Exporting Nigeria’s non-oil products!

(A case study of Nigeria export promotion council, Enugu)

PROPOSAL

The objective of this study is to find out the roles being played by Nigeria Export Promotion Council in Exporting Nigeria non-oil products.  Also to ensure that the economy USS department on crude Oil as the sole source of foreign exchange.  Most companies engaged in exportation and exporters have not fully appreciated the roles performed by this council.  Its achievements, the various incentives offered to exporters to stimulate export, the problem encounter in export promotion.

The researchers will use the following hypothesis! The NEPC has not failed to actively promote the implementation export policies and programmes of the Federal Government.  The NEPC has been enable to initiate export incentives for interested exporters.  That the NEPC pruned information that helped export business.  NEPC has succeeded in their function of promoting the development and diversification of Nigeria export market.

Method of collection of data that will be use in oral interviews and questionnaires in collecting primary data.  A total of will be used. Questionnaires are to be administration to the council staff and exporter- orientated companies in Enugu.

 

After collection of data, the data would be analyzed and finding were to be made to test the hypothesis, the researcher will use chi-square (x²) Based on the findings, the researcher will bring down it’s commendation.

CHAPTER ONE

• Introduction 1

1.1     Background of the study                                                         1

• Scope of the study 6
• Statement of problems 7
• Objectives of the study 8
• Hypothesis 9
• Significance of the study 10

CHAPTER TWO

• Literature review 11
  • Export promotion activities in Nigeria

challenges and prospects                                               11

• Non-oil export promotion, the journey so far and

the pre-condition for accelerated growth                       14

• Strengthening and up grading the status of NEPC 17
• The economy with export promotion 18
• Exporting experiences and suggestions 19
• Why export promotion council promote export. 21

CHAPTER THREE

• Research methodology and design 36

3.1     Population                                                                     36

3.1     Sample size                                                                    37

3.2     Sources of data                                                              39

3.3     Sample technique                                                           42

3.4     Research instrument                                                      42

• Instrument for data analysis 43

CHAPTER FOUR

4.0     Presentation, analysis and interpretation                       45

• Questionnaire for the staff of NEPC 47
• Testing of hypothesis 55
• Interpretation of results 60

CHAPTER FIVE

5.0     Summary of findings and recommendation                             62

• Discussion of findings 64
• Conclusion 65
• 66

Bibliography                                                                  68

 

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY:

No country is an Island, nature has made it that way.  Nigerian Export Promotion Council encourage exportation of non-oil product in Nigeria.

 

Exporting is the marketing of selling of goods and services across national boundaries.  Crossing boundaries of sovereign nations requires passing through the national conditions of entry, for example, when a firm crosses boundaries with products, certain safety, health and labeling regulations must be met.  Duties, tariffs and taxes must be paid.  There are different entry strategies into international markets: Exporting licensing, joint ventures, Direct ownership etc. International sales raises the standard of living of the world community just as domestic marketing raises the standard living of the domestic community.  Exporters capture opportunities in the foreign market; upon this much foreign exchange has been accruing to the coffers of the country.

 

The Nigerian economy has undergone a lot of economic and social transformation in the 1960’s Nigeria was a major exporter of agricultural primary products and by early 1970’s exports from petroleum sector over shadowed that of agricultural products and become the dominant foreign exchange earner for the country.  The policy then was to use the earnings from oil to develop social infrastructures and industrialize the country through the import substitution strategy.  In recent times government find it difficult to generate enough foreign exchange of the heavy reliance on petroleum whose fortune in terms of prices is dwindling in the world market coupled with out.  Insatiable demand for imported goods.  this led to the federal government of Nigeria to put in place policy initiatives to enhance and boost the inflows of the foreign exchange into the non-oil sector of the economy.

The structural adjustment programme (SAP) Introduced in 1986 has one of it’s corner stone.  The promotion of Non-oil exports which comprises of primary products – raw agricultural and mineral products, semi manufacture and manufactured products.  With the sharp decline in oil revenue as from the early 1980’s Nigeria has been faced with chronic shortage of foreign exchange, fiscal and payment deficits and a serious problem of external indebtedness, which increases tremendously from 1.25 billion in 1979 and 18 billion in 1986.  The unhealthy economic situation was caused by the oil gluts of 1978 and 1981 and the falling prices of our reduced demand.  The only alternative was to supply side economics, which is regarded as the new conventional wisdom, of which emphasis on the promotion and diversification of Non-oil export, constitute a major or integral part.  In other to be in a good position to expand and diversify both the product base and the geographical or market concentration of the country’s export trade, the federal government put in place policies to help boost export activities on the country.  These policies were mainly related to the manufactured and semi manufactured products.

The Nigerian Export Council was established by the Nigeria promotion Act No 26 of 1976 and formally inaugurated in March 1977.  The Act was further amended by decree No 72 of 1979.

 

On February 14, 1986 a nine-man committee was inaugurated by the then Honorable Minister of Trade and Tourism to make recommendation for the re-organization of the council.  The final result of this committee assignment was the Nigeria export promotion council decree of 1988. The decree was aimed at – organizing the council in both structural and functioned responsibilities of spearheading implementing incentive x packages contained in the export incentive and miscellaneous Decree No. 18 of 1986 popularly called NERFUND.

The importance of the re-organization is to restructure the operation of the council to negate the bureaucratic red-tapism which created bottleneck in the activities of the council.  Activities of Nigeria export promotion council influence NACCIMA and man who is member of the board, with the minister of commerce and tourism as chairman from the private sector.

 

The re-organization brought about creation of five zonal offices with headquarters at Abuja and headed by directors.

 

The Nigeria Export Promotion Council is vested with the following functions;

• Assist in promoting the development of oriented industries in Nigeria.
• Actively promote the implementation of export policies and programme of the federal military government
• Collect the disseminate information and products available for export
• Promote the development of and diversification of Nigeria’s export trade
• Administer grants and other benefits related to export promotion and development.
• Pursuer the simplification streamling of export procedure and documentation on continuous basis.
• Co-operate with other institutions on matter relating to export financing, export incentive and specialized sources of exporters
• Undertake sources of the current economic condition with special attention to the export sector with a view to advising.
• Establish specific trade promotion facilities in Nigeria and other countries including the establishment of permanent show rooms at important commercial centres in the country.

