crisis that has rocked the Global economy in the past few year has been nothing
but of great interest to governments, experts and scholars in different fields
of study worldwide. Several phrases have been used to describe the situation.
Indeed names like; Economic Depression, Global Meltdown, Economic Downturn, Economic
Recession, and Economic Crunch and so on are no strangers in both the local and
international prints and electronic media and they all tend to describe the
same phenomenon – a slowdown in economic activities globally.
it all started in the United State of America with the sub prime mortgage
crisis, it has continued to spread across Europe and other parts of the world
with its adverse consequences. This crisis has led to the collapse of many
banks and other international financial institutions and even rendered an
entire nation bankrupt.
Nigeria, the banking sector appears to have weathered the storm due to a number
of factors amongst which include the fact that our financial system is not
fully integrated into the world’s financial system. This however does not mean
that the Nigerian economy is completely immune from the crises.
is on this premise that the research was conducted, in order to find out the
relationship between the present Global Economic Crisis and the performance of
questionnaires containing scale rated options were employed to get facts from a
carefully selected audience. The following interested findings emanated from
the analyses carried out.
the crises, Nigerian banks still remain the best option to customers for maintaining
cash deposits. Services such as: money transfer, customer service, facilitating
of contracts through the provision of indemnities and guarantees, and promotion
of exchange, through clearing and third party claims settlement are still being
performed by the banks effectively and efficiently.
banks have become more careful in granting credit facilities which may have
made bank credit more difficult to access. These have potent adverse effects on
both the yearly results of banks and to SMEs who rely heavily on bank credits.
banks may have started showing signs of illiquidity amongst which are the five
(5) banks that were recently affected.
order to rescue the situation, the researcher has made the following recommendations;
recapitalization, merger, take-over, acquisition and provision of guarantees
for the interbank market by the CBN in order to restore the confidence of banks
and the banking public.
it has been discovered that the overall effect of the current Global Economic Recession
on the banking sector is potently adverse. The Chi-Square (X2) test
was applied in testing the three hypotheses that were put forward and all three
alternative hypotheses were accepted.
Table of contents
CHAPTER ONE (1)
1.1 Introduction 1-2
1.2 Statement of the Problem
1.3 Objective of the study
1.4 Significance of the Study
1.5 Research Questions
1.6 Research Hypotheses
1.7 Scope and Limitation of the Study
1.8 Definition of Terms
CHAPTER TWO (2)
2.0 Literature Review
Background of the Current Meltdown 8-13
Models of Economic Depression in View 13
Great Depression of 1930 and the Banking Sector in US 13-15
2.2.2 The US Economic Depression of 1979 and
Solution Proffered 15-16
2.3. Turkey and Its Economic Crises
2.4 The Nigerian Economy and the Banking
Sector under Review 17-19
2.4.2 Causes of Economic Financial Crisis 19-22
2.4.3 Africa and The Global Financial Crisis 22-24
2.4.4 The Effect of Financial Crisis 24-29
2.5 Review of Economic Growth Policies in
2.5.1 Economic Development through Export of
2.5.2 Economic Development through Public Sector 31-32
2.5.3 Import Substitution Industrialization (ISI) 32-33
2.5.4 The Indigenization Policy
2.5.5 Structural Adjustment Programme
2.5.6 Guided De-regulation Economic Reform (GDER) 36-39
2.6 Banking Origins
Early Uses of Banking
of Banking in Nigeria (Pre-Independent Period) 41-43
and Steady Post-Independence, Foreign Dominance 43-44
2.6.4 Oil Boom, Government as Banker
2.6.5 Banking under the Structural Adjustment
Programme (SAP -1986) 46-47
2.6.6 World Wars, Depression and Collapses
2.7 Functions of Banks
2.8 Power over Banks (the Central Bank) 48
