THE IMPACT OF BANK FAILURE IN NIGERIA ECONOMY
A CASE STUDY OF SAVANNAH BANK OF NIGERIA PLC

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CHAPTER ONE
1.0 Introduction 1
1.1 Background of the Study 1
1.2 Statement of Problem 4
1.3 Objective of the study 7
1.4 Significance of the Study 9
1.5 Research Questions 11
1.6 Formulation of Hypothesis 12
1.7 Scope and Limitations of the Study 12
1.8 Definition of Terms 14
Reference 17
CHAPTER TWO
2.0 Literature Review 18
2.1 Evolution of Banks Failure in Nigeria 25
2.2 Fraud in Banks- An overview 33
2.3 The poor management control system and Bank Failure 37
2.4 Tackling Bank failure in Nigeria 40
2.5 Savannah Bank of Nigeria PLC and the Banking
Regulatory umpire: The seizure of operating license 45
2.6 Future prospects of Banking business in Nigeria 51
2.7 Summary of Literature Review. 55
Reference 56
CHAPTER THREE
3.0 Research Methodology 58
3.1 Research Design 59
3.2 Area of Study 60
3.3 Population of Study 62
3.4 Sample and Sampling procedure 63
3.5 Instruments for Data collection 68
(a) Primary sources 68
(b) Secondary sources 69
3.6 Methods of Administration of Research Instrument 69
3.7 Methods of Data Analysis 70
3.8 Reliability and Validity Tests 72
CHAPTER FOUR
4.0 Data Presentation and Analysis 73
4.1 Data Presentation 73
4.2 Data Analysis and Interpretation 74
4.3 Test of Hypothesis 89
Reference 97
CHAPTER FIVE
5.0 Summary of Findings, Conclusions and Recommendations 99
5.1 Summary of Findings and their Implications 100
5.2 Conclusions 106
5.3 Recommendations 108
Bibliography 113

ABSTRACT

The aim of this research study is to analyze and ascertain the extent to which fraud and poor management contributed to bank failure through a careful analysis of banking industry with a particular reference to the presently embattled Savannah Bank of Nigeria Plc. whose operating license was recently revoked.
Chapter one examined the historical development of banking in Nigeria, recognizing the catalytic roles of the business of banking in the economy, together with other introductory analysis on the extent of bank failure and fraud and their effect on the development of banking business in Nigeria.
In chapter two, an overview of bank failure in Nigeria economy was made. Emphasis were laid on their genesis, caused (fraud and poor management), control issues involved in bank failure management. Particular attention was drawn on the impact of banking business in the overall development of the people, and economy and the implications of its failure. The controversy surrounding the revocation of the operating license of Savannah Bank Plc and the prospects of banking business were also treated.
In chapter three, the research narrated how the various data for this study were collected and which informations were used with a view to realizing the objectives of the study.
In chapter four, tables of percentages were used to present and analyze the data collected and which information were used with a new to realizing the objective of the study.
In chapter four, tables of percentages were used to present in analyze the data collected while chi-square method was used to test the postulated hypothesis.
Finally, in chapter five, a critical analysis of the research study revealed that bank failure in Nigeria are attributable principally to fraud, poor management team and adverse economic conditions among other institutional and non- institutional factors. However, it was recommended among other things that due to the peculiar and strategic position of the banking industries and their synergistic effects of change arising. Therefore government should closely monitor the activities of bands through their agencies/regulatory authorities without necessarily politicizing their mandate Banks should equally strengthen their internal control measure. Moreover, if the regulatory authority saddle with the responsibility of managing industry keep an eagle in the industry’s activities, it will stem the tide to bank meddling with the fortunes of depositors shareholders and other interested parties and forth overall benefit of the economy. This is in view of the catalytic role of banking business in the economic confidence in the banking public. Further research on very relevant linked area of the research topic was also suggested by the research. This is in view of the dynamism, and inexhaustibility of the topic of study.
CHAPTER ONE

1.0 INTRODUCTION:
1.1 BACKGROUND OF THE STUDY
One of the indices for measuring the development of an economy is the size, maturity and safety of its banking industry. This is because the banking industry plays a very important role in the mobilization and utilization of investible resources (financial) in the economy. It acts as the intermediary units of the country through a process of “financial inter-mediation”. The absence of a market for which can greatly reduce the growth of economic activities; its business activities are catalysts for economic development.
The Nigeria banking industry at the movement appears to be the verge of collapse. The banking public seems to have cost confidence in banking and chances are that this erosion of confidence may not be reversed unless the regulatory agencies. The central Bank of Nigeria (CBN) and the Nigerian Deposit Insurance Corporation (NDIC) rise up to the challenge.
It was the belief by the government that the banking crisis of the 1990s was caused mainly by fraud that to the promulgation of the failed banks (Recovery of Debts) and financial malpractice’s in Banks Decree Number 18 of 1994 (failed banks Decree). It is however difficult to justify the draconian nature of the failed bank Decree and its implicit assumption that fraud was a major cause of the banking crisis licenses withdrawn by the C.B.N ON account of sharp practices. In other words while it is true that the monumental growth in the number o registered banks may have led to increased fraud, it is unlikely that it was the sole cause of the subsequent banking failures. There is no doubt that fraud has exasperated a desperate situation in the Nigeria Banking sectors. Fraud and embezzlement are not widespread. Both the government and the central Bank are unturned in the fraud and crises jamboree. Furthermore, fraud in itself may not be a sufficient condition for a banking crisis. The researcher submits that extremely bad management may not prove fatal to a bank until adverse economic conditions led to unexpected capital outflows or loan losses. Thus even if every bank which failed is judged to have suffered from mismanagement or fraud, or operated in a over populated banking market, it may well be the case that adverse economic conditions will be the proximate causes of many bank failure.
The NDIC implicitly agree with the above submission in a circular dealing party with current banking crises in Nigeria. It concluded, “the revival of the banking system would entail strong political will that should allow for the adoption of the appropriate failure resolution option, based on the technical judgment of the regulators. Finally and most importantly, a successful restructuring of the banking system would entail a stable macro-economic environment with little relative price distortions that would ensure a sustainable growth for the economy”. Macro economic instability in itself fuels fraud. If the future is perceived as uncertain for instance, persons are more likely to get desperate the perpetrate fraud. It should also be noted that general economic stress is not limited to the banking sector. Inconsistent government policies, high inflation, and the ever depreciating local currency have made planning impossible across most economic sectors further entrenching stress. The economic and social policies of government therefore play a prime role in the promotion of a stable business environment in all economic sectors, including banking. The policy actions that can effectively tackle bank failure in Nigeria must therefore look beyond the banks.
It is the researcher’s submission that in addition to its traditional role of financial inter-mediation, the Nigeria Banking industry has a major role to play in the development of the Nigerian economy. Thus necessitating this research work for purposes of this study, the term banks failure and bank distresses are to be used inter-changeably.

1.2 STATEMENT OF THE PROBLEM
In recent years, the volume and frequency of crises in the Nigerian banking industry has been on the increase. According to NDIC, the level of reported fraud in Nigeria banks rose from N804m in 1990, N3, 199m involved in fraud rose from 3 percent in 1990 to 22 percent in 1998. Perhaps the highest fraud ever reported in any particular year by a Nigeria bank occurred in 1998 when united Bank for African Plc wrote off N786m on account of fraud. One would be tempted to consider the inquisitive mind as to necessity, and indeed imperativeness of the banking industry in Nigeria economic developments/Empowerment as partner in progress. Could Nigeria not have continued to do without these banks, as in fact she had done prior to their advent?
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