AN APPRAISAL OF THE PERFORMANCE OF NIGERIA BANKING INDUSTRY IN POST CONSOLIDATION ERA

ABSTRACT
The current credit crisis and financial turmoil have questioned the effectiveness of bank consolidation programme as a remedy for financial stability and monetary policy in correcting the defects in the financial sector for sustainable development. The project attempts to examine the performances of banks induced bank consolidation and macroeconomic performance in Nigeria in a post consolidation period. The work further analysis published audited account of twenty (20) out of twenty – five (25) banks that emerged from the consolidation exercise and data from Central Bank (CBN), that is, the researcher made use of secondary sources of data for the study. The research employed the use of ordinary least square distribution in the test of two hypotheses formulated. Hypothesis 1, 2, 3, ‘t’ test distribution were used by the researcher and all hypotheses were accepted, while only ordinary least square analysis was used in hypothesis two, which showed that non performing assets of Banks has negative effect on the performance of banks in the post consolidation exercise. More so the use of simple percentage conversion were used in measuring or determining the macroeconomic variables on the yearly basis which covers the pre/post consolidation era 2004-2005 for the research analysis in chapter four; the following result/conclusion emerged from research project work: That consolidation programme has not improve the overall performance of banks significantly, and also has contributed marginally to the growth of the real sector for sustainable development; The bank sector is becoming competitive and market forces are creating an atmosphere where many banks simply cannot afford to have weak balance sheets and inadequate corporate governance; That consolidation of banks may not necessarily be sufficient tool for financial stability for sustainable development and we recommend that bank consolidation in the financial market must be market driven to allow for efficient process.

CHAPTER ONE
INTRODUCTION
1.1  BACKGROUND OF STUDY
Banks serve vital intermediary role in a market-oriented economy and have been seen as the key to investment and growth. Falegan (1987) and Bashir and Kadir (2007) observed that commercial banks play a crucial role in the nation’s economy, by using various financial instruments to obtain surplus funds from those that forgo current consumption for the future. They also make same funds available to the deficit spending unit (borrowers) for investment purposes. In this way, they make available the much need investible funds required for investment as well as for the development of the nation’s economy.

It is important to note that the business of banking is service-oriented, that is, banks render services to their customers. This is why Adekanye (1986) traced the origin of banking to the Italian merchants. The term “bank” is from an Italian language that simply means ‘Bench or Benco’, it is a process that developed out of the ingenuity of the then Italian blacksmith who specialized in the act of building boxes for safe keeping of jewelries and ornaments. This process was further expanded to numbers of banks in the economy, especially the Bank Consolidation of 2005 which brought the number of banks to 24. This has completely reshaped the face of the financial services industry as we include the safe keeping of other valuables, including money.

The fundamental changes in the industry in the last few years have brought a reduction in the industry now have more enlightened investors that are keen on a higher return on their investment (Pandy, 2004). With more people now becoming shareholders in the banking sector, it is apparent that more dividends will be paid out to these new shareholders.

As such dividend decision is one of the three main financial decisions of any firm and it involves the determination of the proportion of a company’s earnings to be paid-out or retained earnings (Olowe, 1998, ICAN, 2006). Consequently, investors are keenly interested in the outcome of their investment, that is, the value of their shares (capital appreciation) and the returns on their shares (dividend). These two values are affected by the quality of policy put in place by management, which directly influenced the returns on such investment or the value of the stocks of the firm (ICAN, 2006).

A dividend policy therefore is the tradeoff between retained earnings, on one hand, and paying out cash as dividend, on the other hand (ICAN, 2006). Olowe (1998) opined that dividends are distributions, made out of a company’s earnings after the obligations of all fixed income holders have been met. The objective of this study therefore is to assess the factors that could be responsible for the performance of banks in the post consolidation era in Nigeria, where performance is determined through the level of profitability.

1.2  STATEMENT OF THE PROBLEM

The problem which this study seeks to solve is to ascertain the reasons for banks poor performance in the post consolidation era in Nigeria. Improvement in individuals, groups or organizations cannot be guaranteed except or unless there is a process of evaluation. Evaluation as a concept is therefore a process by which an organization or firm obtains a feedback on the ways it has carried out its activities over time. Performance links an organization’s goals and objectives with organization’s decisions (Abdulkadir, 2007). It is important to note that before we can declare that an activity has improved, it must have been measured so that the extent of improvement can be determined and/or quantified. Measurement is therefore the first step in achieving improvement....

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Item Type: Project Material  |  Attribute: 100 pages  |  Chapters: 1-5
Format: MS Word  |  Price: N3,000  |  Delivery: Within 30Mins.
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