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Nigeria Commercial Banks Distress, Causes Effects And Solutions.

Nigeria Commercial Banks Distress, Causes Effects And Solutions.

Abstract

The study investigated into the topic “The Commercial Bank is Distress In Nigeria, Causes And Effect. A case Study of Commercial Bank In Onitsha Anambra State.

It examined the features of a failing or distressed bank, its causes, effects and possible remedies with review of related empirical list of the commercial failed banks. One null hypothesis was formulated and tested at 0.005 level of significance using the chi-square (x2) square statics. The questionnaire (about 2000, forms the basic instrument of data collection on the features, causes, effects and solutions to bank distresses of commercial banks in Anambra state. From the study, the following findings emerged;

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I Accepting of the alternative hypothesis and rejection of the null at 8.05  o level since x2 cal (5.48.45)>x2 critical (12.592) implying that bank distress has negative effect on banking activities and the economy in general.

2 The causes of bank distress include: Management, Especially in terms of the human factors.

3 The effects of bank distress are manifested thus:.

Results in loss of public confidence in the banking system, declining banking habit, personal loss of fund by depositors.

Based on the findings, the following remedies are recommended:

1 Regulation of licensing/registration of new banks.

2 Continued tribunal trial of debtors and their collaborators.

3 CBN should set up a periodic monitoring and evaluation committee on banking activities so as render quality advice to the distressed/failing commercial bank.

Introduction

1.1 Background of the Study

There was incredible need for the sudden up sure in the banking industry in Nigeria. Accordingly, Adeolu(1990.13) Observe that; Nigeria has in resent time witness the licensing of new banks and other  related financial institutions at a rate related  unprecedented in the history of banking in Nigeria in few years ago (1989-1990). The rate at which these banks we established increased and the financial effect was competition in the financial sector. There was survival of the fittest. At this point, some people were of the view that this upsurge in the banking industry will time to down surge in no distance time. Anyanwu (1989:13) Stated that, there was great anticipation of large bank failure and distress in the near future in less adequate measures were not taken to prevent such occurrence.

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The anticipated bank distress and failure as foresaw by some academic visited Awka-south local Government Area in the 2000s, there was serious economic hardship in Awka South Local Government Area, some industries wounded up, retrenchment was the order of the period, embargo on employment, fall in exchange rate of naira and some of the established banks become distressed and failed. And some are about to be distressed while few are still thriving.

1.2 STATEMENT OF THE PROBLEM

The structural adjustment programme (SAP) introduced in 1986 was among other this, characterized by deregulation involved interalia liberalization of our banking system. Many banks as a result, are licensed to operate in the system which has a “restricted” or system market for mobilization method such as electronic banking and use of computers to improve their services and attend to customers at minimum possible time.

Banks also offered very high saving deposit interest to more customers from competitions. To control proliferation of banks, the federal government of Nigeria through the central bank of Nigeria raised the minimum capital base required of banks. In addition, governments withdraw its accounts and those of their parastatals from the commercial and merchant banks. As a result, many banks found it difficult to meet up with the withdrawal demand of their customers. There arose the issue of distress and bank failure in the economy with the emergence of distress and bank failure in our banking system, this project therefore is aimed at investigating into the causes and effects of banks in the 2000s till date.

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1.3 OBJECTIVES OF THE STUDY

The researcher tend to achieve the following objectives in the course of this research, viz;

  1. To determine what constitute a distress (failed bank).
  2. To examine both the proximate and immediate causes of the failure.
  3. To appraise the effects of bank distress on the economy.
  4. To search and provide possible solutions that will ameliorate bank distress in Awka South Local Government Area.

1.4 RESEARCH QUESTIONS

  1. What constitutes the features of a distressed banks?
  2. What are the causes of bank distress in the Nigeria economy?
  3. Does banking distress has any effect or implication for the banking industry and the economy as a whole?
  4. Are there any possible solutions to eliminating the future occurrence of distress in banks?

1.5 RESEARCH HYPOTHESIS

To guide the study, based on the research questions, only one hypothesis will be for misdated.

Distressed bank has no significant effect on the banking activities and the Nigerian economy as a whole.

Distressed bank has significant effect on the banking activities of the banking sectors and the Nigeria economy as a whole.

1.6 SIGNIFICANCE OF THE STUDY

This study is significant in the following ways;

First, it highlighted factors responsible for banking distress and banks failures in the Nigeria economy.

Secondly, it is envisaged that the findings suggestion and recommendations of this study will be beneficial to the management of financial institutions. This study shall help to eliminate bank distress in Nigeria since the identified causes will serve as signal pointer. Both credit and monetary policy, guideline makers and other researchers who will be interested in finding ways to reduce bank failure in Awka South Local Government Area will benefit from the outcast of this study. In other words this study will serve as a source of data for future studies in related subjects.

Finally, the outcome of this study will be useful to the researcher as a practical fulfillment requirement for the award of the bachelor of science degree in Economics of the University of Nigeria, Nsukka (Nsugbe Campus).

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1.7 SCOPE OF THE STUDY

This study is limited to the causes and effects of commercial bank distress in the Nigeria Economy from 2000-2013, specifically it will focus attention on the commercial banking sectors in Awka South Local Government Area of Anamba State.

1.8 LIMITATIONS OF THE STUDY

In the course of undertaking this project exercise, the researcher encountered some problems, which tends to have limited the study. These constricts were in terms of inadequate financial requirement to get round and obtain data in the face of fuel scarcity that prevalent in Anambra State, time was lost for leisure and study since the project work was undertaken while in school. To end, this work is so limited.

Nigeria Commercial Banks Distress, Causes Effects And Solutions.

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