Introduction
1.1 Background Of The Study
Commercial banks are generally all-purpose retail bankers, Ajayi (1991). They mobilize deposits of all sizes and from all and sundry in retail as well as in wholesale markets. They engage mainly in borrowing and lending activities. The lending activities of Nigerian commercial banks have been increasing steadily over the years and recently, the pace of increase has acquired a tempo that needs some explanation.
Management of banks is the process of managing money and providing a whole gamut of banking services. Beginning with the management itself, it involves finding the optimal size and composition of banks overall assets and liabilities, Nwankwo (1991).
An essential feature of a good financial system in the banking industry is the existence and implementation of a well developed and cleared defined set of rules, regulations, enforcement of sanction in case of contravention. Since several developments in the Nigeria economy had necessitated major review of the existing rules, regulations and laws. Consequently, the CBN No. 25 of 1991 (as amended) was promulgated to give CBN wider powers to handle all issues relating to banks from licensing to liquidation.
Further development and needs to sanitize the system brought about the promulgation of CBN 1997 decree to amend the existing ones. The 1997 decree was to regulate other areas of Nigeria financial system with CBN assuming control of banks, thus a comprehensive framework for more effective supervision and optimal resolution of problems of distressed finance commenced in 1995. In this regard, the CBN has been taken over the operations of some banks, revoked the licenses of others and appointed the NDIC as a receiver and liquidator of some of these banks.
But over the years, the regulatory authorities have not performing their role creditably. They are not even functioning effectively because enabling environment is not prevalent. Prior to 1988 there was no institution to insure the depositors’ fund and as a result of the accelerated expansion of banking sector the need to insure depositors’ fund became more obvious. The Nigeria Deposit Insurance Corporation was thus established by Decree 22 of June 1988 to provide insurance cover for depositors’ fund and complement the supervisory role of CBN. Currently all institutions licensed as banks by the CBN are covered by depositors’ protection scheme.
A committee comprising representative of banking supervisions and bank examination department of CBN and NDIC was thereafter set up to draw up guidelines to assist banks examining in managing financial institutions.
To this end, this research is an attempt among others to examine management and regulation of commercial banks activities in Nigeria in order to determine their concreteness and paradigm.
1.2 Statement Of Problems/Questions
The problem of this study focuses on the importance of managing and regulating commercial banks activities. To appraise the role of CBN and NDIC in the regulation of banking system in Nigeria, the following research questions are stated for consideration.
- Have the regulatory authorities, CBN and NDIC been performing their role creditably?
- What impact has the structure of the authorities had on the functions?
- Would the regulatory authorities have functioned effectively if enabling environment were prevalent?
- How does the CBN protect commercial banks depositors against loss?
- How does NDIC protect commercial banks depositors against loss?
- How effective has the CBN and NDIC being as regulatory/supervisory authorities?
1.3 Statement Of Objective
The objective of this study is to make a comprehensive examination of the regulation of commercial banks activities. One of the main functions of commercial banks is to provide short-term and medium term loans and advances to various sectors of the economy. It is therefore obvious that its activities do not constitute any obstacle towards the realization of the objectives in regulating commercial banks of the Nigeria economy. In view of the above, the specific objectives of the study include;
- To find out how the regulatory authorities, CBN and NDIC have been performing their role creditably.
- To ascertain the impact of the authorities had on their functions.
- To identify the various functions of the regulatory authorities.
- To ascertain the CBN protection on commercial bank depositors against loss.
- To ascertain the NDIC protection on commercial bank depositors against loss.
- To evaluate the effectiveness of CBN and NDIC.
- To appraise and make adequate recommendation on findings.
It is my belief that the project will be of much importance to the public to know the reasons why commercial banks in Nigeria always experience problems due to mismanagement and inadequate regulation.
1.4 Statement Of Hypotheses
For the purpose of resolving the research problems and questions articulated above, the following hypotheses were formulated and tested in the course of this study;
- H0: CBN/NDIC have not performed their roles in line with the enabling Acts establishing them.
H1: CBN/NDIC have performed their roles in line with the enabling Acts establishing them. - H0: CBN/NDIC structures have no positive relationship with how well they perform their functions.
H1: CBN/NDIC structures have positive relationship with how well they perform their functions. - H0: Regulatory Acts of CBN/NDIC and BOFIA have not assisted to protect the depositors against losses of fund.
H1: Regulatory Acts of CBN/NDIC and BOFIA have assisted to protect the depositors against losses of fund.
1.5 Significance/Regulation Of The Study
To analyze the management and regulation of commercial banks activities, we need to consider the role of CBN and NDIC in the regulations of the banking system in Nigeria and how the banking industry has performed under regulation and how does it benefit;
(1) Government:
It is expected that the findings of this research will be very useful to the government in managing and regulating commercial banks activities.
(2) Investors in the Financial Services Industry:
Investors especially entrepreneurs who wish to establish and run their own financial institution may find this work useful.
(3) The Banking Public:
This research will be useful to depositors who patronize financial institutions and commit their funds into these institutions.
(4) Future Researcher:
People who wish to carry out further research in this area will certainly find this work relevant.
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