 

1.2     SCOPES OF THE STUDY:

The scope is Nigeria Export Promotion Council because they promote export in Nigeria and also helps in realizing foreign exchange.

 

The ideal situation would have been to study all exporters in Nigeria on the roles and functions performed by the Nigerian Export Promotion Council towards the export of non-oil product.

 

1.3     STATEMENT OF PROBLEMS

The fact that all nations are equally in doubt with the same resources makes exports come in.  It allows for exchange of goods and services where it is needed.

 

The Nigerian Export Promotion Council plays a very important role.  They encourage Nigerians in the exportation of non-oil products.  Are they playing their role on export?

 

• Is the economy still solely dependent on crude petroleum as against the diversification of the export base?
• Does an average business marchant know the necessary incentives to stimulate export.
• That the private sector is still not conducive enough for export promotion.
• The council is not aggressively marketing Nigerian products abroad.
• Do the council perform commensurate with it’s foreign counterpart.
• That the council is yet to fulfill many of the functions it is expected to perform and as a result of this, there has been noticeable decline in the role and functions they carryout.

 

1.4     OBJECTIVE OF THE STUDY:

• To know if the export producer at the Nigerian export promotion council in any way impedes exportation of non-oil products.
• Functions and roles performed by the Nigeria Export Promotion Council
• To ascertain if this functions are carried out
• To examine the degree of implementation of it’s function.
• To determine other functions, the export council is to be involved in.
• The effect of Nigerian export promotion council to an average Nigerian towards exportation.
• To ascertain the appraisal and functions of the council
• It’s achievements and the degree of such achievements
• The various incentives offered to stimulate export.
• The problems encountered in export promotion.

1.5     HYPOTHESIS:

• Nigerian export promotion council has succeeded in their function of promoting development and diversification of Nigeria export market.
• That NEPC activities and publicity had no adverse effect on the products that are exported.
• NEPC has not failed to actively promote the implementation of export policies and programs of the federal government.
• That NEPC has been able to initiate export incentives for interested exporters.
• That the NEPC provides information that help export business.

 

 

 

1.6     SIGNIFICANCE OF THE STUDY:

There are a lot of opportunities opened to exporters but because of ignorance, most exporters are not able to seize the opportunities to their advantage; with the attention given to export promotion now in the country by the federal government, there I no doubt about the reliance of this study.

It will be of assistance to the government, Nigerian Export Promotion Council and association of Nigerian exporters.  It will help various potential exporters to have the knowledge on how to embark on export business.

 

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THE NATURE AND CONSEQUENCES OF JUVENILE DELINQUENCY IN NIGERIA: A STUDY OF ENUGU NORTH LGA, ENUGU STATE

Foreign Transaction For Dollars Payment :
Bank Name: GTBank
Branch Location: Enugu State,Nigeria.
Account Name: Chi E-Concept Int’l
 Account Number:  0117780667. 
Swift Code: GTBINGLA 
Dollar conversion rate for Naira is 175 per dollar. 

ATM CARD:  YOU CAN ALSO MAKE PAYMENT USING YOUR ATM CARD OR ONLINE TRANSFER. PLEASE CONTACT YOUR BANK SECURITY FOR GUIDE ON HOW TO TRANSFER MONEY TO OTHER BANKS USING YOUR ATM CARD. ATM CARD OR ONLINE BANK TRANSFER IS FASTER FOR QUICK DELIVERY TO YOUR EMAIL . OUR MARKETER WILL RESPOND TO YOU ANY TIME OF THE DAY. WE SUPPORT CBN CASHLESS SOCIETY. 

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form>DELIVERY PERIOD FOR BANK PAYMENT IS  LESS THAN 24 HOURS

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EVALUATION OF THE DYNAMIC EFFECTS OF ROLE CASH HOLDING IN A DEVELOPING ECONO0MY

(A CASE STUDY OF OGBETE MAIN MARKET)

ABSTRACT

 

One of the most prominent characteristics of under developed nation is the use of high proportion of cash, relative to demand deposit in business transaction. This cash relative to demand deposit has resulted to the existence of idle cash in such economics.

In an under developed country like ours, a significant percentage of money is held in form of cash a sizeable portion of this cash is kept idle, with the resultant consequence that the productive sector is denied they of such fund. This sizeable amount of cash that is not used for anything. Under the banking system ability to create deposit money, thus affecting the volume and cost of loans. The effect of these idle money has system magnified itself that it has resulted to unemployment low business investment and declining national income.

This research has been organized into five chapters with the first chapter dealing on introduction, while the second chapter centers on review of related literatures chapter three showed the method of research used. Chapter four and five develled on analysis of data test of hypotesi summary of findgs, recommendations and conclusion respectively.

PROPOSAL

 

With the multifarious (many/various ) increase in the economic system money become the most acceptable means of transaction and payment of debt. The proportion of money which is not used in normal recurring transaction or is held in excess of the normal need is called “idle cash” The excess of the normal need is called “Idle cash” The continuos with drawl of money from the circular flow of income between the household individual s, firms and industries becenies so alarming and devastating; it deprive the  users the great opportunity of making any meaningful and judicious use of idle cash.

In the area of research methodology primary and secondary source of data collecting  will be adopted. The primary data source  includes oral interview administration on questionnaire observation and literature review. While the secondary sources of data collection to be adopted are the use of text books, financial standards etc.

There are some constraint towards this project     which I include money –which is inadequate time to combine my lectures, personal chores and project research work, protocols to be observed will surely delay this project. Inadequate libraries and materials to lay hands on.

