ABSTRACT
An empirical survey and study carried out in this research work
attempted to probe into the effects of Central Bank of Nigeria’s controls on
Commercial banking in Nigeria. In pursuance of this, various types of
commercial banks transactions were considered with various types of Central
Bank Control on them and its effects.
The objective
of the study was clearly stated, statement of research problem discussed and
relevant hypothesis developed from this problem. The scope of the study was
between 1990-2005. In order to see that the objectives of this research work
are rightly achieved, the researcher reviewed several literatures relating to
this research, with emphasis on banking supervision as a function of Central
Bank of Nigeria.
Also, the
research methodology was also mapped out which showed the research design,
method of data analysis, identification of population and determination of
sample size; questionnaires was designed and administered among the staffs of
the banking supervision department of the Central Bank of Nigeria. The
information supplied on the questionnaire were then analyzed and the results
interpreted thus:
- That Central Bank of Nigeria’s control on
Commercial banks has no adverse effects on the banking operation.
- That Central Bank has been effective in promoting
monetary stability and sound financial system.
- That the legal instrument of Banks and other
financial institutions Decree 25 of 1991 makes the supervisory role of
Central Bank of Nigeria more effective.
More so, summary of findings
based on data collected and analyzed was made, conclusions based on summary
were drawn and recommendations on the conclusion were thereafter provided.
TABLE OF CONTENTS
Title
Page
Certification
Dedication
Acknowledgement
Table of Content
List of Content
Abstract
CHAPTER ONE
INTRODUCTION
1.1
Introduction
1.2
Statement of
Problem
1.3
Objective of The Study
1.4
Significance of The Study
1.5
Scope And Limitation Of The Study
1.6
Research Question And Statement Of Hypothesis
1.7
Definition Of Terms
CHAPTER TWO
LITERATURE REVIEW
2.1 The Nigerian financial System: History And
Meaning
2.2 Banking
And Its Supervision in Nigeria
2.3 Control
of Commercial banks By Central Bank of Nigeria
2.4 The
Operations of The Nigerian Commercial; Banks
2.5 Practical
Problems of Banks in Nigeria
2.6 Supervision
As A Function of Central Bank of Nigeria
2.7 The
Impact of Bank Supervision on Commercial Bank
References
CHAPTER THREE
RESEARCH METHODOLOGY
3.1
Introduction
3.2
Identification Of Population and Determination Of
Sample Size
3.2.1
Determination of Sample Size
3.3
Selection of Sample Size
3.4
Research Design
3.5
Questionnaire Assumptions
3.6
Questionnaire Administration
3.7
Validity
3.8
Reliability
3.9
Method of Date Analysis
References
CHAPTER FOUR
PRESENTATION AND ANALYSIS OF DATA
4.1 Introduction
4.2
Analysis of Questionnaire
4.2.1
Analysis of Questionnaires And Interview Responses
4.3
Testing
of Hypothesis
4.3.1 Symbols to be used
4.4
Hypothesis
I
4.5
Hypothesis
II
4.6
Hypothesis
III
4.7
Research
Findings
Reference
CHAPTER FIVE
SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.1
Summary
of Findings
5.2
Conclusion
5.3
Recommendations
5.4
Suggestion
for further Studies
Bibliography
Questionnaire
CHAPTER
ONE
INTRODUCTION
1.1
Introduction
Central Bank of Nigeria (CBN) is
an institution engaged in the business of Central Banking. It differs from
other banking institutions in terms of functions, roles and operations, and
generally regarded as the hub of the monetary and banking system in Nigeria.
The Central Bank of Nigeria was established in 1985 under the Act of parliament
known as the Central Bank’s Act. The Bank commenced business on 1st
July 1959 with an initial capital of N3.0 million. Before the establishment of
the bank, a rudimentary monetary system had already being the process of
transforming the Nigeria economy from a barter economy to a monetary one. The
media of exchange then were however, multi-famous and therefore not very
conducive to the operations of a modern monetary system. (Adewumi, 1989).
Furthermore, one could not regard
Nigeria as having a monetary system, at least in terms of orderliness until the
establishment of the West African Currency Board (WACB) and the introduction of
a single currency system for West Africa in 1912. The establishment of the West
African Currency Board essentially prepared the way for the emergence of modern
financial system in Nigeria. More so, the WACB could not engage in monetary
management, neither was Nigerians trained in the art and in order to eliminate
this deficiency and promote the growth of the domestic money and capital
markets, especially as the country marched towards political independence in
1960, the CBN was established by the Central Bank of Nigeria Act of 1958.
(Olufemi, 2001).
The Central Bank of Nigeria is a
privileged banking institution whose effective supervisory function, among
arrays of functions endears it to the state. In most countries, Central Banks
are responsible for the issuing of legal tender currencies, acting as banker to
the Central government, keeping of cash reserves for the commercial banks,
acting as sole custodian of a country’s reserves of foreign exchange assets and
a host of other functions.
Due to the shift in policy towards
liberalization of financial markets and the fact that in many developing
countries, banking system are in a state of crisis repairing rehabilitation,
restructuring, increasing emphasis has been given to improved and strengthen
the supervision of banks in developing countries.(Ugoji, 1997).
The Banking Decree of 1969, as
amended in 1970 and Banks and other financial institutions Decree 25 of June
1991, as amended in 1992 has armed the CBN with the supervisory powers over the
major operators in the financial sector of the economy.
The Banking Decree of 1969
therefore provides in clear terms guidelines for effective supervision of the
banks to ensure monetary stability and a sound financial structure in
Nigeria.(Longe, 1984).
