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The Impact Of Recapitalization Of Banks On Bank Lending Activities In Nigeria In Nigeria Banks
[A CASE STUDY OF UNION BANK OF NIGERIA PLC, ILORIN]
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CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The impact of Recapitalization of banks on lending in Nigeria
Banks demands critical view.
Since lending is one of the roles of banks which depends on the available capital base of the banks, any attempts by Central Bank to increase the pre-determination of banks lending will have measurable and remarkable impact on the whole economy.
To enhance financial stability of banking industries in Nigeria, reduce the reluctance of commercial banks to lend to the public and safeguard the stability and improvement of banks, the Central Bank of Nigeria consistently increase the minimum capital form as low as 12 million and 20Million for merchant and commercial banks relatively before 1992 to N25Billion in 2005, then in 2011, the new Capital base is now N100Billion naira.
With stipulated minimum capital base of N25billion, some banks could not meet up and thereby merge were inevitable other banks that could not, were liquidated at January 2, 2006. Union bank of Nigeria Plc and 24 other banks scaled together 14 banks including Trade bank. There said to be liquidated 25 banks of solid capital base of N25Billion now have more money to lend to the public at lower interest without fear of getting liquidated.
1.2 STATEMENT OF THE PROBLEM
There is impact of recapitalisation of banks on lending in Nigerian banks, for a commercial bank to lend money out to the public; it must have a tangible capital base. Since not all banks would be able to meet up. Wherever there is recapitalization exercise, there tends to be liquidation, therefore, there must be impact of recapitalization of banks on lending in Nigeria banks.
1. What has been the impact of Union banks of Nigeria Plc?
2. Has the impact been all truly positive?
3. Is there then a remarkable relation between recapitalization of banks and lending?
1.3 JUSTIFICATION FOR STUDY
The importance of this study is to look into the effect of recapitalization of banks on lending in Nigeria.
It also justifies the fact that recapitalisation of banks source the liquidity of banking industries.
Academically, the study indense up the knowledge of well meaning Nigerians especially those concerned with the economy like banks especially the students on the relationship between recapitalization and lending.
1.4. OBJECTIVES OF THE STUDY
1. To find out the effect of the recapitalization of banks on lending in Nigeria banks.
2. To observe the impact of recapitalization in lending in Nigerian banks.
3. To show the relationship between recapitalization and lending in Nigeria.
4. To broaden the knowledge of people in banking industries and student in banking and finance institutions.
5. To create awareness in the necessity of effective recapitalization of banks in Nigeria from time to time.
6. For partial fulfilment of Higher National Diploma certificate course in Banking and Finance without which the certificate could not be awarded to me as a student.
1.5 HYPOTHESIS
For the purpose of this research some of the statements of hypothesis are formulated. They are:
Null Hypothesis represented by the Ho
Alternative Hypothesis represented by the H1
(a) H1: There is relationship between recapitalization and lending in Nigeria banks
Ho: No relationship between recapitalization of banks and lending in Nigeria banks.
(b) Ho: Recapitalization of banks reduces capacity in Nigeria.
H1: Recapitalization of banks increases lending capacity of banks in Nigeria.
(c) H1: Recapitalization of banks improve the economy
Ho: Recapitalization of banks does not improve the economy.
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