The researcher therefore wish to embark on this work to remedy some of these problems and their effects on the economy. The project work intend to highlight the pros and cons of the negative use of idle cash , constant flow of money in circulation, light interest rate and poor cross Domestic product (GDP) the research work will not only be in document for the accounts department

CHAPTER ONE

INTERODUCTION

• Background information of the study
  • Statement of the problem
  • Objective of study
  • Hypothesis
  • Significance of the study
  • Scope of the study
  • Limitations of the study
  • Definitions of term

REFERENCES

 

CHAPTER TWO

LITERATURE REVIEW

• The role of money in a developing economy
  • Money and banks
  • Demand for money
  • Motives of demanding money
  • Banks functions and money creation
  • Limitations of money creation
  • Supply of money
  • Velocity of circulation
  • The concept of idle cash
  • Reason that led to a fall in idle cash
  • Effect of idle cash holding in a developing economy

 

CHAPTER THREE:

RESEARCH DESIGN / METHODOLOGY

• Area of study
  • Source of data
  • Data collection methods
  • Questionnaire design.
  • Sample design
  • Method of data analysis
  • Method of testing hypothesis

 

CHAPTER FOUR

• Data presentation and Analysis
  • Test of hypothesis

 

CHAPTER FIVE

SUMMARY OF FINDINGS RCOMMENDATION AND CONCLUSION

• Summary of findings
  • Recommendation
  • Conclusion

BIBLIOGRAPHY

QUESTIONNAIRES

 

 

 

 

 

 

 

 

 

CHAPTER ONE

 

INTRODUCTION

• BACKGROUND INFORMATION OF THE SUBJECT MATTER

In a developing economy like ours, a sizeable amount of money is held in excess of  normal need. This excess money   is held is idle, because it does not produce any income, The business communities, individuals, household etc are holding a great proportion of this idle money. The involvement in the evil of boarding cash has a very serious effect on the financial institutions. The banking system ability of creating deposit money is constrained or hampered. The banks can only create small amount of deposit money, which is not enough to satisfy the teeming population seeking for loan. As a result of this, the interest rate will increase proportionately. Prices will increase while on the other hand demand will reduce increase in unemployment rate and drastic fall in national income.

The industrial sector is also affected because they depend on commercial and merchant banks loan for effective production and expansion. The consequences of bank not wholly honoring loan realest has put these industries in a light corner by producing below capacity, low quality product and retrenchment as an available means of production cost cut measure or to bread even

Economic growth and development of any nation is a combination of many variable ie price, inflation deflation employment and interest rate. This variable. Money is the prime mover of economic development as a result of its relationship with economic activities. Increase in the volume of money supply in the economy will definitely bring a remarkable change in the interest rate. This effect will lead to increase investment, employment, national income and expansion of industries.

With increase in awareness and effective mobilization of idle cash held by these prime agents of the economic activities, the ability of creating deposit will be enhanced. Banks can now meet the loadable demands of the entire economy wholly

 

• STATEMENT OF PROBLEMS

The availability of capital is the most outstanding factor to consider in assessing the workability feasibility, survival and its ability to met business expenses as and when due. Are business organizations able to finance their business activities? If not what is responsible for this? Is it the inability of banks to give enough loans.?

With the increasing number of banks every day there is the assertion that banks are not able to meet the Loanable demand of theses business organization, both small and big organization. Why have these apex institution failed to meet up to the financial needs of these yearning organization? Is it that enormous amount of money is held idle in the pocket purses and homes of public.

What factors are responsible for high interest rate, unemployment, inflation etc? have the reasons of holding money ie transaction speculative and  precautionary motives actually justified the need  for continued holding of cash? What has been done by government and financial institutions towards solving these problem?

The research will therefore analyze the problems facing the effective mobilization of idle cash held by the public with greater emphasis on ogbete main market. In  line with this research the effects of idle cash holding to the economy in general and the holder in particular, will not be left out

Recommendation based on the findings will be made to rebuild the relationship between banks and business communities.

 

• OBJECTIVE OF THE STUDY

The objectives of the study is centered on

1. Examining the extend or level of relationship between banks and the businessmen
2. Finding out the cost of holding cash relative to demand deposit and the consequences involve in holding money.
3. Determining what the financial institution has been doing in respect to mobilizing these idle cash and channeling them to the productive sector of the economy.

 

• HYPOTHESIS

The following hypothesis will be focused and tested on:

1. Idle cash holding and economic activities are not related.
2. Idle cash did not contribute to the factors responsible for rising interest rate
   • SIGNIFICANCE OF THE STUDY

The idle of this study I aimed at the determination of the dynamic effects of idle cash holding in a developing economy like Nigeria and Enugu business communities is particular. Precisely, on completion of this research it will provide:

1. An insight into the size of idle cash hold which does not contribute to the economic growths and development of the economy.
2. A means solving the liquidity problem of banks
3. Government with the knowledge of the effectiveness of banks activities and reveal areas of loop- hold that need arrest.
4. The business communities the economic advantages of making use of banks.
5. Solution to the problem of literature on idle cash on Enugu, which is scarcely available.

 

 

 

 

• SCOPE OF STUDY

The research is limited to only Enugu business communities an important city in Enugu state. Discussions in most aspects affect Nigeria economic position and other countries.

 

• LIMITATOIONS OF THE STUDY

In the course of this research work, 1 encountered some numerous problems as

1. FINANCE: As a result of lack of finance 1 the researcher was unable to visit ogbete market as often as possible. As a student one is faced with many problems that gulp all the money give for the exercise.
2. TIME: Thee time given for the study is rather too small and short as the researcher is faced with other school activities and lectures in other courses during the period of the study. A research of this nature that is expected to give an in depth preview should require a concentration of time and efforts.
3. ACCOMMODATION: The researcher had neither a relation nor friend resident at the surrounding of ogbete main market. This made it difficult for a permanent stay around Ogbete.
4. LITERATURE: There is hardly enough literature or material concerning the implication of idle cash holding in Enugu state and this serves as a major constraint. Finance and accommodation made it possible to limit research to what is only obtainable in Enugu library.
5. TRANSPORTATION SYSTEM POBLEM The research being carried out in main Enugu metropolis transport cost is high coupled with incessant fuel scarcity it was a problem at the period of this research

 

• DEFIUNITION OF TERMS

1. MONEY: Money is anything used to facilitate transition. In other word, money is anything that is generally acceptable as an instrument for settling debts and carrying out different transaction. Money must function as a standard of differed payment store of value unit of account and medium of exchange.

Moreover before money can perform this function effectively it must have some characteristic as general acceptability divisibility etc.

Different commodities that have various time and culture served as money paper gold silver mental cigarettes etc.

