ABSTRACT This research work focuses on the Effect of Information Communication Technology (ICT) on deposit mobilization and profitability of banks in Nigeria. It also revealed how computer technology is being used in taking strategic decisions in an organization, with the usage of computer technology. It helps to discover how efficiently and effectively the bank(s) are performing as regards deposit mobilization and trend(s) in profitability. Some research instrument(s) were used in this continuous writing were: Interview, Questionnaire and Observations which were illustrated with charts and (Chi-square). It starts with background of the study up to final recommendation to the higher
Capital occupies a vital position in any business in which bank is included capital is particularly important in the banking industry, that is adequacy is a comfort to the depositor or the shareholder. Bank are to be adequately capitalized in order to perform their role in building the nation economy.
According to the editorial of Nigeria bankers (2003) “The nature of Nigeria banking industry was healthy and sound from the independent in 1960 to their deregulation and the liberalization of the industry which started kin and middle of 1980’s, situation changes drastically since manifestation of bank distress that subsequently cleared the life of 37 banks from 1994 to 2003 in which their problems can be traced bank to the undercapitalization of these banks.
The National Economic Empowerment and Development (NEEDs) 2004, is the initiative of the Obasanjo’s administration aimed at reforming the entire economy of the nation Nigeria. Under the NEEDs the financial service in clear with the country are to reformed, given clear with the country are to be reformed, given that “the success of NEEDS will depend in part on the ability of the financial intermediaries to play their roles by adopting the strategy of addressing low capitalization, the poor governance practice of financial intermediaries that submit inaccurate reformation to regulatory authorities and to strengthen and rationalize the regulatory and supervisory framework in the financial sector.
The reform agenda under NEEDs is saying categorically that the low capitalization of banks must be death with achieving the goals of NEEDs.
According to Sanusi (2005) “The new capital accord, base II of 1998 tackle the issue of capital at the inception, the major element of based committee of the 1998 capital accord included the explicit unmake of capital requirement to a bank question and degree of risk and establishment of internationally, comparable minimum capital requirements. Combining the objectives if National Economic Empowerment and Development Strategy (NEEDs) and that of the new capital accord based II of 1998 it will be deduced that up with the global economic and financial trend and ensigncy the economic development of Nigeria.
Ogunniyi (2005) is of the opinion that the Central Bank of Nigeria as empowered by BOFIA from time to time determine the minimum paid up share capital of categories of bank in Nigeria in which there were upward review from time to time. The issue of recapitalization to banks to the time of #25 billion was announced by CBN governor Charies Soludo on the 6th July, 2004 generated a lot of controversies but if practically examine, it is what the nation need for overall economic growth.
1.1 BACKGROUND OF THE STUDY
According to (Ogunniyi 2005) prior to the announcement of CBN governor professor Charles Soludo raise their capital base to #25 billion by December 2005 there has been many distress stories of banks in Nigeria.
There are banks in the sector that are goes candidates of merger and acquisition outright liquidation virtually all the bank kin this group have either overdrawn their account with CBN or have had their capital eroded by losses. It is observed that many banks merging as a means of survival at the expense of real banking operation, it is evidence that the low capitalization of the bank has make it difficult to finance the economy. Any bank with a strong capital base will serve as a shock absorber.
Low capital of banks is the causes of many stories of bank distress in the country which usually have a bad effect on the economy of a nation in term of competition, under capitalized ban will not able to compete with the other banks in the global market.
1.2 STATEMENT OF THE PROBLEM
The Nigeria banking system has undergone remarkable changes over the years, in terms of the number of institution ownership structure as well as depth and breath of operation. These changes have been influenced largely by challenges passed by deregulation of the financial sector.
Globalization of operations, technological innovations and adoption of supervisory and prudential requirement that conform with international standard. As at the end of 2007, there were 89 deposited money banks operation in the country, comprising institution of various size and degree of soundness. Hence, the largest banks in Nigeria has a capital base of about 240 million compares of #528 million for the smallest bank in Malaysia.
The latest assessment shows that the whole overall health of Nigeria banking system could be described as generally satisfactory, the state of some bank was leas cheering specifically, as at end of March 2004, the CBN’s rating of all the banks, classified 62 as some satisfactory. 14 as marginal and are manifested by their over drawn position with the CBN, high incidence of non-performing loans, capital deficiency, weak management and poor corporate governance. These shortcoming have, in recent years led to the revocation of the licensed of two clearing house activities prior to the commencement of the new settlement system.
