research work is basically on the impact of recapitalization on shareholder
return in Nigerian banking industry. Relevant information was collected from
primary and secondary source. Using ordinary chi-square to analyzed the data
gathered through central bank of Nigeria.
TABLE OF CONTENT
of content VI
1.0 Introduction 1
of the study 2
of the problem 2
of Hypothesis 2
Significance of the study 3
Purpose of the study 3
of the study 4
of the study 3
of terms 3
of the study 5
The Theoretical Perspective 6
The generalization resulting from the identification of the problem
implication of evolution 7
The effect of recapitalization on the shareholder return 8
The effect of recapitalization policy on Nigeria banks 8
The effect of re-capitalization policy on the Nigeria economy 9
The challenges of re capitalization policy 9
3.1 Introduction 11
of data collection 11
size and sampling techniques 11
of Variables 12
and analysis of data 13
of data base hypothesis question 15
conclusion and recommendation 18
19 References 20
Capital occupies a vital
position in any business in which bank is included capital is particularly
important in the banking industry, that is adequacy is a comfort to the
depositor or the shareholder. Bank are to be adequately capitalized in order to
perform their role in building the nation economy.
According to the
editorial of Nigeria bankers (2003) “The nature of Nigeria banking industry was
healthy and sound from the independent in 1960 to their deregulation and the
liberalization of the industry which started kin and middle of 1980’s,
situation changes drastically since manifestation of bank distress that
subsequently cleared the life of 37 banks from 1994 to 2003 in which their
problems can be traced bank to the undercapitalization of these banks.
The National Economic
Empowerment and Development (NEEDs) 2004, is the initiative of the Obasanjo’s
administration aimed at reforming the entire economy of the nation Nigeria.
Under the NEEDs the financial
service in clear with the country are to reformed, given clear with the country
are to be reformed, given that “the success of NEEDS will depend in part on the
ability of the financial intermediaries to play their roles by adopting the
strategy of addressing low capitalization, the poor governance practice of
financial intermediaries that submit
inaccurate reformation to regulatory authorities and to strengthen and
rationalize the regulatory and supervisory framework in the financial sector.
The reform agenda under
NEEDs is saying categorically that the low capitalization of banks must be
death with achieving the goals of NEEDs.
According to Sanusi
(2005) “The new capital accord, base II of 1998 tackle the issue of capital at
the inception, the major element of based committee of the 1998 capital accord
included the explicit unmake of capital requirement to a bank question and
degree of risk and establishment of internationally, comparable minimum capital
requirements. Combining the objectives if National Economic Empowerment and
Development Strategy (NEEDs) and that of the new capital accord based II of
1998 it will be deduced that up with the global economic and financial trend
and ensigncy the economic development of Nigeria.
Ogunniyi (2005) is of the
opinion that the Central Bank of Nigeria
as empowered by BOFIA from time to time determine the minimum paid up share
capital of categories of bank in Nigeria in which there were upward
review from time to time. The issue of recapitalization to banks to the time of
#25 billion was announced by CBN governor Charies Soludo on the 6th
July, 2004 generated a lot of controversies but if practically examine, it is
what the nation need for overall economic growth.
1.1 BACKGROUND OF THE STUDY
According to (Ogunniyi
2005) prior to the announcement of CBN governor professor Charles Soludo raise
their capital base to #25 billion by December 2005 there has been many distress
stories of banks in Nigeria.
There are banks in the
sector that are goes candidates of merger and acquisition outright liquidation
virtually all the bank kin this group have either overdrawn their account with
CBN or have had their capital eroded by losses. It is observed that many banks
merging as a means of survival at the expense of real banking operation, it is
evidence that the low capitalization of the bank has make it difficult to
finance the economy. Any bank with a strong capital base will serve as a shock
Low capital of banks is the causes of many
stories of bank distress in the country which usually have a bad effect on the economy
of a nation in term of competition, under capitalized ban will not able to
compete with the other banks in the global market.
1.2 STATEMENT OF THE PROBLEM
The Nigeria banking system has
undergone remarkable changes over the years, in terms of the number of
institution ownership structure as well as depth and breath of operation. These
changes have been influenced largely by challenges passed by deregulation of
the financial sector.
operations, technological innovations and adoption of supervisory and
prudential requirement that conform with international standard. As at the end
of 2007, there were 89 deposited money banks operation in the country,
comprising institution of various size and degree of soundness. Hence, the
largest banks in Nigeria has
a capital base of about 240 million compares of #528 million for the smallest
bank in Malaysia.
The latest assessment
shows that the whole overall health of Nigeria banking system could be
described as generally satisfactory, the state of some bank was leas cheering
specifically, as at end of March 2004, the CBN’s rating of all the banks,
classified 62 as some satisfactory. 14 as marginal and are manifested by their
over drawn position with the CBN, high incidence of non-performing loans, capital
deficiency, weak management and poor corporate governance. These shortcoming have,
in recent years led to the revocation of the licensed of two clearing house
activities prior to the commencement of the new settlement system.