2. FINANCIAL INSTITUTION: This is an organization or institution that acts as a middle may in order to being lenders and borrowers together making available, Loanable funds to those willing to pay for the cost.
3. BANK: This is a financial institution whose main motive is to maximize profit through the maximization of deposit and extension of loans and advances to the economy. Banks pays interest to fund owners and change interest on; loans extended to fund users.
4. CASH: This is the aggregate amount of notes and coins held in the bank branches, head offices and also the amount that are in the hand of the public
5. BANKING HABITS:  This portrays the degree of responsive of the public in a given territory to the use of banking facilities available to them. In another words, it is seen as the rate at which the populace makes use of banks.
6. IDLE CASH: cash that is put into unproductive use because it does not contribute anything to the holder. This sis also an accumulation of currency in excess of the normal needs usually motivated by fear of future scarcity
7. ECFONOMIC GROWTH AND DEVELOPMENT: Economic growth is the process of increasing national output and income per head of a nation. It demonstrates the extent to which real national output head has increased

Economic development is where a country real per capital gross national product of income increases over a sustained period of time. It is also the desirable change in the economic and social super structure of the society.

REFERENCES

 

1. Lipsey RG: An introduction to positive Economic Butter and Tammer Ltd (1985).
2. Femi Adekanye: Elements of banking in Nigeria F and A public (1986)

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THE NATURE AND CONSEQUENCES OF JUVENILE DELINQUENCY IN NIGERIA: A STUDY OF ENUGU NORTH LGA, ENUGU STATE

Foreign Transaction For Dollars Payment :
Bank Name: GTBank
Branch Location: Enugu State,Nigeria.
Account Name: Chi E-Concept Int’l
 Account Number:  0117780667. 
Swift Code: GTBINGLA 
Dollar conversion rate for Naira is 175 per dollar. 

ATM CARD:  YOU CAN ALSO MAKE PAYMENT USING YOUR ATM CARD OR ONLINE TRANSFER. PLEASE CONTACT YOUR BANK SECURITY FOR GUIDE ON HOW TO TRANSFER MONEY TO OTHER BANKS USING YOUR ATM CARD. ATM CARD OR ONLINE BANK TRANSFER IS FASTER FOR QUICK DELIVERY TO YOUR EMAIL . OUR MARKETER WILL RESPOND TO YOU ANY TIME OF THE DAY. WE SUPPORT CBN CASHLESS SOCIETY. 

OR
PAY ONLINE USING YOUR ATM CARD. IT IS SECURED AND RELIABLE.

form>DELIVERY PERIOD FOR BANK PAYMENT IS  LESS THAN 24 HOURS

CALL OUR  CUSTOMERS CARE  OKEKE CHIDI C ON :  08074466939,08063386834.

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08074466939 or 08063386834, YOUR PROJECT TITLE  YOU WANT US TO SEND TO YOU, AMOUNT PAID, DEPOSITOR NAME, UR EMAIL ADDRESS,PAYMENT DATE. YOU WILL RECEIVE YOUR MATERIAL IN LESS THAN 2 HOURS ONCE WILL CONFIRM YOUR PAYMENT.

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Evaluation of Nigeria system, emphasis

on value added tax – study of federal 

board of inland revenue (fbir)

Preface

 

Evaluation of Nigeria tax system emphasis on value added tax (VAT) study of Federal Board of Inland Revenue is a dynamic subject and needs appraisal. It is for this concern that moved the writer into the research work. He tried to give the reader a bird’s eye-view of the entire gamut of the newly introduced tax system in Nigeria.

His research project is divided into five chapters, one delves with introduction. Chapter two relays the literature review, chapter three deals with the research design and methodology. Chapter four houses data presentation analysis and interpretation, lastly chapter five gives the summary of the findings conclusion and recommendation.

It is worthy to note that chapter four in the main, discusses extensively the work in question

Abstract

 

This study is carried out with the aim of evaluating Nigeria tax system with special emphasis on value added tax – study of Federal Board of Inland Revenue (FIBR).

 

It began with the history and development of Nigeria tax system right from its introduction between 1804 and 1810 and went through the fields of various tax It main purpose its to find out which tax system s good for Nigeria especially when compared to sales tax.

 

There is no gainsaying the fact that the study no problem. For instance the research discovered that (VAT) administration is solely the work of Federal Board of Inland Revenue.

 

The objective of research are various, amongst them: – to ensure that there is a minimal tax evasion and avoidance: that the replacement of sales tax with VAT is on the right direction and assess the revenue collectible from Vat.

 

In the light of the above some hypothesis were propounded and they are: who bears the incidence of tax, whether VAT reduces tax evasion and avoidance, whether it affects negatively the demand for products, and if VAT has justified its introduction. The result from the analysis reveals that  VAT is a suitable tax system in Nigeria.

 

Consequent upon result from the study carried out, it is recommended that VAT should be allowed to stay, it is indeed a force to reckon with in Nigeria tax system.

CHAPTER ONE:

• Overview of study
  • Introduction
  • Statement of problem
  • Objectives of the study
  • Hypotheses
  • Scope and limitation of the study
  • Significance of the study
  • Definition of terms

 

CHAPTER TWO:

2.0     Review of related literature

• Objectives for the imposition of VAT
• The origin and history of VAT
• Administration of VAT in Nigeria
• The basic structure of vat, administration
• Methods of computing vat
• Accounting of vat
• Inspection of vat operations
• Vat and sales tax compared
• Economic stabilization of vat

CHAPTER THREE:

3.0     Research Design and methodology

• Population
• Sample selection
• Description of instrument used in data collection ‘
• Questionnaire distribution and collection
• Other sources of data
• Procedure of data analysis

 

 

CHAPTER FOUR:

4.0     Data presentation analysis and interpretation

• Presentation and analysis of data
• Testing of Hypothesis

CHAPTER FIVE:

• Summary of finding, Conclusion and Recommendation

5.1     Summary of findings

• Conclusion
• Recommendations

Appendix

Questionnaire

Bibliography

 

 

LIST OF TABLES

 

