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The Role Of The Nigerian Deposit Insurance Corporation In The Regulation Of Nigeria Banking Sector
[A CASE STUDY OF CENTRAL BANK OF NIGERIA ILORIN]
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1.2 JUSTIFICATION OF THE STUDY The significance of this study is to draw attention of the regulatory authority (Central bank) and NDIC to the effect of continued failure and distress in banking industry. Further research is needed to this study to know the causes, effects, implication of failed banks on Nigerian economy as well as appraisal of the impact of NDIC on banking sector and its efficiency since inception till date in the management of distressed and failed banks.
1.3 OBJECTIVES OF THE STUDY This study is carried out for the following 1992; an annual average growth rate of 40 percent. In spite of these gains, continued to deteriorate in 1989, 7 banks were adjudged technically insolvent. In 1990, the number increased to 9 and in 1991, eights had become distressed while fifteen (15) were in various terms of distress. Another idea of the structural adjustment programme was the introduction of deposit protection scheme. The need of this was to avoid less of confidence on banks and adverse effect on macro economic resultant in bank failures. The deposit insurance scheme was established by the Nigerian deposit insurance corporation (NDIC) Decree no 22 of 1988. The institution was principally meant to insure all deposits fund so that adequate compensation will be given to depositors on account of bank failures, more so, the reason why the deposit insurance scheme was established, was due to the experience of prior bank failures, economic reforms and increased competitions among banks, reduction in the risk of systematic crisis involving failed and unsound bank practices that are capable of causing breakdown in payment system, the need to ensure safe competition and creativity as well as fair play amongst financial institutions. 1.4 PROBLEMS OF THE STUDY Some of the problems that led to the study of the role of the Nigerian deposit insurance corporation (NDIC) in the regulation of Nigeria banking system include; Reasons:
To know what role the Nigerian deposit insurance corporation has played till date on the Nigerian banking industry.
To know what positive impact the Nigerian deposit insurance corporation has made in sanitation and reformation of the Nigerian banking system.
To what extent has the NDIC met liquidation and pay off of insured banks during liquidation.
To know the extent to which NDIC has helped to reduced bank distress through their supervisory activities. To know the justification and reaction of banks to the deposit insurance scheme.
1.5 HYPOTHESIS OF THE STUDY In an attempt to achieve a through analysis of this study, hypothesis are needed to give focus and direction to the study. A hypothesis is a specific declarative statement of a tentative nature whose validity is to be established by recourse to empirical findings. For proper analysis of the study, the following hypothesis have been formulated to assist in giving focus and direction to the research work. H0: represents the null hypothesis H1: represents the alternative hypothesis H0: the Nigerian deposit insurance corporation does not have any impact in the regulation of Nigeria banking sector. H1: the Nigerian deposit insurance corporation has a positive impact in the regulation of Nigeria banking sector. 1.6 SCOPE OF THE STUDY
This research work is aimed at increasing knowledge on previous research works done by researchers in the past on this topic. However, in-depth analysis will be carried out in the role of NDIC in the regulation of the banking sector in Nigeria. Considering various reforms that have occurred in the system. This study is intended to deal with critical analysis such as; reasons for the adoption of the scheme, justification for its adoption, its impact so far and to what extent has it restored confidence in the banking sector and its impact on the economy. However, the study is limited to the operations of the Nigerian deposit insurance corporation since its establishment in 1988 till 2011; also, the limitation of this study will includes: Time constraint to make adequate findings Inadequacy of funds to collect extensive data. Inadequacy of relevant and more recent data due to the constraints mentioned in (i) and (ii) above (iii) Reluctant attitude of institutions to reveal and release information necessary for the study. 1.7 DEFINITION OF TERMS FINANCIAL DISTRESS: This is when a fairly reason able proportions of banks in the system are unable to meet their obligations to their customers,
INSOLVENCY: When there is an obstacle to prompt action by banks in performing their obligations. UNDERCAPITALIZATION: this is situation where banks operate with very little capital. PAY-OFF: This involves the payment of insured deposit up to the insurable limit to the depositors of liquidated banks. FRAUD: The wilful misappropriation of funds or eve manipulation of figures done to obtain an unjust or illegal financial advantage through dubious means. LIQUIDATION : This is the winding up of a business by converting its assets into cash to pay off its creditors in order of preference and its owners as well.
LIQUIDITY: this is when a bank has enough assets which are in cash and other convertible assets which can be easily converted to cash. They are called near cash or liquid assets.
DEPOSIT: Amount lodged in the bank by a person or business which withdrawal is on demand by cheque or without cheque and provides a base or ability to create money through loans and advances by banks. BANK FAILURES: banks closed temporarily or permanently on account of financial difficulties and including banks whose deposit liabilities were consumed by other banks of the time of closing, with the aid of loans of purchase of assets. DEREGULATION: removal of regulations, regulatory authorities and or interference’s of market forces to allow for free autonomy. 1.8 ORGANIZATION OF THE STUDY Chapter one of this project focuses on how modern banking were practiced in Nigeria dates back to 1892. It also studies the problems that led to the study of the role of the Nigerian deposit insurance corporation (NDIC) in the regulation of Nigeria banking system. Chapter two of this project centres on the role of banks in economic system. It also studies the causes of financial distress in Nigerian banking system. It also studies the reason for the establishment of the deposit insurance scheme in Nigeria and their benefits. Chapter three is aims at giving a description of tools, instruments and method that are caused in presenting and analyzing data and information. In this project work, secondary data has been employed. It also studies method of data analysis in which historical and descriptive method is used and also simple regression method of statistical analysis were used to explained the impact of the NDIC in the regulation of the Nigeria banking sector. Chapter four focuses on the data presentation and analysis. It studies the period before the operation of NDIC. It also shows the computation of correlation coefficient showing the degree of positive and negative relationship. Chapter five focuses on the summary, conclusion and recommendations of this project work.
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ABSRACT - [ Total Page(s): 1 ]ABSTRACTThe Nigerian banking sector plays a major role in economic development in any country. These they do, through financial intermediation and other banking functions to encourage real sector or innovate productive activities. However, distress in banking sector cannot be totally erased because like other forms of businesses, risks are involved. In combating this, the central bank of Nigeria served as the apex in the banking sector and performs regulatory and supervisory activities to create ... Continue reading---