2.8.1 Functions of the Central Bank
2.8.2 Other Banks
2.8.3 Commercial Banks
2.8.4 Wholesale or Merchant Banks
2.8.5 Investment Bank
2.8.6 Mortgage Banks or Savings and Loans
2.8.7 Non-Banks Providing Banking Services 51-52
2.9 Universal Banking (Origin)
Banking in Nigeria
2.9.2 Banking Regulatory Framework
and Strategy of Monetary Policy 53-54
of Monetary Policy
Rendered by Banks
of Access Bank
3.1 Research Methodology 60
3.2 Research Design
of a Good Research Design 62
Types of Research Design Employed For the Research 62-63
Research Design Symbol
3.3 Study Population
3.4 Sample and Sampling Technique
3.4.1 Sample 64
3.5 Data Collection Instrument 64-65
Validity of the Research Instrument 66
Reliability of the Research Instrument
Method of Data Collection
Method of Data Analysis
of The Methodology
CHAPTER FOUR (4)
4.1 Data Presentation, Analysis and
4.2 Data Presentation, Analysis and
4.3 Analysis of Questionnaires
4.4 Test of Hypothesis One (1)
4.5 Test of Hypothesis Two (2) 86-88
4.6 Test of Hypothesis Three (3)
CHAPTER FIVE (5)
5.1 Summary, Conclusion and Recommendations
I Letter of Request
Recession is a general slowdown in
economic activities over a sustained period of time or a business cycle
contraction. An increasing commodity and energy prices and a disruption in the
financial and capital market characterize a recessionary economy. As the topic
imply “global economics recession in banking industry the researcher intend to
contribute his own knowledge on recession. The word “recession” is a general
slowdown of an economic activity over a sustainable period of time or business
cycle contraction. Historically, The first recession can be traced back to 1930
when the great economic down turn ever experienced in global economy took
place. This lasted from 1929 to 1931.Little wonder why it is referred to as
“the great depression of the 1930s
The current economic crisis have been
tagged numerous name like; Economic Meltdown, Economic Depression and so on.
Whatever name it is called, it simply means a gradual slowdown in economic
activities globally. The most recent one, which has spread to other part of the
world, started in 2007 in United State of America due to unrestricted lending
to sub/prime mortgage. The reasons for this crisis are varied and complex, but
largely it can be attributed to a number of factors in both the housing and
credit markets, which developed over an extended period. Some of these include:
the inability of homeowner to make their mortgage payments, poor judgment by
the borrower or lender, speculation and
overbuilding during the boom period, risky mortgage products, high personal and
corporate debt levels, financial innovation that distributed and concealed
default risks, During recession many macro economic indicators vary in similar
ways, production as measured by Gross Domestic Product (GDP), employment level,
investment spending, capacity utilization, household income and business profit
from various Governmental and non-governmental bodies like: the International
Monetary Fund (IMF), World Bank (WB), and the Central Bank of Nigeria (CBN) and
so on, all tend to be predicting and forecasting an impending and gradual
slowdown in other developed nations like Britain. The developing countries of
Africa are not left out either. For instance, the Central Bank of Nigeria had
recently released a report, forecasting an anticipated slowdown in economic
growth in 2010. It is therefore pertinent to carry out an empirical assessment
of the effect of the current global economic recession on the various sectors
of the Nigerian Economy especially the banking sector. This will help to
establish a roadmap to be adopted in rescuing the economy from total collapse.
Of major interest to the researcher is the Nigerian-banking sector, hence the
topic: The Global Economic Recession: Its impact on the banking industry in
1.2 STATEMENT OF THE PROBLEM
role of the banking industry in the Nigerian Economy cannot be over emphasized.
Banks are part of the infrastructure of the country within which development
takes place. They certainly help in the shift from a subsistence economy to a
cash crop economy by encouraging both the use of money and confidence in it.
