industry, capital market operators and the relevant regulatory and supervisor institutions.
3. Regulatory And Supervisory Authorities:
They operations of the institution under this jurisdiction, CBN for Banking system, SEC for capital market NAICOM for insurance industry.
4. Universal Banking System:
This is a new concept in the Nigeria banking system which tends to remove the functional barriers between commercial Merchant and consequently powers of the bank to undertake apart from their conventional banking business, capital market operations and insurance services.
5. Financial Conglomerates:
This is a group of financial based serve provides identical in all respects; and controlled by holding company.
6. Globalization And Liberalization
This is the state of mutual interaction and coming together of the global economy where emerging practices, concepts, and conventions that have found fooling in other economy are brought to other economics.
This is yet another economic policy that tend to remove the obnoxious and retrogressive policies that inhibits free movement of goods and services.
7. Financial Market:
This is the market or any contact arrangement whereby the sellers and buyers of varying degree of financial obligations can meet in order to facilitate exchange.
8. Principle Crisis:
This is the situation whereby the financial system is characterized by distress failure and unresponsive to its corporate existence.
This is a system that allows the force of demand and supply to determine the supply, prices and quantity of financial services .
10. Financial Interdiction:
This is the process of mobilizing fund from surplus economic unit and advancing the same to the deficit unit.
Summary, Conclusions and Recommendations:
This chapter summarizes the findings on study of the impact of universal banking in nigeria financial system using first bank plc, enugu state as case study. The chapter consists of summary of the study, conclusions, and recommendations.
5.2 Summary of the Study
In this study, our focus was on study of the impact of universal banking in nigeria financial system using first bank plc, enugu state as case study. The study is was specifically focused on examining the overall performance of the Nigeria banking system prior to the introduction of the universal banking as a foundation in justifying its relevance to the nations financial system, To find the problems that will be faced by the other participants in the financial system (Capital Market operators and the insurance industry; To find the problem that will confront the regulatory and supervisory authorities in performing their statutory duties; To find the short carryings associated with the concept of universal banking in the Nigeria financial system, To find the benefit that will come from the introduction of the universal banking to the financial sector and recommending the application or not of the concept of universal banking in the Nigeria financial system.
The study adopted the survey research design and randomly enrolled participants in the study. A total of 100 responses were validated from the enrolled participants where all respondent are staff of first bank plc, Enugu State.
With respect to the analysis and the findings of this study, the following conclusions emerged;
Finance and society are two side of a survival coin. Under the growing commercialization, universalization and globalization numerous financial products and services have emerged and developed perpetual relation in all sphere of life. With fast moving economies and growing economic appetite it became paramount for banks to adopt matching pace in order to fulfill the global social and economical needs. It has been found that in many developed economies universal banking have proved their importance and responded efficiently to the customer demand and played vital role in economic development and served as an importance source of external fiancé for enterprises.
Nigerian financial sector is orthodox and very much influenced by the British rules and is relatively banking oriented and are been the primary supplier of financial services. But now banking scenario in Nigeria has changed due to globalization and strategy of universal banking became dominant practice. To meet the economical obligation in changing and diversifying universal financial galaxy, the Nigerian banking industry adopted the philosophy of ‘big size fits well’ and thus financial conglomerates through mergers and strategic acquisitions among bank and non banks have emerged and implicitly conveys the futuristic fact. In this paper, an attempt has been made to explore potential of multipurpose financial institutions / universal banking in respect to Nigerian market and their future in long run in deregulated an intensified competition among banks and form of non banking financial intermediaries and in addition, have analyzed the strength, weakness, opportunity and threat of Universal Banking (UB) in nigerian context.
The study found that universalisation contributes to efficiency save cost but not significantly. The study found that universally very few universal banks have investment banking arms with enough strength to stand on their own. After financial crises the investment banking arms of large size international commercial banks dominated the key market such as bonds, currencies and commodities due to decline in pure wholesale banks. It is found that private universal banks have higher efficiency and productivity in urban area due to providing large number of diversified services and financial products under one roof but have limited penetration in semi urban and remote area and paying high cost which has adversely effected their growth. Social sector banks on other hand have better penetration and advantage of geographical spread but with high cost and NPA which impacted its margin and growth. It is found that private, foreign and public sector banks have conflict of interest. Private and foreign banks have profit motive and public sector banks have social motives and thus have distinct approach and consequences.
It is found that most of the universal banks with subscale investment banking arms will not be in position to find buyers nor they will be in position to wind down their business without incurring losses due to the contract in which they have entered that produce risk to the banks such as swaps or other derivatives which can last 20 years or more. Such positions and situations are not easily managed and their creators are forced to maintain hedging or managing the risks. It is also found that at a time of winding down the business it is harder to attract and retain investors and employees. Such kinds of problems suggest regulators ought to look for more subtle interventions than simply carving banks up. Further regulators have to specify how big investment banks can be compared with commercial banks.
Apart from all regulatory shortcomings and odds, Nigerian financial market have untapped potential and have space for all competitive banks to grow. Nigerian banking sector day by day becoming more competitive, efficient and innovative in comparison to multinational giants. The study concludes with the fact that concept of supermarkets / multipurpose financial institutions / universal banking is progressive and competitive. UBs have played, are playing and could play a significant role in nation’s economic and social development and their competition will be advantageous to the end users. Future of such banks in long run deregulated and in intensified competition is expected to be safe.
Generally it is found that society trust public sector banks in comparison to private or foreign banks. Thus public sector banks have to explore the potential of the trust and have to transform themselves into efficient universal banks. Social sector and private UB must launch attractive and protective financial product, services and financial schemes which may be flaxy and tax saving. They also motivate and properly guide society to invest their ideal money for better growth and return in future. They must develop protective ring fence in which they have to maintain enough capital and liquidity in order to support each business without any discrimination. All the UBs have to be transparent and loyal to the customer and have to develop confidence in society in order to attract investment in their banks. Regulators and Regulatory bodies have to be effective and efficient in implementing the policies, rules and regulation time to time in order to control the financial crimes.
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