Abstract
The study
examines the effect of deregulation of banking system on profitability of bank
using (UBA) as a case study. In this study, prior literature as it relates to
the subject matter were reviewed. Data was collected through administering of
constructed questions. A number of persons were selected to represent the
sample size of the study. Data were analyzed using the simple percentage method
and the test of hypothesis was done using the chi-square statistical tool for
data testing, the results revealed that the banking system is recording more
profits. It was concluded that banking system was reactive to deregulation from
different sources as explained and the nominal profit as shown in the account
did not mean that the real profit has increased. The effect of deregulation of
the banking system I the profitability of banks was the major discovery of this
project work and it is recommended that commercial banks should be careful and
prudent in loan disbursement
TABLE OF
CONTENTS
Title Page i
Certification ii
Dedication iii
Acknowledgements iv
Abstract v
Table of Contents vi
Chapter
One: Introduction
1.1 Background of the Study 1
1.2 Statement of the Problem 5
1.3 Objectives of the Study 6
1.4 Significance of the Study 7
1.5 Scope and Limitation of the Study 8
1.6 Statement of Hypothesis 8
1.7 Definition of Terms 9
Chapter
Two: Literature Review
2.1 Introduction 11
2.2 Origin,
Aim, Nature and Process of Deregulation 14
2.3 Different Dimension of Deregulation 18
2.4 Reforms and Deregulation of the Banking
Sector 19
2.5 The Effect of Deregulation of UBA Profitability 22
2.6 Summary 23
Chapter
Three: Research Design, Methodology and Findings
3.1 Introduction 24
3.2 Research Deign 25
3.3 Sample and Sample Selection Procedure 26
3.4 Questionnaire Design 26
3.5 Data Collection Method and Analysis 28
3.6 Summary 28
Chapter
Four: Data Presentation, Analysis and Findings
4.1 Introduction 30
4.2 Data Presentation 30
4.3 Data Analysis 33
4.4 Test of Hypothesis 35
4.5 Summary 41
Chapter
Five: Summary, Conclusion and Recommendations
5.1 Summary of Findings 42
5.2 Conclusion 43
5.3 Recommendations 44
References 46
Appendix
I 47
Appendix ii 48
CHAPTER ONE
INTRODUCTION
1.8
Background of the Study
Given the magnitude of
economic problems that confronts Nigeria especially since the early 1980s such
a stagement growth, rising inflation, unemployment, food shortage and mounting
external debt the necessity for economic reforms become paramount. It was
considered that failure to initiate reforms which would seriously jeopardize
the long term growth and development prospects of the Nigeria economic. This
step was the major policy moved by government in soothing the poor economic
situation which was resulted in poor allocation of scare resources. Poor
returns to investment and low productivity etc since the emergence of the
structural adjustment program (SAP).
In 1980, most sectors
of the Nigeria economy have continually be deregulated. Deregulation forms one
the major policy strategies for revamping Nigeria economy. It will however lead
to stimulating investment, increase in efficiency allocation of resources and
decrease in wastage in productivity process. One sector that has to be greatly
affected by deregulation is the banking industry. The banking sector stand as
one of the major engines of growth in the economy of nation and has been used
as one of the main stimulants of exchange in the Nigeria economy. According to
Oyelan (1988) bank and other financial institutions are the bedrock to
revamping the Nigeria economy adding that “banks” have a crucial role to play
in the programs, against the back drop of the most fundamental changes in the
nations economy, courtesy of infrastructural adjustment program SAP as further
stated by Falae (1990) “Banking and finance are both the handmaid and mid-wife
of the economy”. In recognition of the above certain key areas of banking have
been affected by deregulation to stimulate economy transformation and growth,
these are as follows:
1.
Deregulation of
the interest rate structure allow it to be determined by market forces and
sometimes fixing margin within which it can fluctuate all these is to stimulate
saving and investment in the economy.
2.
Deregulation of
the foreign exchange are bought and sold by the banks and determined for the
purpose of having realistic exchange with which would removed the existing
distribution and disequilibrium in the economy.
3.
Deregulation is
registration of new banks that is free entry of bank with a view of increasing
competition and efficiency.
4.
Equity
participation in other companies by the banks thereby encouraging wholesaler
banking and stimulating industries growth and investment.
5.
Deregulation of
credit and monetary control order which the cost and availability of credit and
determined through the financial market, these step indirect approach to
monetary control. This is to generate more investment in the economy and
promote growth.
6.
Deregulation
sectorial allocation of credit, consequently all allowing the market to
determine the allocation of credit in the economy.
7.
The removal of
the central bank from the orbit of the finance and it acquisition of
autonomance satus with retorting responsibility direct to the persidence as
enhance its operational efficiency.
