Abstract
The study
examines bank capital adequacy and economy development in Nigeria. The
objective of the study is to find out the reason for the review of capital base
of commercial banks in Nigeria and to find out the determinants of bank’s
capital adequacy. In this study, personal interview, questionnaire, internet
and textbook were employed in the collection of data. Data collected were
presented in tables and percentages form. Percentage methods were used to
analyze data collected while the chi-square statistical model was used to test
for the hypothesis formulated. The study revealed that new capitalization rate
will increase the output capacity in Nigeria. Based on the findings, the study
recommended that the Federal Government should give a strong competition to the
commercial banks on the issue of moving the nation forward. This they can do by
way of giving out loans to people at a very reasonable rate of interest through
any of the designated development bank.
TABLE OF CONTENTS
Title Page i
Certification ii
Dedication iii
Acknowledgements iv
Abstract v
Table of
Contents vi
Chapter One: Introduction 1
1.1
Background to the Study 1
1.2
Statement of Problem 2
1.3
Research Questions 2
1.4
Objectives of the Study 2
1.5
Statement of Hypotheses 3
1.6
Significance of the Study 3
1.7
Scope of the Study 4
1.8
Limitations of the Study 4
1.9
Definitions of Terms 5
Chapter Two: Review of Related Literature 6
2.1
Introduction 7
2.2
Historical Development of Commercial Banking in
Nigeria 7
2.3
What is a Bank? 7
2.4
Commercial Banking 8
2.5
Functions of Commercial Bank 9
2.6
Bank Capital and Economic Development 12
2.7
The Researcher’s Perspective of the N25BN
Capitalization Base 15
Chapter Three: Research Method and Design 18
3.1
Introduction 18
3.2
Research Design 18
3.3
Description of Population of the Study 18
3.4
Sample Size 19
3.5
Sampling Technique 19
3.6
Sources of Data Collection 19
3.7
Method of Data Presentation 19
3.8
Method of Data Analysis 20
Chapter Four: Data Presentation, Analysis and
Interpretation 21
4.1
Introduction 21
4.2
Presentation of Data 21
4.3
Data Analysis 21
4.4
Hypothesis Testing 34
Chapter Five: Summary of Findings, Conclusion and
Recommendations 40
5.1
Introduction 40
5.2
Summary of Findings 40
5.3
Conclusion 41
5.4
Recommendations 42
References
44
Appendix I 46
Appendix II 47
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The
downturn in the nation’s economy ever since termination of the Republic in 1984
and coming of the military thereafter is no longer news. Series of efforts by
the various government whether sincere of insincere towards improving the
betterment of the economy are also appreciated. Of importance to any economy is
the financial market which comprises of both Capital Market and Money Market of
lich commercial bank is an integral part. Ever since the establishment of the
first commercial bank more than a century ago, the industry has witnessed a lot
of topsy-turvy depending on government policies and regulations. Years before
introduction of structural adjustment program (SAP) in 1986, there were few
banks working in a regulated environment and with the coming of SAP the
whole economy became porous courtesy of the regulation syndrome occasioned by
preaching and teaching of SAP. What became the order of the day were the
proliferation of banks and other
financial institution. The banking sector was so bastardized that every nook
and corner there sprang up banks. What is witnessed today is that these banks
are in form of distress, which is now history.
1.2
Statement of Problem
The
importance of bank capital adequacy in a country cannot be over emphasized.
Commercial banks are supposed to be one of the agents by which the nation’s
economy could be rejuvenated (make more lively or useful). But from the angle
of the new Governor of the Central Bank of Nigeria, the banks rather than being
an agent of boom to the nation have been agent of doom. They refuse to pay the
economy, but rather inflict pain on the economy. They are supposed to play in the
achievement of macroeconomic objective of maintaining price stability and
reduction of unemployment in the economy.
1.3 Research
Questions
1. What
are the sources and uses of banks’ funds?
2. What
is bank’s capital adequacy?
3. What are determinants of bank’s capital
adequacy?
4. How are the roles of bank supervision and
examination adequately being carried
out in Nigeria?
5. What are the reasons for the review of the
capital base of commercial banks in Nigeria from N2hn in May 2004 to N25bn in
June of the same year?
1.4
Objectives of the Study
1.
To highlight the sources and uses of bank’s funds
2.
To find out bank’s capital adequacy
3.
To find out the determinants of bank’s capital
adequacy
4.
To find out how roles of bank supervision and
examination adequacy being carried out in Nigeria.
5.
To find out the reason for the review of capital
base of commercial banks in Nigeria.
1.5
Statement of Hypotheses
Hypothesis One
Ho: Inadequate
bank capital base is not one of the economic developments.
HI: Inadequate bank capital base is one of the economic
developments.
Hypothesis
Two
Ho:
N25bn capital base will not make
Nigerian commercial banks to be active to their responsibilities as one of the
key agents needed to achieve more economic objectives.
HI: N25bn capital base will make Nigerian
Commercial Banks to be active to their responsibilities as one of the key
agents needed to achieve more economic objectives.
1.6
Significance of the Study
It is
hope that this study will be of benefit to the government, commercial banks and
the society at large to know there responsibilities in bank adequacy and
economy development.
1.7
Scope of the Study
The
project work covers bank capital adequacy and economy development in Nigeria
and effort will be made to study the contribution of the commercial banks to
the national economy growth and development.
1.8 Limitations
of the Study
It
must be acknowledged that an error proof research work is hard to come by. Most
especially that the basis for academic research is to find out about such
errors with a view of correcting them or improving of such work. Therefore it
is expected that this research work might not be an exception.
i. The scope of the study is wide and there
s likelihood that justice might be done to all the years under the period.
ii. Secondly, the variables that constitute
basis for economic development is numerous and such the research might he
limited to those that the bank capital has direct effect on.
iii. There may be unavailability of data for
some part of the period under consideration.
iv. Another limiting factor might be financial
constraint as well as time constraint. However, attempt will be made to bring these problems to the barest minimum.
1.9 Definition of Terms
Bank: A place where one can store, deposit,
stock, money
and valuable documents for further usage.
Capital: Assets, fund, wealth, principal
investments of a nation’s resources
Adequacy: Sufficient fund that satisfies the
need of an economy.
Economy: The financial system of a nation
resource
Capital market: The money base of the nation, where sales of stock and
security is traded
Money Market: Trading of currency
Commercial Bank: Store house solemnly for the purpose
of profit making.
Inadequate: Insufficiency of fund in a nation,
or too little fund in circulation to meet a nation’s needs.
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