4.2         Showing responses in payment of tax

• Showing response whether vat can increase the general cost of production
• Showing response of vat rate
• Showing response of vat incidence
• Showing response of whether vat will reduce the demand of a firm’s product
• Showing responses whether vat will reduce tax evasion and avoidance
• Showing whether vat is a major contributor of federal government revenue.
  • Showing position of vat in revenue generation in 1996
• Showing the inflationary effect of vat on Nigeria economy
• Showing the effect of vat vatable goods and services
• Showing response whether vat is favourable or unfavourable
• Showing response on vat publicity
• Showing response concerning whether vat should be privatized
• Showing response on vat staff strength
• Showing response the introduction of vat has been justified
• Showing vat comparison with sales tax
  • Hypothesis incidence of vat
  • Hypothesis on tax evasion and avoidance
  • Hypothesis on the yield of vat
  • Hypothesis on vat justification

 

 

 

 

 

 

 

 

 

 

CHAPTER ONE

• OVERVIEW OF THE STUDY

1.1     INTRODUCTION

Revenue is a very important concern to any nation of the world both for the developed and the under developed nations. The essence of this is to enable her undertake her numerous activities. The question that often comes to mind is, how are the government source here revenue. This answer is not for fetched, as a nations’ government can source her revenue at home or from external grants and aids, interest and loan repayments, mining income and royalties, licenses, etc. besides all these, the main source of government revenue comes though taxation. This will now lead us to the definition, discuss as introduction to Nigeria and then try to find out the most viable form to taxation for Nigeria.

 

Taxation is defined as a compulsory levy imposed by the government for the general purpose of government. It is fees and revenue from individuals, business firms and cooperate bodies. Furthermore, is a tax is a compulsory levy imposed by the government on individuals and business firms and paid by them to the government (Ojo, 1982 P. 171).

 

Taxation was first introduced in Nigeria by the Fulani Jihad led by sir Usman Dan Fodio between 1804 and 1810. this was because of a well administered caliphate in the federal Hausa states which facilitated the imposition of taxes. Laggard refined the tax. System by combining the different taxes into simple, understandable and collectable direct tax. Between 1904 when Lord Laggard introduced income tax and to date, Nigeria has seen many tax laws with their ordinances. Among these are: Income Tax Management Act (ITMA) 1961: Capital transfer tax Act  (CTTA) 1979 etc. thus, taxation is to be important and dependable but the question is which is the more viable tax system that would stand the test of time in Nigeria. Since the writer wants to evaluate the Nigeria tax system, the concept of value added tax (VAT) come into play. What then is VAT? VAT which stands for value added tax is defined as a form of indirect taxation applied at a flat of 5% on spending or general consumption (goods and services). Again, vat is an indirect form of taxation based on the general consumption behaviour of the people (Ochiogu, 1994, P. 174); it is regulated by the vat Decree No 102 of 1993, which took effect from January 1, 1994. Under section 7 – of the vat Decree, the tax is administered by the Federal Board of Inland Revenue. It is intended to replace the 1986 sales tax law, which failed to generate funds for the government. Two agencies of the United Nations organization – the international monetary fund (IMF) and the World Bank which are closely identified which the establishment and monitoring of structural adjustment programme (SAP) in Nigeria in 1987 (Just a year after the introduction of SAP) advised that the tax systems in Nigeria needed some reforms, some as to make the government revenue less dependable on revenue derived from petroleum (Oil).

 

In other words, as one of the means of raising additional non-oil revenue locally, the introduction of vat was suggested to the Federal Government to replace the existing tax.

 

Consequent upon this, the federal government set up two tax study groups in 1991. one was set up by the federal ministry of finance and economic development to study and make recommendations on the reforms needed in the direct taxes in Nigeria. The other study group on direct taxation was set up by the federal ministry of budget and planning and inaugurated on April 26, 1991 with the following objectives:

 

• Overhaul the Nigeria tax system and embark on a deliberate low tax regime.
• Review the tax laws.
• Reduce dependence on oil (Petroleum) revenue
• Improve the administration in indirect taxes
• Re-organize the entire tax administration to make it more efficient.
• Maintain a fairly even tax incidence across various lines, stages and elements of production, including non-productive element of taxation on imported goods.
• Most importantly, attempt to make a remarkable shift from direct to indirect taxation in order to minimize government dependence on oil revenue.

 

It was this committee (the indirect group) that gave a guidance for the establishment of modified value added tax committee to carry out a feasibility study on the implementation to the new tax system in Nigeria. The government accepted its report with some modifications and therefore agreed to introduce vat in 1993 but for public opinion, the date was shifted to January 1, 1994.

 

1.2     STATEMENT OF PROBLEM

Since revenue is the blood- source or the life-wire of any nation. It is bitter truth to mention that agriculture, which used to be the largest carrier of revenue for Nigeria in the 1960s and early part of 1970s have been denied of adequate attention it needed. This was because Nigeria depended more on oil as a source of her revenue, thus, there is every need to arrest the situation. Furthermore, since the vat administration is solely the work of FBIR, it leads to monopoly, hence their few staff do not cover all the points for collection. In addition, to this, staff are not well compensated and the net effect of this that they do not put in all efforts to achieve the laudable goals and objective of the new tax system.

 

This study therefore tends to proffer solution in how to improve the situation. In order to stabilize the Nigeria economy, how to generate enough fund is borne in mind. As tax evasion is much reduce with vat and its attendant high rate of consumption, Nigeria government can generate more fund through it than with any other form of tax as to evade tax through vat is as an individual denying himself of consumption of any vat able goods or services. Payment is by everybody irrespective of ones age provided that the person receive the services. Nevertheless, there is no complete evasion free with vat, as the middlemen whose duty is to collect the tax may not render to entire money so collected to the coffer of the government. Therefore, vat should be evaluated based on relative term and not absolute term of the essence in this case. The FBIR should have enough staff so that every establishment that renders vat ale services or deals with vat able goods should have one taxman present to ensure that the tax authority has accurate figure of the tax collectible form such establishment.

 

1.3     OBJECTIVES OF THE STUDY

The purpose for which this study was carried out were based on the following outlines:

• To asses the revenue collectible from vat.
• To show that the replacement of sales tax of 1986 with vat is on the right.
• To show that there is a minimal tax evasion with vat that in any other form of tax.
• To appraise the effective and efficient vat administration.
• To attest that with the broad scope of vat, quite a considerable proportion of tax (revenue) is realized.

