ABSTRACT
This research work examined the “A study of impact of financial distress on Commercial Bank of Nigeria. It investigated the causes and characteristic of bank distress in Nigeria economy. It is believed that these problems that hinder smooth banking in commercial banks will be evaluated to ensure safe and sound banking system.
Many related literature were reviewed as the researchers collected data for this work in remote communities where banking. The effect of bank distress on the economy on the other hand included the erosion of public confidence mostly to the commercial banks.
TABLE OF CONTENTS
TITLE PAGE
APPROVAL PAGE
DEDICATION
ACKNOWLEDGEMENT
ABSTRACT
TABLE OF CONTENT
CHAPTER ONE
1.0 Introduction
- Background of study
- Statement of problems
- Purpose of study
- Research question
- Significance of study
- Delimitation scope and limitation
- Definition of terms
CHAPTER TWO
2.0 Review of related literature
- Meaning and characteristic of distress
- Causes of bank distress in Nigeria
CHAPTER THREE
3.0 Research design and methodology
- Sources of data
- Location of data
- Method of investigation
CHAPTER FOUR
- Summary and findings
CHAPTER FIVE
5.0 Recommendation
- Conclusion
- Reference and bibliography
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
A bank can be defined as an organisation whose principle operation is concerned with the accumulation of temporarily idle money of the general public from the purpose of advancing to others for expenditures.
John Paget defined a bank as “A corporation or person(s) who accepts money on current account pays cheques on such account on demand and collects cheques for customers”
Oxfords advanced learners dictionary defined a bank as an organisation or place that provides a financial service or a place where something is stored ready for use.
The establishment of modern banking in Nigeria dates back to the colonial era when the African banking corporation was formed in 1892 to distribute currency notes of bank of England for the British Treasury subsequent developments were encouraged by colonial trade. In the bid to address the credit needs of indigenous enterprenurs, Nigerian later ventured into the banking business, initially through private individual initiatives and later through deliberate government policy.
The problem of distress in the financial sector, including outright bank failure, has been observed in Nigeria as far back as 1930 when the First Bank failure was reported. Indeed, between 1930 and 1958 when the Central Bank of Nigeria was established, over 21 banks failure were recorded.
However, the degree of intensity and scope of the distress has never been as serious as had been observed since June 1989 when the government directive to withdraw deposits of government and other public sector institutions from bank to the CBN exposed the weak financial condition of most financial institution and the severity a problem has progressively increased.
The distressed condition has been traced to a wide range of causes, some of which are listed on literature review.
Eventually, when distress come into the scene, tears of loosing fund to the banks influenced negatively, in the commercial bank.
1.2 STATEMENT OF PROBLEMS
With the ware of distress spreading in the finance companies, community banks and primary mortgage institutions a total of 24 banks were distressed in 1993, as against to in 1992, 31 finance house were classified distressed while 118 were in default of matures obligation, 456 complaints against 156 finance companies for non resumption of mortared funds however, total assets on liabilities of 395 finance firms stood at N13.38 billion in 1993 as against N2.44 billion reported for the proceeding year (1992).
The situation was attributed to the followings:
- Prevailing economic recession, policy induced stock poor and detonating assets quality arising from large portfolio of non-performing credit, non maintenance of assets and liability.
- Poor management bothering on sharp practice and lack of experience, which is the most serious problem, associated with bank distress in the commercial bank.
- Ineffective inefficient and poor performance of the financial sector on the role of promoting and supporting economic development in the commercial bank.
The problem in focus above, triggered off the interest of the researchers to carry out study.
1.3 PURPOSE OF STUDY
Under the purpose of study, which in other words, is the objectives of study, the researcher will try to ascertain the following.
- What bank distress in all about?
- How it has affected the commercial banks
- The causes of bank distress.
- To ascertain the percentage of commercial banks in the rural areas.
1.4 RESEARCH QUESTION
- What is financial distress on Nigeria commercial bank?
- What are the causes of bank distress?
- How does financial distress affects the commercial bank?
- What can be done to prevent bank distress?
1.5 SIGNIFICANCE OF STUDY
In discussing the effect or impact distress on the commercial bank the researcher have some important beneficiaries, which include the followings;
(a) BANKING SECTOR: From this work, the management should know the damages, distress in causing the conceptions of the bank. This will make the management seat up an enunciate managerial policies that are capable phasing out cases of distress in banks.
(b) ACADEMIC INSTITUTION: This work is relevant to the institutions and the students in the field of management science, especially those in banking and finance in the sense that it will improve their literate review purposes. Some copies of this work will be kept in the institution library for subsequent researchers for further research references.
(c) THE GENERAL PUBLIC: It is also significant to everybody these include mostly the investors, public libraries and research institution, where copies of this work will be kept and the general public can go and get copies, read and now what is going on at the commercial bank.
(d) INVESTOR: The study exonerates fears the investors have from saving in the bank due to distress because the investor would not like to dump the little they have with the bank.
(e) PUBLIC LIBRARIES: This work will increase their stock of books of research purposes by researcher.
(f) RESEARCH INSTITUTES: It is significant to the researcher institutes because they keep those research work for further research by researcher.
1.6 DELIMIATION SCOPE AND LIMITATIONS
DELIMITATION: This work is delimited to the effects of distress to the general economy. The use of primary data, questionnaire method and interview methods are also delimited in this project work.
SCOPE: This study covers the effect of bank distress in the commercial bank.
LIMITATION: The following problems were encountered during the project work.
(a) TIME FACTOR: No time is specifically given for the term paper work, one will be.
(b) LACK OF RESEARCH FACILITIES: Lack of text books or reference material which contains the effects of banks distress on the commercial bank were hardly seen or found which made it difficult for the researcher to get enough facts.
(c) SHORT OF FINANCE: Lack of money or financial problem at times limit researcher form group to the villages to get facts as may be needed for the works.
1.7 DEFINITION OF TERMS
- COLLATERAL: Stocks of bound pledged as security for repayment of a loan.
- UNSCRUPULOUS: Not guided by coincidence, not held back from doing wrong.
- AMITY: Friendship is friendly relations between person or countries.
- FINANCIAL INTERMEDIARIES: Like finance companies primary mortgages institutions etc that serve as a go-between or link in the financial institutions.
- MALAISE: Feeling at bodily discomfort but without clear signs of a particular illness.
- PARLANCE: Use or choice of words, ways of speaking.
- DEFAULT: Fail to perform a duty or to pay a debt.
- ALLAY: Make something (e.g. pain, trouble excitement fears) less.
REFERENCES
Emmanuel I. Nze (2002): Partnership and miscellaneous accounts challenge
lithographic press Ltd, Enugu.
Akuwudike H.C. (2992): Management information system Gostak Pringing and
Publish Co. Ltd., Enugu Nigeria.
Ebhodaghe J.O. (1994): Boadroom/management practice distress in the
banking system NDIC quarterly, vol. 4 No. 2 Page 15 – 25.
Ann Eche B.Sc (Hons) 1999: Insurance Basic Principle and practice Immaculate
Publication Ltd, Enugu.
Iloh J. (1998): Business finance issues and APPH, Enugu Glanic
Ventures.
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