The Globalization Of Finance And Its Implication For Financial Stability (A Case Study Of GBT Bank And UBA Bank Plc)
This work describes one of the major challenges of the present globalization and its effects on the banking globalization is now increasing recognized as central to the growth of market economic for banking sectoral this represents both a demand as well as a new landscape of business opportunity. Several years ago, main part of the banks did not consider the globalization problems relevant for their operations. Recently the bank began to realize the major impact of the globalization our the way of creating the banking risk in the future.
The banking management in the context of globalization represent one of the challenges of these days. Staring from literature in the globalization field in this work focuses on several relevant issues related to banking management. Based on these finding the study recommends that banks in Nigeria should not relent in their foreign counterpart in doing business in order to increase their foreign earnings.
Bank should also spend more on information and communication technology since this has the capacity of increasing their profit. This information technology (IT) should be used to localize all the branches to a single branch networking. In spending more on information and communication and very small aperture terminal (VSAT) technology and interview banking VSAT technology apart from making possible voice and banking. We further recommend that more bank should be opened in foreign countries in order to increase foreign participation in home country’s banking.
Table Of Contents
- Title page
- Approval page
- Table of contents
- 1.1 Background of the study
- 1.2 Statement of problems
- 1.3 Objectives of the study
- 1.4 Research questions
- 1.5 Research hypothesis
- 1.6 Significance of the study
- 1.7 Scope of the study
- 1.8 Definition of terms
2.0 Literature Review
- 2.1 Introduction
- 2.2 The evolution of globalization
- 2.3 The nature of financial globalization
- 2.4 The role of financial globalization and financial sector development in Nigeria
- 2.5 effect of globalization of the banking management
- 2.6 The role of central banks in a globalised financial system
- 2.7 The Nigeria banking reforms
- 2.8 Implication of financial globalization on the financial stability of deposit money banks
- 2.9 Challenges of financial globalization
- 2.10 Globalization and monetary policy
- 2.11 Risks and effects of globalization
- 2.12 Empirical review
3.0 Research Design and Methodology
- 3.1 Introduction
- 3.2 Research design
- 3.3 Sources/method of data collection
- 3.4 Population and sample size
- 3.5 Sample techniques
- 3.6 Validity and reliability of measuring instruments
- 3.7 Method of data analysis
4.0 Data Presentation and Analysis of Data
- 4.1 Introduction
- 4.2 Presentation of data
- 4.3 Analysis of data
- 4.4 Testing of hypothesis
- 4.5 Interpretation of result
5.0 Summary, Conclusion and Recommendations
- 5.1 Introduction
- 5.2 Summary of findings
- 5.3 Conclusion
- 5.4 Recommendations
The globalization scene in the twenty first country has witnessed a resurgence of international banking and holistic integration of business transaction with little or no restriction. These according to Goldbery (20120 have occasioned a tremendous growth in the liberalization of banking operations across borders.
Though, the international monetary fund (IMF) (2010) sees globalization as the growing economic and social interdependence of countries through increased volume of cross border transaction and improved technology, therefore the financial operations of any nation significantly translates into the socio-economic status of the citizens Eboh, Okanya, Uma (2010) and Uma, Obidike (2013) argued that globalization has increased access to capital inflow, technological transfer and strong bargain for improved technical and managerial workforce.
Globalization does not only broaden the nation’s economic fortunes but also exposes the nation to stiff competition and efficiency through huge capital inflow capacity building and improved service delivery.
1.1 Background Of The Study
They have been different deductions about what globalization depicts. Some related it to the scientist perspective economic and social political perspective while some view globalization from the information technology aspect but globalization under this research work is viewed from the banking perspective.
On this note there are so many definitions given to globalization by different authors globalization can be seen as a process of integrating economic decision making such as. Consumption investment and savings all across the world this is a process of creating a global market in which all nations are forced to participate. In other words globalization is a process of expanding economic cooperation among states and this does not necessarily imply future breakdown of boarding.
Globalization can also be defined as the integration of national economies through trade and financial transaction. It is a process that has tended to reduce the ability of micro economic policy to achieved its objective without the due consideration of countervailing affects of competing policies adopted by other nations. The effects of globalization on the Nigeria banking performance has been the outcome of several factors among which are the increase in the volume of international trade and capital flows, technological improvement in the communication and data processing and the deregulation of domestic market for information and technology, telecommunication technology tends towards the building of strong Nigerian banking system.
In order to aid its efficient and effective performance especially with the new reform of recapitalization of twenty-five, billion naira (N25,000,000,000).
All over the globe foreign banks has entered into countries and added another dimension to a stiff domestic competition and in the process significantly affecting the structure of domestic banking markets. This is particularly evident in the united states. Old banks have captured growing share of key market Rose (2016).