 

1.4     HYPOTHESES

To achieve a meaningful objective of this work, a number of hypotheses were drawn.

 

Where:        Ho:    –        Null hypothesis

Hi:     –        Alternative hypothesis

 

HYPOTHESIS I

H₂:     –        Consumers bear the incidence of Vat entirely

H₁:     –        Consumers bear the incidence of Vat entirely

 

HYPOTHESIS 2

H_o:     –        Vat reduces tax evasion and avoidance.

H₁:     –        Does not reduce tax evasion and avoidance

 

HYPOTHESIS 3

H_o:     –        Vat effects negatively the demand for vatable products.

H₁:     –        Vat does not effect negatively be demand for vatable products.

HYPOTHESIS 4

H_o:     –        The yield from vat has justified it introduction

H₁:     –        The yield from vat has not justified its introduction

 

1.5     SCOPE AND LIMITATION OF THE STUDY

As earlier pointed out, Nigeria has seen many tax laws. In evaluating Nigerian tax system emphasis was based on vat. The reason fir such limitation in scope was principally to delve well into nearly all aspects of the newly introduced tax system so that the reader after going thought he entire text will have course to believer that he is well equipped with things that matters as vat is concerned.

 

The writer because of want to time and fun could not tour the length and breath of the country to gather more facts on this newly introduced tax system, but at any rate, with the selected areas he was able to cover, he is quite convinced that any reader of this research work will have a bird’s eye-view of the entire gamut of vat in Nigeria.

 

However, as research is an on going concern, the reader is free to still improve on this project work.

 

1.6     SIGNIFICANCE OF THE STUDY

This study gives the reader the totality of tax systems in Nigeria with a particular emphasis of value added tax where a critical evaluation was done.

 

It contribution to the nations economy, importance and objective were thrown into light. The administration and accounting of vat were also brought to the knowledge of the reader.

 

1.7     DEFINITION OF TERMS

          Some terms used in this exercise are here below defined for the comprehension of the research work.

FBIR –        Federal Board of Inland Revenue

FBRS          –        Federal Board of Revenue Services

SIRS –         State Board of Revenue Service

 

Vatable person,                   –     Corporate or incorporate that deals in vatable good and services.

Vatable goods and service            –   Tangible and intangible commodities or services that are not exempted from vat.

Vatable period                    –     Period covered by any particular return. The vatable period in Nigeria is one month.

Equitable taxation               –     Means the more one consumes. The more tax he pays

Input tax                             –     Tax paid or payable by a taxable person on the importation of any goods used or to be used for the purpose of a business.

Output tax                           –     Tax on the supplies by a taxable person.

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EVALUATION OF CASH AND CREDIT MANAGEMENT POLICIES AS AN INSTRUMENT FOR AVOIDING ILLIQUIDITY AND LIQUIDATIONS

(A CASE STUDY OF ANAMCO, ENUGU STATRE)

CHAPTER ONE:

 INTRODUCTION

• General introduction and background of the study
• Statement of problem
• Objective of the study
• Research questions
• Working hypothesis
• Significant of the study
• Scope and limitation of the study
• Historical background of Anamco
• Definition of terms and concepts

References

 

CHAPTER TWO:

 LITERATURE REVIEW

• Concepts of liquidity and its effect on business operations
• Issues in cash management
• Cash planning and control
• Techniques of cash control
• Management f receivable (debtors)
• The use of accounting ratios in the management of cash and accounts

References

 

CHAPTER THREE:

 RESEARCH DESIGN AND METHODOLOGY

• Sources of data
• Research population
• Sample size and sampling techniques
• Questionnaire design /administration
• Validity and reliability of instrument
• Method of data analysis

 

CHAPTER FOUR:

DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

• Analysis and discussion of research questionnaires
• Test of hypothesis

 

CHAPTER FIVE:

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION

• Summary of findings
• Conclusion
• Recommendations

References

Appendix

Questionnaires

RESEARCH PROPOSALS

 

          This research work is designed to find out the magnitude to which cash and collectibles bear to the firms total working capital and to discuss as far as possible the extent to which improper management of cash resources and accounts receivable can create illiquidity and a state of insolvency in a business outfit.

In conducting the research for this topic, the primary sources of information will be interviews and questionnaire and also secondary sources like text book, Annual reports, journals and periodicals.

The appropriate statistical tools will be applied in analyzing the project data.

The major problems which I am likely to encounter while doing this research work are: time factor, inadequate funding, anti-research attitude.  Apart from all these problems and which must be looked at the time of initiating this research, the research work will be a practicable one if adopt all the techniques above.

I hope that when this project has been completed, the problem of untimely liquidation and illiquidity in financial and other sectors of the economy will be a thing of the pasty.

In conclusion therefore, the researcher will suggest how adequate cash and credit management by the financial managers can lead to expansion of business.

CHAPTER ONE

 

INTRODUCTION

• General introduction and background of the study

The management of an organization’s capital relates to the finance and investment of non-human resources, that is, physical and monetary assets, for the purpose of maximum benefit in terms of profitability.  According to Frear (1980) profitability is determined in part by the way in which a company manages its working capital elements, especially the company’s management policies in respect of cash and account receivable/payable.  Basically, there would be a drop in profit if the basic element of working capital were raised without a corresponding rise introduction or margins. So one of the principal functions of a financial manager is to provide the erect amount of each elements of working capital at the right time and in the appropriate place to realize the greatest return on investment. A business which is basically profitable in a capital intensive industry with high level of inventory turnover but does not have an effective/efficient policies for it’s’ working capital constituents, especially cash, can easily be stopped by a temporary set-back into liquidation because it has no room to maneuver.  Traditionally, the users of accounting information, especially the external users are interested in notions of solvency and liquidity as criteria for assessing credit worthiness.  In recent years, cash and trade credit management has become the most important sector of financial management in many trading and manufacturing organizations.  At one time, it was possible for a business to survive without proper cash management policies as well as lay down policies for accounts receivable (trade debtors) as long as it was reasonably profitable.  Accounting to Bennel (1989) prior to 1970’s; trade credit was not a dominant feature of conducting business and procurement of fund were largely easily were not exploited to its fullest use.  Today however, this has not generally been the case and many highly profitable companies have had liquidity.  Problems and some have gone into liquidations, largely because of lack of appropriate cash and credit management policies/techniques.  In these circumstances, business executives now attach a high decree of importance to the cash and accounts receivable management function.  In large organizations, the financial director or treasurer is usually in charge of the management of cash resources and in introducing appropriate systems that will ensure adequate working flow that enable the economy to remain liquid at all times.  Illiquidity problems could be found in all types of companies and not restricted to small inefficient firms.  In some cases, large well known companies have experiences illiquidity problems and in some few instances, liquidation proceedings and eventual demise of such organizations.  The current wave to distress in our financial sectors (Banks and insurance companies) provides a good background to illiquidity problems arising from ineffective in cash and credit management policies in spite of their profitability.  Today, several of these institutions have been liquidated.