1.3 STATEMENT OF HYPOTHESIS
The main hypothesis used in this project topic are Null hypothesis Ho
Alternative hypothesis Hi
Ho: There is no impact of recapitalization on shareholder return in the banking industry.
Hi: There is impact of recapitalization on shareholder return in the banking industry.
Ho: There is no impact of recapitalization on credit fined by the bank
Hi: There is impact of recapitalization on credit fined by the bank.
1.4 SIGNIFICANT OF THE STUDY
In the wake of bank failures, the economy suffered several stress. Many depositors and the shareholders lost their hand earned money, many suffered starvation because their breakdowns lost their jobs in the process. In a number of cases, depositors who lost their life savings died because of their apparent hopelessness. People from different angles of life have commenced on this commonly topical issue as it touches the very fabric of the national economic life.
This study is being embarked upon with a view to justifying the ongoing recapitalization exercise as directed by the CBN and how it would affect the Nigeria economy.
The research work will be of benefits to practicing bankers, students of business studies seeking to study the Nigeria banking industry and the entire public who need to have knowledge of the recapitalization and consolidation of Nigeria banking industry.
1.5 PURPOSE / OBJECTIVE OF THE STUDY
The purpose of this research work is to investigate the role of capital for financial institution, why is it important, how market generated capital requirement from regulatory requirement and from that regulation requirement should be taken. Bank serve as a useful focus for analysis because many of the friction that make capital structure relevant cost of financial distress, asymmetric information, transaction cost and regulation have been studied in banking literature.
Moreover, banks play an important role on global economy, and are the first category of institution to be subjected to internationally coordinated capital regulation.
Finally bank systematically have the highest leverage of firms in any industry, in sharp contrast on the implications. In the light of painful experience distress in the Nigeria banking industry and that of the current aggressive competition in the industry due to upsurge in the system, this research work aims to investigate.
- What measure should be adopted avoiding another experience of distress in the system?
- What deficiency should be removed to ensure that banks study healthy and operate efficiency?
- What impact would the recapitalization exercise have on the Nigeria economy?
- How should the issue of merge among banks be resolved without on unforeseen failure?
1.6 DELIMITATION OF THE STUDY
In carrying out this research work, attention would be focused on commercial banks recapitalization issues, recapitalization policy of the central bank of Nigeria and its impact of Nigeria and its impact of Nigeria banking industry.
This research work will be limited to the volume of information acquired through materials like national dailies, periodic journals, text books, speeches, internet and writer-ups on related subject.
1.7 LIMITATION OF THE STUDY
Time Constraint: During the course of writing this research work, the respondent that justify the question took a lot of time before making an effect on the questionnaire paper. The time for the research works is so short to go on extra mile for more data.
Inadequate Data: This research work will be limited to the volume of information acquired through materials like national dailies, periodic journals, text books, speeches, internet material and writer-ups on related subject.
Lack of adequate finance: During the course of writing this research, there is lack of finance to travel from one place to another place for the collection of more data for the research work.
Incorporate attitude of respondents: As it is unduly know that banks are often busy, so questionnaire administration were not answered very well because majority of the staffs were occupied with the customers. This constraint might be regard as that of non-response during peak periods.
1.8 DEFINITION OF TERMS
Bank: According to Sir John Paget, a bank is a corporation or person(s) who accepts money on accounts, pay cheques on such account and collects cheques for customers. F.E Perry, also described bank as an establishment,. Which deals in money, receiving it on deposits on demand, collecting cheques from others and lending or investing the surplus until required.
Capital: It means the value of business (Get worth) to the owners, and it may have been built up by direct investment by the owners by the retention of post profit or both. Capital (c) = Asset (A) – Liabilities (L).
Recapitalization: This refers to the change in capital in the financial institution in order to make an effect on their operation.
Effect: Is an impact of something on a particular operation.
Shareholder: Is an individual who contribute to the development and operation of an organization as a means of receiving dividend.
Liquidity: Is the ability of banks to maintain sufficient cash balance or such assets that can be easily and instantly converted into cash, to meet cash withdrawal requirement of its customers, and to meet other cash operation at all times.
It is also the ability of banks to grant loans or advance as a function of the extent of the liquidity of the bank.
1.9 ORGANIZATION OF THE STUDY
This research work would be divided into five chapter. The first chapter will be introduction and overview of the study. Chapter two will focus on the interactive review on recapitalization of the being industry. The third chapter would be based on the methodology to be used for data analysis and chapter four will focus on the interpretations and analysis of the data collected while the final chapter which is chapter five shall comprise the summary of findings, conclusion and recommendations.