ABSTRACT
The banking industry in Nigeria is still highly regulated despite the increasing wave de –regulatory measles is sneeping across all facts of the life .The reason for this regulatory tendencies, are however, not far fetched for in the history of banking and economic of many nation ,banks have been the most widely regulated of all business
The prudential of licensed banks could be seen as one myriads of regulatory measure of the apex financial authority (the central bank of Nigeria) on banks .
In this work the impact of this guidelines on this operation of bank had been looked into.
The introductory part of the research work examines the need of prudential guidelines on the services and performances of banks.
Chapter one dealt with the definition of problem banks are having which includes inadequate resources to net the N 256,had debts and poor management.
Chapter two reviewed some literature that has direct bearing on the topic, with a view of giving the work a proper background.
This literature to the topic in question is made up of a review of different text books, journals, magazines and newspapers publications here various authors have discuses the framework or better understanding of the study.
Chapter three covers he research design and methodology, indicating primary and second data sources and the instruments used and sample size determination where covered here.
A number of hypothesis were also propounded by the researcher which were tested in chapter four of the work using data collected from first bank of Nigeria Okpara Avenue Enugu. This was followed by answering the research questions.
The study was concluded with chapter five, where the research findings were summarized.
Based on the findings, conclusions were drawn from the study and recommendation made towards the removal of the distress stigma in the banking industry.
Impact of prudential guidelines on the services and performances of Banks.
A case study of first Bank of Nigeria Limited Okpara Avenue Enugu.
INTRODUCTION
BACKGROUND OF THE STUDY.
The Nigerian banking system has undergone remarkable changes over the years, in terms of the number of institutions, ownership structure , as well as depth and breadth of operations. These changes have been influenced largely by challenges posed by deregulation of the financial sector, globalization of operations, technological innovation and adoption of supervision and prudential requirements that confirm to international standards.
As at the end of June, 2004, Chime (2004:8) stated that there were 89 deposit money banks operating in the country, composing institutions of various sizes and degrees of soundness. Most banks in Nigeria have capitalization of less than $10million. Even the largest bank in Nigeria has a capital base of about Us $240million compared to Us$526milion for the smallest bank in Malaysia. Apart from the smallness, they have heavy fixed cost and operating expenses leading to high average cost for the industry. This puts undue pressure on banks to engage in sharp practices, increase cost of intermediation, gap between deposit and lending rates and separate investment in software and hardware. The prevailing situation in the industry is more or less a caricature of the system. Chime (2004:9) stated that Nigerians hold more than N4006 as currency outside of the banking system. This he opined that it ie due to large informal economy, perverse incentive to look mostly to high net-worth agents for deposits, government agencies, blue clip companies and rich individuals. According to him, a further analysis of the returns of the marginal and unsound banks reveal that they account for 19.290 of total assets of the banking system, 17.290 of total deposit liability while the industry non performing assets account for 19.5% . These ratios except that for deposits, were below the bigger point for declaring the system as distressed, they are nevertheless of major supervisory concern. Besides the significant dependence of many Nigerian banks on government deposits, with the three tiers of government and parastatals accounting for over 20% of total deposit liabilities of deposit money banking was another concern. The structures of banks promoted tendencies towards a rather strictly behaviour of deposit rates, particularly at the retail level, such that while banks’ lending rates remain high and positive in real terms, most deposit rates especially those on savings, are law and negative.
The summary from the foregoing is that the Nigerian banking system faces enormous challenges just like other sectors of the economy.
Consequently, the federal Government introduced the National Economic Empowerment and Development Strategy (NEEDS) with its state and Local Government affiliates. N
With its state and local government affiliates. Needs is Nigerian home-grown poverty reduction strategy (Chime 2004:2) It is a medium term strategy (2003-2007), but which derives from the countries long-term goals of poverty reduction, wealth creation, employment generation and value re-orientation. The Macro-economic framework of Needs include: Reforming Government and institution (public sector reforms, privatization/Liberalization, governance, transparency and anti-corruption, service delivery). It is under this reform that
Banking sector reform was entrenched. The reform code accordingly was named: PROJECT EAGLES, at the apex bank level (CBN)
Consequently on July 06 2004, the Central Bank of Nigeria Governor announced the Minimum capital base for all banks to N25billion. This saw First Bank of Nigeria PLC merging with MBC International Banks to meet the target.
It was in a bid to assess the effect of this prudential guideline on the service and performance of bank that this work is being carried out with 1st bank of Nigeria PLC Okpara Avenue Enugu as a case study.