1.0 Introduction
1.1 Background Of The Study
The importance of banking sector on the economy has led to considerable increase on regulatory policies by the federal government and the central bank of Nigeria.
Many scholars have different views on the concept of regulation of commercial banks. Nwikina (1997) and Gbosi (1993) agreed that “the numerous incidence of bank failure necessitate banking regulations and government policy to bring order into the system.
However, since monetary and banking activities as well as else where are intervene in several ways and have influence on the performance of each other and both controlled the same ways and as a result of the distress tat has be fallen the banking sector and the numerous failures. The government has to take some necessary steps to return sanity into the system.
The aim of government so far in controlling the financial sector is to control the money stock in order to influence domestic economic growth, the government also through the central bank of Nigeria control the activities of the banking sector by issuing license to banks, setting up the minimum unpaid up capital and supervision and examination of banks.
From 1991, when the BOFID, banks and other financial institutions decree was promulgated, there have been improvement in banking sector with the amendment made in the 2001 budget speech which requires that in the next two years, the minimum paid up capital of banks with the #1,000,000. Hopes are rising that the regulations will bring change in the banking sector. Banking is a business vested with a public interest. Successful operation of our commercial banks is therefore necessary for the orderly functioning of the nations business since all the banking sector. It is not merely the concern of those who have invested their money in the banking business, nor those who have entrusted their deposits to the bank. It is also a matter of public concern. Distress in the financial sector which has been an issue of national concern have also succeed in running the commercial banks, the customers have lost confidence they previously had in the banks due to the activities of many distress banks management, but the intervention of government and many regulatory policies which were some what late the distress would have passed the line.
Today, a lot of regulatory politics are made by the government concerning the operations of the commercial banks. In this study, the researcher will try to analyze how these policies affect the operations of the banks.
Finally, when laws are made they result in changes in the existing system over years several legislation concerning the operations of the banks has been made. In this work, the researcher shall examine various governed regulatory policies and their effects on the operations of commercial banks.
1.2 Statement Of The Problem
Commercial banks are financial intermediaries helping to channel funds from surplus economic limits to deficit ones to facilitate business transactions, deposits and undertake commercial lending for the development of the banking system yet, due to their activities adequate profitability declaration were not made in every fiscal year because of the following reasons:
- The problem of credit portfolio arising from default in making payment and non-performing one.
- Problems arising from fraud and defalcation
- Liquidity risk arising from maturity mismatches, faulty balance sheet structure and change in interest rate, as set prices and foreign exchange rates, fluctuations operating errors and inefficiencies of internal control system and inexperience staff.
The study therefore undertake to study the impact of the apex banks, central bank of Nigeria regulation and policies as it affects the profitability level of commercial banks.
1.3 Objectives Of The Study
The purpose of this study is to establish how government regulatory policies affect the operations of the commercial bank in Nigeria and to determine that effect, (positive or negative) these policies have on the operations of commercial banks in the economy.
1.4 Significance Of The Study
The focus of this study is to evaluate the effect of the existing government regulatory policies, so as to proffer ideas, which will bring about necessary modifications in the system to aid greater effectiveness and efficiency in the banking industry.
The research work will be of benefit to the following groups:
- The central bank of Nigeria in designing new regulatory measures to promote the banking sector.
- Management of commercial bank will find it useful as it will inform and educate them on the need, for regulatory policies.
- Researchers will also find the work useful; as it will form the basis of further research in the area dos study.
1.5 Research Questions
- Can government policies and regulations pose problems in the activities of the commercial banks on their profitability?
- To what extent do policies and regulations affect the operation of commercial banks?
- Do the adherence of commercial banks to the enforcement of policies and regulation employed by the CBN enhance their efficiency?
- Does central bank of Nigeria regulations and policies on commercial banks have some negative impact on the profitability of the bank?
- Is regulation one of the causes of bank fraud?
- How does the federal government through the apex bank regulate the operations of commercial banks in Nigeria?
1.6 Scope Of The Study
This study will cover various commercial banks to test for the impact of government regulation and policies on the profitability. Selected commercial banks will under preferably ten (10) commercial bank situated in Port-Harcourt as follows:
- All state Trust Bank
- Union bank
- United bank of Africa
- First bank of Nigeria
- Afri- Bank
- Standard Trust Bank
- United bank (U.T.C)
- Citizen bank.
1.7 Limitation Of The Study
It is not gain saying that every road leading to success is littered with obstacles and thorns. It is acknowledged that these barriers, which limited the work, cannot be over emphasized.
Limitation of course are general constraint when carrying out a research work like this, one of the constraint faced by the researcher is the time allocated to the research topic was limited due to the brevity of the time in the session. As a result of this, virtually the research work was done in a haste to catch up with the time and to this effect the research work was limited to some extent. Other constraint being the availability of materials.
Financial constraints also posed a major factor that militate against a smooth work of this nature, due to financial constraint on my part to take care of logistic, such as transportation and other requirements.
1.8 Definition Of Terms
Effects:
Result produced
Government:
means the rule, regulation and control of central bank over commercial banks.
Regulatory:
Is the principles or act by which central bank rules commercial banks.
Policies:
Is the act of plan by central bank on commercial banks.
Operation:
The way central bank works on commercial banks have a wide spread branch as they handle most of the ordinary banking business in Nigeria. They are concerned with a short term borrowing and lending and they also transfer funds.
Deregulation:
Not according to rule
Legislation:
Law making
Constraints:
Act of forcing
Profitability:
Banks are business established to make profit
Liquidity:
Is the relative amount of assets in cash, available to meet short term liabilities.
Portfolio:
Is the arranging purchases and sales of securities as well as attending to registration rights.
Paid Up Capital:
Is the paid money on share issued
Promulgated:
To bring into force
Reserved Capital:
Keep back money for future
Ordinance:
The rule that governs the banks
Liquid Assets:
Money inform of property
Nominal Interest Rate
Named share
Real Interest Rate:
Actual share
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