These developments have naturally had an effect on credit and cash management policies and it is therefore considered to be particularly important that the reasons behind these liquidity problems should be appreciated; using Anambra motor company ltd – a manufacturing organization as a case study.  The choice of this organization is the relevant, which cash and credit management policies bear to its operation.

 

• Statement of the problem

Many profitable organizations are forced into untimely liquidation, bankruptcy and experience work stoppages as a result of strike action and consequently operate at losses not because the business is not profitable but due to inefficient utilization of cash and other material resources at its disposal.  Moreover, majority of business transactions are conducted credit basis and this has always increased the volume of account receivable (debtor) and a substantial amount of these receivable are lost daily through bad and doubtful debts.  The resultant effect is that companies have huge amount of its fund tied to un-collectables, hence a state of illiquidity can arise.  Therefore, the continued existence of a firm/company, its survival and growth depends, among other factors on how best the firm utilizes its available cash resources and the efficient management of its collectable as the neglect of these highly important core of management are could soon lead to a state of insolvency due to illiquidity problems.  The study is therefore designed to evaluate the essence of efficient cash and credit management policies existing in Anambra motor company limited

 

• Objective of study

Realizing the high rate of failed / distressed organization in the financial sector and the manufacturing sectors of the economy due to illiquidity and problems and the fact that factors responsible for such distressed conditions had not been properly addressed, the specific objectives of the study are to find out:

1. The magnitude to which cash and collectibles bear to the firm’s total working capital
2. To discuss as far as possible the extent to which improper management of cash resources and accounts receivable can create illiquidity/ a state of insolvency in a business outfit.

• To evaluate the extent to which an organization that requires regular use of cash resources that can ensure regularity in its liquidity management through the technique of cash flow budgeting.

1. To assess the adequacy of cash and credit management policies of the case study
2. On the basis of the findings of the study, propose a comprehensive and effective cash/credit policies (package) that would made for an effective management of cash and account receivable as a way off insolvency and eventual liquidation.

 

 

• Research question

The following research questions have been designed to address the detailed area of the study and will serve as a guide to the researcher on the issue of the study.

1. Why are most profitable organization experiencing liquidity problems in spite of large turnover and better profit margin?
2. Why is cash management an essential variable in determining the continuous existence and growth of business organization?

• What are the techniques that can lead to efficient cash management?

1. How can a company achieve efficiency and effective collective of receivable.
2. When should a company grant credit to its customers?
3. What are the likely consequences of refusing credit?

• When should a company stop further credit facilities to customers?
• What are the likely consequences of not collecting receivables as at when due?

1. How can cash budgeting/ preparation of flow statements ensure adequate cash availability to solve liquidity problems?
2. What are the consequences of not using cash projections techniques for cash planning and control?
3. How can a company determine the optimum cash balance to meet liquidity requirements?

• Should a company charge interest on over due accounts?

These and others are the area in which this study intends to explore.

 

• Working hypothesis

According to Spiege (1972) “a research hypothesis is an assumption,  statement or suggestion about the population under consideration”.

Omololaijie (1986) defined hypothesis as a suggested investigation”

Consequently, the following hypothesis will be used in this study:

1. Illiquidity and insolvency is a result of bad credit and cash management policies.
2. Profitable organizations do not face liquidity problems since they made huge amount of profit
3. Liquidity problems are due to lack of cash planning and budgeting system
4. Granting cash discount has no significant effect on the ability of debtors to pay their debts.

 

• Significance of the study

This research project will be of great importance to the company management and other corporate bodies as well as the general public as investors. This way which this study has been planned and carried out will offer enough information and explanation to all those engaged in the management of an organization either as financial managers or financial controllers.

Furthermore, this study is expected to offer a secondary source of data to many students/ researchers in the are of working capital management.

 

• Scope and limitation of the study

Osuala (1989) defined scope of study as those parts of topic or problem that normally might be considered to be part of such but which because of limitations of time, physical capacity or other reasons, the researcher cannot or does not wish to include.”  Thus the researcher had to restrict himself to a particular area of concentration and specific period of time.

The scope of this study is limited to cash and credit management policies for improved liquidity in an organization with particular reference to Anambra motor manufacturing company ltd.  The researcher will only decree on the design of effective cash and credit policies through cash budgeting techniques and efficient collection procedures for bailing out companies in the web of Illiquidity/liquidation.

It is also necessary to state the scope of the study was limited to Enugu environment due to time, financial and other constraints which inhibit the researcher’s scope of activities in this field.  Unwillingness/unco-operative posture of some respondents also affected the scope of this study.

 

• Historical Background of Anammco

Daimler Ben A.G of Germany, the parent company of ANAMMCO LTD started its export to Nigeria since 1952.  Mercedes – Benz commercial vehicles have been successfully marketed throughout Nigeria since then utilizing a distributive network, which has  particularly laid emphasis on services this brand of vehicles had been made market lender in the country through imports.