The profiles of the foreign banks that have entered into joint ventures with Nigeria banks are intimidating. They have the capacity and potentials to restructure the banking system of any country. The strategic alliances between Nigerian banking and foreign banks and the increasing resources of Nigerian banks to foreign markets to raise capital fund are signs of movement towards the globalization large extent aid a magnitude level of great performance in the industry and of course tending it to greater height.
Furthermore, globalization has transformed the Nigerian banking performance in a profound way by altering the size and structure of the firms that comprise it. Major banks can now extent their branches network beyond national frontier or built strategic base in foreign national financial centers by acquiring either local banks or subsidiary banks. The network of financial connections among bank and other financial institution is now embracing the global world.
Globalization has not only transformed the Nigerian banking system and or aid its performance, but also has a positive impact on wholesale financial markets as evidence by blurring off the traditional barriers between commercial banking and investment banking and asset management motivated by the boom in equity and bond market in high yielding instruments and the wave expanded or introduced into the field of investment banking by engaging in security operations.
Also globalization is simply viewed as the gradual evolution of markets and institutions such that geographical boundaries do not restrict financial transactions globalization of banking in any economy means that domestic banks have opportunities to engage in banking.
1.2 Statement Of Problems
The problems which this project work is interested in finding answer to are centered on the following:
- That globalization has doubtfully performed up to the task in positively affecting the Nigeria banking industry performance through its role of financial liberalization that is the presence of foreign bank in a particular country and the establishment of the local banks subsidiaries in foreign counties to aid international financial transactions.
- To view how foreign bank participation is associated with a reduction in profitability non interest income and overhead expenses of domestic efficiency and competition into the domestic bank industry.
- To examine how increased participation of foreign banks in the domestic banking system has served as instrument of macro economic reform to recapitalize and rehabilitate troubled banks outside the boost inefficiency and competitiveness of market operators.
- Also foreign banks entry into the domestic market heightened competition this might result to and worry that foreign banks will take away their business. But financial globalization has made it possible for innovation to spread quickly around the world. Those who skillfully adapt international best practices to local condition are most likely to succeed.
- And to know how globalization aids or facilities integration between both foreign and domestic financial institutions in the world and in particular, how globalization of banking in Nigeria has aided the domestic banks in raising capital in the international markets.
1.3 Objectives Of The Study
The major objective of this research wok is to examine the role of globalization end its implication on financial stability of banks in Nigeria, and the specific objectives of this study will be listed as follows:
- To examine how globalization has widened domestic banks marketability
- To examine the impact of globalization of finance on the financial stability of bans in Nigeria.
- To examine the effectiveness of the Nigeria banking system strategies in coping with the world competition.
- To examine critically, the impact of globalization on the Nigerian banking performance.
- To compare and contrast the experiences of the advance countries financial performance under globalization with that of domestic financial performance
- To appraise policy measure of government towards ensuring Nigeria banks benefit from globalization.
- To find out the extent foreign banks has penetrate Nigerian banking system.
1.4 Research Questions
For some of the objective of this study to be realized certain hypothesis must be stated and tested and then must be prelude by some questions. The following questions will be addressed in the course of this research work.
- To what extents has globalization of finance wideness domestic banks marketability?
- Is there any impact of globalization of finance on the financial stability of banks in Nigeria?
- Is there any effectiveness of the Nigerian banking system strategies in coping with the world competition.
- What is the impact of globalization on Nigeria banking performance?
- What are the similarities and difference between the experiences of the advance countries financial performance under globalization with that of domestic financial performance i.e Nigeria?
- What are the policy measures of government towards ensuring Nigeria banks benefit from globalization?
- To what extent has foreign banks penetrated Nigeria banking system?
1.5 Research Hypothesis
The conjectural statement of this research work in respect of the research question are as follows:
- Ho2: Globalization has no impact on the Nigerian banking performance
HA: Globalization has impact on the Nigeria banking performance.
- Ho: There is no impact of globalization of finance on the financial stability of banks in Nigeria.
Ho: There is an impact of globalization of finance on the financial stability of banks in Nigeria.
1.6 Significance Of The Study
The study shall serve as a reference point to students of banking and finance bank practitioners and policy formation in banking industry.
Through the study the inefficiency that exist in the banking operation are thrown opened to the public and researchers in the discipline. It also helps to understand how globalization could bring efficiency in services delivery to customers through the introduction of modern technology into banking operations.
Through the study, one shall be able to know why GTB bank Nigeria through the adoption of new technologies in its operations.
Furthermore, the end result of this research work would be germane and or imperative to academicians investors, financial institutions as well as the government who may be interested in making use of the information’s available there in. however, it will as well widened the knowledge and or the understanding of the generality of the people on how globalization policies positively or negatively influence their day today business operation and management.
Finally, it is as well important to note that, at the end of this study, reasons for the prevailing attitude of banks in Nigeria towards globalization through their performance appraisal would be known.
1.7 Scope Of The Study
The concept of globalization is so broad diverse and significance to the socio-economic scene of every nation. This study shall focus on the effect of globalization of finance end its implication on the financial stability of banks in Nigeria.