The Banking Supervision
department is responsible for carrying out this role of the Central Bank of
Nigeria. It is therefore the duties of this department to ensure that all
licensed banks operate in accordance with the provisions of the banking decree
1969 and various monetary policy circulars.
However, this research work is
interested a knowing and finding out how far this supervisory role of the CBN
has been effective towards the promotion of safe, stable and efficient
financial system in the growth of Nigerian economy.(Isimoya, 1988).
1.2
STATEMENT OF
PROBLEM
According to (Ugoji, 1997).
Banking is basically a service industry operated by human beings, as such it is
natural.
The supervisory department of
central bank of Nigeria is one of the executive arms that oversee the
operations of banks in Nigeria. It’s inadequate control measures by the apex
supervisory department of Central bank of Nigeria on the large expansion of
banking operations among the commercial banks in Nigeria as resulted to many
banking difficulties; such banking problem that arises are distress among
commercial banks, Complexity of nature of banking laws and operations, Lack of
capital formation, Monetary instability, mis management of funds etc.
The supervisory department of
central bank of Nigeria has made several efforts to reconcile these problems,
therefore; this research work should be able to discover how effective is
Central bank of Nigeria Supervisory role on commercial baking in Nigeria.
1.3
OBJECTIOVE
OF THE STUDY
The objectives therefore of
undertaking this research are:
a.
To analyses the impacts of central bank of Nigeria
supervisory role on the large expansion of commercial banking operations in
Nigeria.
b.
To examine the issues of distress among commercial
banks in Nigeria.
c.
To examine the legal instrument of banks and other
financial institution by Central bank of Nigeria.
d.
To identify the monetary instability among commercial
banking in Nigeria.
e.
To examine the effective control of the supervisory
department of CBN over commercial banks in Nigeria.
1.4 SIGNIFICANCE OF THE STUDY
The
importance of this study is to bring to the knowledge of those who may be
privilege to lay their hands on this project work, the vital role the Central
Bank of Nigeria has been playing in the banking sector since it was established
in Nigeria.
The
CBN supervisory role of examining the books of the banks on a periodic base
both on-site and off-sites monitoring. It’s effectiveness in managing the
distress that had rear its ugly head in the banking industry over the years
before the CBN was established.
The goal of bank supervision is to promote a
safe, stable and efficient financial system.
1.5
SCOPE AND LIMITATION OF THE STUDY
This
study will bring to light the supervision function of the banking supervision
department of CBN between 1960-2005 and the response of the commercial bank to
this supervision as well as cover the functions of all the divisions of the
banking supervision department.
Also, the study is highly limited by time
coverage and data constraints. Time to sufficiently administer interview of a
wider cross section of the staffs of the bank (CBN) was found difficult, and
the geographical regions of the central banks and the commercial banks in
Nigeria.
The research was limited to only central bank
at Lagos and also some cross section of commercial banks here in Lagos.
1.6
STATEMENT OF
HYPOTHESIS
1.
It is evidence to show that CBN policies should be
effective not only on the banks but also on all other financial institutions.
2.
It is evidence to show that the impact of
supervisory role on the large expansion of commercial banking operations is
regulated by the central bank of Nigeria supervision department.
3.
It is evidence to show that the isses of distress
among commercial banks in Nigeria is controlled and regulated by Central bank
of Nigeria.
4.
It is evidence to show that the monetary policies,
credit guidelines, and the interests of the depositors are protected by the
central bank of Nigeria
5.
It is evidence to show that the legal instrument of
banks and other financial institutions decree 25 of 1991 makes central bank of
Nigeria effective.
1.7
DEFINITION OF TERMS
1.
On site
monitoring – on site examination provides the means for appraising banks on a
continuous basis and for suggesting improvement in performance standard.
2.
Off site monitoring – It involves the analysis of
banks’ returns to the CBN as statutorily required.
3.
Licensing – Express permission from the Governor of the
CBN in order to undertake banking business in Nigeria.
4.
BOFD – Banks and Other Financial Institution Decree of
1991
5.
Capital requirement – it’s the adequate capital
required to cushion capital erosion or any losses that may arise from lending
activities.
6.
barter Economy – It is an economy where goods are
exchanged for goods.
7.
Service industry – It is an industry that doesn’t produces
tangible goods but only render services.
8.
Cash reserve requirement – this are reserves kept by
banks to meet maturing obligations as they fall due.
9.
Liquidity ratio – This ratio is defined as the ratio of
total specified liquid assets to total current liabilities and reflects the
liquidity position of a bank.
10.
Capital Adequacy ratio – This ratio is defined as the
total qualified capital to total risk – weighted assets.
Internal
Control Systems – Are instituted in the financial system and they help to ensure
that assets are safeguard and those commitments and payments are duly
authorized.
11.
PCD – Public Complaints Desk: It’s a complaint desk
maintains by the CBN. It’s where the public may lodge any complains they may
have against their banks.
12.
Provisioning – Provisions are made on the basis of
perceived risk of default on specific credit facilities.
13.
Exchange rate – This is the price of one currency in
terms of another.
14.
Interest Rate – Is the price of money. It is the
opportunity cost of holding money and the return for parting with liquidity.
15.
Distressed Banks – These are banks with problems
relating to liquidity, poor earnings and non-performing assets.
16.
Prudential Guidelines – These are guidelines and
practices which all licensed banks are required to adhere to in reviewing and
reporting their performance.
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