They provide a convenient means of making payments between people easy by the
use of cheques and also provide safe places for depositing money.
they aid development by their ability to make loans. Undoubtedly, banks and
other financial institutions especially commercial banks play the all important
role of intermediating funds between the surplus and deficit sectors of the
economy which in turn aid development of the latter.
the banking sector is an intricate part of the economy and this means it does
not operate in isolation. Therefore, it is likely to be plagued by crisis in
the larger economy. Consequently, the desire to empirically study the impacts
of the current Global Economic Crunch on the banking sector is borne out of the
realization of the importance of the sector to the Nigerian economy
1.3 OBJECTIVE OF THE STUDY
The research work will be
conducted deliberately to establish the impact, adverse or otherwise of the
Global Economic Depression on the banking industry in Nigeria. The aim of this
research study therefore is to examine the impact of the current global financial
crisis on the Nigerian banking industry. The outcome of this research study is
expected to assist Nigerian policy makers, banks management teams and banks
regulatory bodies in Nigeria in the following ways.
know the major causes of the financial crisis in Nigeria.
v To determine
the extent of the impact of the global financial crisis on the Nigerian banking
industry and the entire economy.
v To determine
various options that could cushion the impact as well as avoid future
elucidate the origin of the current Global Economic Crisis.
To determine the
effect of the economic crisis on investors’ confidence both locally and
To find out what to
do in order to rescue the economy from the present meltdown.
suggest ways of dealing with the complexities arising from the current economic
1.4 SIGNIFICANCE OF THE STUDY
research work will be useful to all stakeholders and players in the banking
industry. The banks regulatory authorities will particularly find the result of
this research very relevant in formulating and regulating policies for the
research work will contribute to the already existing body of knowledge. It
will try to push back the frontiers of findings already existed on the topic
and also add to the solutions earlier proffered by previous researchers in
tackling the complexity brought about by the global economic meltdown.
attempted to find answers to the following questions:
is the impact of the ongoing Global Economic Recession on the Nigerian banking
does the ongoing Economic Recession affect the role of the banking industry?
is the correlation between the ongoing Global Economic Crisis and the
performance of the banking sector?
was the position of banks before the global financial crisis?
were the impacts of the global financial crisis on the Nigerian banking
made the crisis spread to the Nigerian banking industry?
the banking sector immune to the present Global Economic Crisis?
the banking sector help in rescuing the Nigerian economy from the current
Global Economic Recession?
does the CBN Banking polices & regulation increase or reduce depression in
the banking industries.
Ho: The ongoing Global Economic Recession has
no effect on the Nigerian banking sector.
Hi: The ongoing Global Economic Recession has
effect on the Nigerian banking sector.
Ho: The ongoing Global Economic Recession does
not affect the roles of the Nigerian banking sector.
Hi: The ongoing Global Economic Recession
affects the roles of the Nigerian banking sector.
Ho: There is no correlation between the ongoing
economic recession and the performances of the Nigerian banking sector.
Ho: There is a correlation between the ongoing
economic recession and the performances of the Nigerian banking sector.
1.7 SCOPE AND LIMITATION OF THE STUDY
This research work was directed more
at the banking industry. It will empirically seek to unveil the impacts of the
Global Economic Crunch on the performance and sustenance of the industry.
Though emphasis was on the banking sector, however, other
parts of both the global and local economy were considered
1.8 DEFINITION OF TERMS
This refers to a general slowdown in economic activities over a sustained
period of time.
Same as above
ECONOMY: This refers to the totality of the
economy of different countries of the world.
Adjustable Rate Mortgages
ECONOMIC RECESSION: This refers to a
gradual and sustained slowdown in the world’s economy.
These are financial products called mortgages backed securities on sales in the
US Financial market.
ACTIVITIES: These refer to the various activities
that take place within the economy e.g. production, investment, consumption and
This refers to the economy as a whole.
VARIABLES: These refer to economic indicators
such as production, capacity utilization, employment level, investment
spending, household income and business profit.
MARKET: It refers to the market where short
and medium term funds can be sourced .e.g. banks.
MARKET: It refers to the market where
long-term funds can be sources e.g. the Nigerian Stock Exchange (NSE).
Small and Medium Scale Enterprises.
Central Bank of Nigeria
International Monetary Fund