For the purpose of emphasis the research shall empirically focused on GTB banks, Plc and its profitability profile for the period of 2011-2017.
Finally, the nation’s economy shall be x-rayed. Using two variables such as foreign direct investment and gross domestic product and how the duo have affect banking operations in Nigeria.
1.8 Definition Of Terms
Globalization operationally is the mechanism of global economic, political and cultural integration. Banking operations operationally, encompasses all activities carried out by commercial banks in order to maximize growth profitability and economic survival.
2. Foreign Direct Investment:
foreign direct investment operationally, is an investment in a business by investor from other nations.
3. Gross Domestic Product (GDP):
Gross domestic product operationally, is the variable used to measure the economic health of the nation as well as the living standard of the citizens.
This implies to combine parts into whole. In this study integration means the combination of globalization and the Nigerian banking system to aid efficient performance.
This refers to the freeing of trade investment and capital follows between countries.
A bank is being defined as any institution which is carrying on the business of banking like, taking deposit, making payment and lending.
7. Financial Market:
This is a composition of institutional arrangement that facilitates the intermediation of funds.
It is defined as the study of the way in which national resources are used and how wealth they produced are divided and the application of the principles to the need and property of the society (LEZSON WEBSTER).
It is a bank business whose principle operations are concerned with the accumulation of the temporary, idle money of the public for advancing some to other for expenditure.
10. Bank Transfer:
Is a method of making payments in which payment made at any branch of any bank for the account of a payee with an account at any branch of the same bank.
11. Hedges Fund:
It is a fund used to eliminate or reducing risk by undertaking a countervailing transaction.
12. Multinational Trade:
A trade that comprise of several countries.
13. Financial Stability:
This is when there is a financial equilibrium in the economy and thus resistant to change.
14. Interest Rate:
This is the cost of borrowing or effective makes price
The recapitalization process whereby two or more banks merged so as to arrive at a capital base of twenty five billion or more.
5.0 Summary, Conclusion And Recommendations
This chapter present summary of key study findings, conclusions and recommendations suggestion for further research are also discussed. The data was analyzed and findings presented in tubules for easier interpretation. This chapter specifically brings out the discussion. Based on the study in chapter four. Based on the key findings a number of conclusions are drawn and policy implication made and further research suggested in the following section.
5.2 Summary Of Findings
In the last decades, countries round the world have become more finally integrated driven by the potential benefits of financial globalization.
One of the main benefits of financial globalization is the development of the financial globalization is the development of the financial sector financial markets become deeper and more sophisticated when they integrated with world markets increasing the financial alternatives for borrower and investors. Financial recruits operating in a global environment enable international risk diversification and facilitate consumption smoothing.
Although financial globalization also poses new challenges. The crises of the 1990s after many countries liberalized their financial system have questioned in part the gains of globalization. Countries become exposed to external shocks and crisis from contagion effects. In the initial stages of liberalization, if the right infrastructure is not in or put in place, financial liberalization can lead to increased risks. Moreover, in a financially integrated economy, policymakers have power policy instrument to conduct economic policy.
From the empirical evidence in the research, the researcher concludes that globalization is a silent tool for economic growth and development. Though Nigeria has witnessed economic growth as banking operations has created employment opportunities for the citizens but this has not translated into economic development resulting from high cost of doing business infrastructural deficiency and inability to domesticate the local raw materials to expand the economy hence the gross domestic product has been adversely affected. This indicates the argument of AJAYI (2011) that suggest that integration of domestic economic mechanism to enhance the standard of living.
In the light of the findings, the researcher recommend that:
- Foreign direct investment should be geared towards the diversification of creating balance between the services and manufacturing sections to increase local resource utilization economic sub-contracting and broadening of the economic fortunes.
- Finance and business environment reforms should be strengthened especially improvement of Nigerian basic infrastructure.
- Macroeconomic policy should be aggressively implemented to enable domestic banks compete favourably with their foreign counterparts.
- Trade policies in favour of export expansion should be encouraged
- Capacity building and entrepreneurial skills should be encouraged to improve employment and the nation’s gross domestic product.
- There is also need to reduce fiscal deficits and improve monetary management in order to prone down inflation rates and bring about a more competitive real returns on Nigeria asset vis a vis Nigerian’s trading pastures
- The private sector participation also needs to be strengthened to compliment governments efforts in the liberalization process of banking sector. However, the more private operations take advantage of the liberal policies of government in the financial sector, the more there will flow in, fresh foreign capital in form of equity and other portfolio investment.
- More fundamental is the need on the part of multilateral institutions including IMF and world bank to create a more supportive operating environment for private business and funding in support of long-term investors in infrastructure. In the face of increased capital susceptible to balance of payment difficulties in which case half should be supportive through provision of funds without strangulated conditionality.
- The banking sector also needs to seek up by adequate supervision and regulation. The in going reforms in the banking sector will help in this direction in no small measure.
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