1.3 STATEMENT OF HYPOTHESIS
The main hypothesis used
in this project topic are Null hypothesis Ho
Alternative hypothesis Hi
Ho: There is no impact of
recapitalization on shareholder return in the banking industry.
Hi: There is impact of
recapitalization on shareholder return in the banking industry.
Ho: There is no impact of
recapitalization on credit fined by the bank
Hi: There is impact of
recapitalization on credit fined by the bank.
1.4 SIGNIFICANT OF THE STUDY
In the wake of bank
failures, the economy suffered several stress. Many depositors and the
shareholders lost their hand earned money, many suffered starvation because
their breakdowns lost their jobs in the process. In a number of cases,
depositors who lost their life savings died because of their apparent hopelessness.
People from different angles of life have commenced on this commonly topical
issue as it touches the very fabric of the national economic life.
This study is being
embarked upon with a view to justifying the ongoing recapitalization exercise
as directed by the CBN and how it would affect the Nigeria economy.
The research work will be
of benefits to practicing bankers, students of business studies seeking to
study the Nigeria banking
industry and the entire public who need to have knowledge of the
recapitalization and consolidation of Nigeria banking industry.
1.5 PURPOSE / OBJECTIVE OF THE STUDY
The purpose of this research
work is to investigate the role of capital for financial institution, why is it
important, how market generated capital requirement from regulatory requirement
and from that regulation requirement should be taken. Bank serve as a useful
focus for analysis because many of the friction that make capital structure
relevant cost of financial distress, asymmetric information, transaction cost
and regulation have been studied in banking literature.
Moreover, banks play an
important role on global economy, and are the first category of institution to
be subjected to internationally coordinated capital regulation.
systematically have the highest leverage of firms in any industry, in sharp
contrast on the implications. In the light of painful experience distress in
banking industry and that of the current aggressive competition in the industry
due to upsurge in the system, this research work aims to investigate.
What measure should be adopted avoiding
another experience of distress in the system?
What deficiency should be removed to
ensure that banks study healthy and operate efficiency?
What impact would the recapitalization
exercise have on the Nigeria
How should the issue of merge among banks
be resolved without on unforeseen failure?
1.6 DELIMITATION OF THE STUDY
In carrying out this research
work, attention would be focused on commercial banks recapitalization issues,
recapitalization policy of the central bank of Nigeria and its impact of
Nigeria and its impact of Nigeria banking industry.
This research work will
be limited to the volume of information acquired through materials like
national dailies, periodic journals, text books, speeches, internet and
writer-ups on related subject.
1.7 LIMITATION OF THE STUDY
Constraint: During the course of writing this research
work, the respondent that justify the question took a lot of time before making
an effect on the questionnaire paper. The time for the research works is so
short to go on extra mile for more data.
Data: This research work will be limited to the volume of
information acquired through materials like national dailies, periodic journals,
text books, speeches, internet material and writer-ups on related subject.
of adequate finance: During the course of writing this
research, there is lack of finance to travel from one place to another place
for the collection of more data for the research work.
attitude of respondents: As it is unduly know that banks are
often busy, so questionnaire administration were not answered very well because
majority of the staffs were occupied with the customers. This constraint might
be regard as that of non-response during peak periods.
1.8 DEFINITION OF TERMS
Bank: According to Sir John Paget,
a bank is a corporation or person(s) who accepts money on accounts, pay cheques
on such account and collects cheques for customers. F.E Perry, also described
bank as an establishment,. Which deals in money, receiving it on deposits on
demand, collecting cheques from others and lending or investing the surplus
means the value of business (Get worth) to the owners, and it may have been
built up by direct investment by the owners by the retention of post profit or
both. Capital (c) = Asset (A) – Liabilities (L).
refers to the change in capital in the financial institution in order to make
an effect on their operation.
an impact of something on a particular operation.
an individual who contribute to the development and operation of an
organization as a means of receiving dividend.
the ability of banks to maintain sufficient cash balance or such assets that
can be easily and instantly converted into cash, to meet cash withdrawal
requirement of its customers, and to meet other cash operation at all times.
It is also the ability of banks to grant
loans or advance as a function of the extent of the liquidity of the bank.
1.9 ORGANIZATION OF THE STUDY
This research work would
be divided into five chapter. The first chapter will be introduction and
overview of the study. Chapter two will focus on the interactive review on
recapitalization of the being industry. The third chapter would be based on the
methodology to be used for data analysis and chapter four will focus on the interpretations
and analysis of the data collected while the final chapter which is chapter
five shall comprise the summary of findings, conclusion and