ABSTRACT
A descriptive study was made about financial distress in some Commercial Banks using secondary statistics.
This research work was designed to describe the Financial distress in some Commercial Bank in Nigeria. Also the causative factor as it affects Commercial Banks with the limited area of coverage.
The study also look at the following objectives such as nature and type of financial distress facing some Commercial Banks, banks involved in the distress, causes of distress, level of distress and to know if poor management also cause distress.
The study also answers the five (5) research questions. It was also discovered that distress is caused as a result of poor management, insolvency loss asset base, inadequacy of capital etc.
Therefore, recommendation such as: proper management, adequate funding, increased asset base provisions and adequate liquidity were made for the study. Also such research work should be done to other non-financial Banking Institution and other West African Country.
LIST OF TABLE
TABLE 2.1 LEVEL OF DISTRESS IN THE BANKING SYSTEM – 29.
TABLE OF CONTENTS
TITLE PAGE II
APPROVAL PAGE III
DEDICATION IV
ACKNOWLEDGEMENT V
ABSTRACTS VI
LIST OF TABLES VIII
TABLE OF CONTENTS IX
CHAPTER ONE
INTRODUCTION
- BACKGROUND OF THE STUDY 1
- STATEMENT OF PROBLEM 2
- OBJECTIVE OF THE STUDY 3
- RESEARCH QUESTIONS 4
- SCOPE OF STUDY 5
- LIMITATION OF STUDY 5
- SIGNIFICANCE OF THE STUDY 6
- RATIONALE/JUSTIFICATION FOR THE STUDY6
- DEFINITION OF TERMS 7
- ASSUMPTION OF THE STUDY 8
CHAPTER TWO
LITERATURE REVIEW 9
- FINANCIAL DISTRESS 13
- MANAGING DISTRESS IN NIGERIAN BANKS 14
- ASSESSMENT OF THE RESOLUTION FRAMEWORK
IN NIGERIA AND PROBLEMS 21
- ACTION TO TACKLE FINANCIAL DISTRESS
- CAUSES OF FINANCIAL DISTRESS
- MEASURE/EXTENT OF DISTRESS IN NIGERIA
CHAPTER THREE
RESEARCH METHODOLOGY
- SOURCE OF DATA 39
- LIMITATION OF SOURCE OF DATA 41
CHAPTER FOUR
FINDINGS 43
CHAPTER FIVE
SUMMARY, CONCLUSION AND SUGGESTION FOR
FURTHER RESEARCH
- SUMMARY OF FINDINGS 47
- CONCLUSION 48
- SUGGESTION FOR FURTHER RESEARCH 49
BIBLIOGRAPHY 50
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In the Nigerian Banking system considering the last decade the Commercial Banking to be precise had under gone a rapid expansion both in terms of the number of Institution and the scope of Financial services rendered. As bank licensing was liberalized so was the seed of instability sown in these banking system at the same time.
As these expansion trend continuous, a sign of lacked vision among the investors and the directors motive of quick returns to satisfy the liquidity operation. The word distress has been in existence but increased promptly as these institution increased due to acute shortage of resources and the massive with drawal of deposit by government agencies and other public sectors from these bank.
The development threatened the Financial structure, expose and undermine the economic system which impede development of the economy.
Therefore, distress places a great burden on regulatory authority, depress the economy, undermine the payment system and discourage savings.
1.2 STATEMENT OF THE PROBLEM
Some Commercial Banks have been diverted to assist in loans and advances to various sectors of the economy. And the Commercial Banking is known as refall banking which accept deposit and make payment to his customers. But the Financial condition of some of these Commercial Banking due to the political instability/electoral campaign that is on. Political analyst describe this on coming election to be one of the brutal crisis that is to come. Therefore, there is panic with drawal of fund by these bank customers. This institution is now bogged down by distress, insolvency, poor liquidity due to decline in deposit, and loss of confidence. The crisis has to be averted and the urgency prompted the study. This research work is designed to describe the financial distress in some Commercial Banking system in Nigeria.