The above policy
measures stated have affected the banking industry greatly even the so called
big three that is United Bank for Africa (UBA) Plc, First Bank of Nigeria Plc,
Union Bank of Nigeria Plc since the policy moved geared towards affecting bank
credit and deposit directly as defined by the Central Bank of Nigeria (CBN) in
the banking policy guidelines publication and since profit maximization is one
of the main stays of the existence of banks, authors investigation how the
policy measures has affected profit ability of banks, through the credit and
deposit flow, with particular reference to the United Bank of Africa (UBA).
United Bank of Africa (UBA) Plc is one of the oldest Nigeria banks and of the
Africa leading financial institution was established in 1949. the bank merged
with former standard trust bank during the consolidation exercise which
commenced in July, 2004 through December, 2005. the bank offers banking
services to more than 7 million customers across 750 employees (as at 2009) and
over 2000 Automated Teller Machines (ATMs) it has its presence in New York,
London, Paris, among others UBA is connecting people and business across Africa
and beyond through retail and co-operate banking innovative across border
payment, trade finance and investment banking. The bank has a deposit base of N1.29 trillion as at the end of year 2010,
thus making it the third largest bank in Nigeria in terms of deposit and ranked
513 in the world in 2011 edition of top 1000 banks int eh world by the banker
magazine.
1.9
Statement of the Problem
1.
Has deregulation
of banks has any affect on their profit?
2.
Are banks making
more profits due to deregulation?
3.
Has banking
deregulation led to increase in competition for customer?
4.
Are banks more
careful and prudent in loan disbursement to borrowers?
5.
Have banks
become more careless due to deregulation?
6.
Are there enough
internal procedure in place in the banks?
1.10 Objectives of
the Study
The author want to
ascertain the effect of deregulation of the banking sector with regards to
profitability in so doing the author hope to discover whether deregulation has
made the banks worse of or better off since efficience returns to the
investment is one of the basis armed to use United Bank for Africa as base or
empirical study, since the bank is one of the few bank that has been properly
rooted before the process of deregulation and act present has one of the
highest amount of deposit and greater of the credit in Nigeria economy. the
study deals as rents with the various operation component of banking operation
which deregulation has effects which resulted in the level of banking
profitability, this study deals towards findings out how efficient rate has to
reflect in the profitability.
1.11 Significance of
the Study
In this study we are
trying o examine the performance of banks and it effect on profitability in a
deregulated economy so as to be able to determined how banks can enhance their
profits. The banking industry has to learn to adopt to the rapid changes taking
place in the Nigeria economy because the source or failure of any bank would
depends on its ability to adopt to changes. The Nigeria economy for once has
been undergoing a great deal of changes which has affected the performance of
banks. It is necessary therefore, for bank to lear from their collective
experience so as to better equipped for the up and down of the economy there
must be an understanding of the factors governing there was indirect monetary
control by the central banks whereby banks were allowed to fix the interest
rate, there was a tendency to retain increase in interest rate structure as a
way of stimulating investment and growth. As part of the structural adjustment
program (SAP) financial linearization of experts and the open market of banks.
1.12 Scope and
Limitation of the Study
The areas covered by
this study are the main areas of banking operation affected by deregulation and
subsequently the profitability of banks from the genesis of deregulation the
activities of the supervise and regulatory authorities and their agencies the
period will be examine and how the different levels of deregulation have
affected profitability banking operation will be examined also.
1.13 Statement of
Hypothesis
Hypothesis
I
Ho: The deregulation of bank has no effect on bank
profit.
HI: The deregulation of banks has effect on bank profit.
Hypothesis
II
Ho: Banks are not more careful and prudent in loan
disbursement to borrowers.
HI; Banks are more careful and prudent in loan
disbursement to borrowers.
1.14 Definition of
Terms
1.
Bank: Is
a financial institution where money and valuable are kept, and it include
commercial banks, discount house, acceptance house and financial institution.
2.
Bankers: Any
person who carries on banking business partner or owner of a joint stock.
3.
Banking:
Is the act of collecting, saving of money and assisting people in terms of
facilitating their financial transaction.
4.
Money: Any
thing which is generally acceptance in exchange of settlement of debt.
5.
Loan and advance: Is
a form of lending by banks base on interest for the purpose of making profit.
6.
Deposit: Is
money/cash paid into the bank for safe keeping it includes fixed amount or any
form.
7.
Deregulation: To
restrict control by rule or to stop adjustment so as to make accurate.
8.
Pre-deregulation: Is
the period or time before deregulation that is period which control by rules
was still effective.
9.
Post-deregulation: Is the period deregulation was effected the time
after direct control by rules was restricted.
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