1.3 OBJECTIVE OF THE STUDY
The objectives of the study are:
- To describe the nature and type of Financial distress facing some Commercial Banks in Nigeria.
- To identify some of the Commercial Banks involved in distress in Nigeria.
- To identify the causes of financial distress in Nigeria.
- To determine the level of distress in these Commercial Banks.
- To find out if the distress is caused by poor management.
1.4 RESEARCH QUESTIONS
For the purposes of this study, the following question is addressed.
- What is the nature and type of financial distress in Commercial Banks in Nigeria?
- What are the causes of Financial distress among some Commercial Banks in Nigeria?
- What Nigerian Commercial Banks are involved in Financial distress?
- What is the level of distress in some Commercial Banks?
- Is poor management responsible for Financial distress?
1.5 SCOPE OF THE STUDY
The study examines distress and causative factors as it affects some Commercial Banks.
However, it was not possible to carryout the research in the country as a whole, but with the available range covered it made possible for the project to be unbiased.
1.6 LIMITATION OF THE STUDY
The study is limited within Enugu State due to insufficient time to carryout the work.
Apart from time factor the inability of accessing all distress Commercial Banks, Financial constraints also caused the limitation etc.
Other possible limitation to the study could be lack of transparency among the distressed bank to the researchers to avoid exposing their image.
1.7 SIGNIFICANCE OF THE STUDY
The importance of a healthy banking system cannot be over emphasized, for so many reasons, ranging from the vital economic importance of the huge deposits at state to public confidence, jobs and career of people and the key role these banks plays in economic development. Also the benefit of finding solution on how to get a resolution of the crisis will be found useful to investors or customers of these banks, the regulatory and supervisory authority and even the government. The solution will also be useful to the managers in general of these banks.
1.8 RATIONALE/JUSTIFICATION FOR THE STUDY
The fundamental reason of this study is to be in compliance with the requirement of the school management and the department for obtaining the Ordinary National Diploma (OND). Apart from this is to enlighten students how to carryout research independently.
- DEFINITION OF TERMS
DISTRESS: As been defined by Hornby it is the state of being in difficulty and needing help. Smith and Wall 1992, Ologun, 1994 defines distress as “unhealthy situation” or a state of inability or weakness which prevents the achievement of set goals and objectives.
FINANCIAL DISTRESS: This is when Financial Institution can no longer cope with their Financial structure and require help. This could take various forms like, insolvency, poor management, in liquidity, lack of deposits etc.
COMMERCIAL BANKS : These are financial institution referred to as retail banks. They accept deposit are make payment on demand to their customer.
1.10 ASSUMPTIONS OF THE STUDY
This piece of research work was based on the following assumptions:
- It is assumed in this research that the data (Secondary) used are correct and reliable.
- The procedure used are method are correct and reliable.
- That the available data or information will be able to describe the study.
REFERENCES
First Banks of Nigeria PLC, June 2000 “Determination of Commercial Banks portfolio in Nigeria”, p. 2-3.
Monthly Business & Economic Report October 1997
Remedial Approach to the sanitization of the Financial Institution, P. 2-4.
Sunderanjan V. 1998: Banking Crisis and Adjustment.
Recent Experience on Paper presented at
IMF Seminar p. 6.
Lambate M. 1999: “Assessment of the problems of the financial
System”
Cambridge University Press. P. 54.
Okigbo P.N.C. 1995 Nigerian Financial System
Longman P.65.
Goldsmith 1996: “Comment or Financial Crises, Theory, History and Policy”
Cambridge P. 25.
Nigerian Deposit Insurance Corporation 1996: Annual Report and
Statement of Accounts, Lagos P.4.
Benston G.J. 1996: Perspectives on Safe and Sound Banking,
Cambridge MIT Press.
Corrigan E.G. 1999: A perspective on Recent Financial Disruptions,
Quarterly Review, Fed. Reserve Bank of
New York P.26.
Sanusi J.O. Sept. 1998: Supervision of Banking Industry in Nigeria, An Operation View point” CBN, Economic and Financial Review Vol. 32, No. 3. P. 22.
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