The then federal military government of murtal /Obasanjo came up with the bold plan of negotiating a joint venture association with other manufacturers of commercial vehicles in Nigeria.  The series of negotiations evolved into signing of partnership agreement between the federal military government and the Daimler Benz AG of Germany was thus incorporated as a private limited liability company with an authorized share capital of N7000,000 (seven million Naira) on 17^th January, 1977 to carry out the terms of agreement.  The then military governor, vol. John Atom Kpera, then laid the foundation stone of the company, in the then Anambra state on 12^th may 1978.  The official commissioning of the plant was later performed on 8^th July, 1980 by the then president of the federal republic of Nigeria, Alhaji shehu shagari

Location

The company is located on a 31-hectre piece of land situated 8km east of Enugu, very close to the Enugu Air port in Enugu state of Nigeria.

 

Staff strength

Anammco has a total staff strength of about 580 current in its payroll with over 75% forming as their Junior staff.

 

Production range

The multi-million Naira plant was initially planed to produce trucks for the Nigeria market.  But today, the plant has diversified its production range to include the full range of commercial vehicles for the rapid industrialization of the country.  He only produces trucks as originally planned, but has gone a step further in fabrication, manufacturing and the production of buses and other utility vehicles.  Part of its product range today includes:

MB trucks of 5-38 metric tons gross weight

MB o131 (42 seater  city/Intercity buses)

MB 0400R (intercity bus-49 seats)

MB 0400RS (intercity bus – 54 seats)

MBO 911 (56 seater bus)

MBO 114 (61 seater bus)

MBO 1520 (52 seater bus)

Fire fighting vehicles

Ambulances

Mobile clinics

Refuse disposal vehicles

Vehicle refurbishment

The company has made an enviable mark on the nations industrial growth, adding over 30,000 (thirty thousands) vehicles to the nation’s transport sector, backed up effectively with a network of over 36 after sales service points and spare parts supply depots.  The company’s central spare parts Depot in Enugu stocks over 35,000 line items.

 

• Definitions of Terms/concepts

1. Liquidity: Availability of cash or near cash assets for prompt settlement of current liability
2. Solvency: state of being able to pay current debts obligations as at when due

• Accounts receivable: this refers to debtors

 

References:

1. Benneth R. (1989) Small business survival; London pitman publishing ltd
2. Fear O.H.N. (1987): The management of business finance, London: Pitman publishing ltd
3. Osuala E.C (1987): Introduction research methodology Onitsha: Feb. publishers ltd
4. Spiegel, M 91972): Statistical S.I (metric) 3^rd Edition USA: Mcgraw Hill Incor

Omololaiye (1986): Research methods and statistics,  Jos: Fab Anieh Nig. Ltd.

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THE NATURE AND CONSEQUENCES OF JUVENILE DELINQUENCY IN NIGERIA: A STUDY OF ENUGU NORTH LGA, ENUGU STATE

Foreign Transaction For Dollars Payment :
Bank Name: GTBank
Branch Location: Enugu State,Nigeria.
Account Name: Chi E-Concept Int’l
 Account Number:  0117780667. 
Swift Code: GTBINGLA 
Dollar conversion rate for Naira is 175 per dollar. 

ATM CARD:  YOU CAN ALSO MAKE PAYMENT USING YOUR ATM CARD OR ONLINE TRANSFER. PLEASE CONTACT YOUR BANK SECURITY FOR GUIDE ON HOW TO TRANSFER MONEY TO OTHER BANKS USING YOUR ATM CARD. ATM CARD OR ONLINE BANK TRANSFER IS FASTER FOR QUICK DELIVERY TO YOUR EMAIL . OUR MARKETER WILL RESPOND TO YOU ANY TIME OF THE DAY. WE SUPPORT CBN CASHLESS SOCIETY. 

OR
PAY ONLINE USING YOUR ATM CARD. IT IS SECURED AND RELIABLE.

form>DELIVERY PERIOD FOR BANK PAYMENT IS  LESS THAN 24 HOURS

CALL OUR  CUSTOMERS CARE  OKEKE CHIDI C ON :  08074466939,08063386834.

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EVALUATING THE IMPACT OF BANK DISTRESS ON THE PROFIT GROWTH OF EXISTING COMMERCIAL BANKS.

(A CASE STUDY OF SELECTED COMMERCIAL BANKS)

ABSTRACT

This work “Evaluating the impact of Bank Distress on the profit growth of commercial banks” has the objective of showing the effect of distress on the profit growth of commercial banks. The causes of bank distress in Nigeria and the possible prevention strategies or failure resolution options of bank distress. The review of related literature was done to give an in depth knowledge of the topic to the researchers. Both primary and secondary sources of data were used by the researchers.

Simple statistical tools like T-test, least square (B) and tables were used to analyse the data collected. The following findings were made; Banks made lower profit during distress period and higher profit during distress period and higher profit after distress period. Meanwhile, banks generally made lower profit during distress period. We recommended that the supervisory arsenals to ensure minimum distress with little or no effect when it occurs.

CHAPTER ONE

1.0     Introduction                                                                                      1

• Background of the study 1
• Statement of the problem 5
• Purpose/Objectives of the study 5
• Research Questions 6
• Research Hypothesis 6
• Significance of the Study 7
• Scope, Limitations and Delimitations 7
• Definitions of Terms 8

 

CHAPTER TWO                  

2.0     Review of Related Literature                                                   10

• Definition of Distress in Banking Industry 10
• Symptoms of Distressed Banks in Nigeria 14
• Causes of Banking Distress 16
  • Capital Inadequacy 18
  • Inept Management 19
  • Ownership Structure/Political

Interference in Management of Banks                                               20

• Distress Management and Failure Resolution Option 21
• The Role of Banks in an Economic System 30

Reference                                                                                 33

CHAPTER THREE

3.0     Research Design and Methodology                                         35

• Research Design 35
• Area of Study 36
• Population 36
• Sample and Sampling Techniques 37
• Instruments of Data Collection 37
• Methods of Data Presentation 38
• Methods of Data Analysis 38

Reference                                                                                 40

CHAPTER FOUR

4.0     Data Presentation and Analysis                                                        41

• Graphical Illustration of Banks Profit 43

CHAPTER FIVE                  

5.0     Findings, Recommendation and Conclusion                                     54

• Findings 54
• Recommendation 56
• Conclusion 58

Bibliography                                                                           59

Appendix                                                                                61

 

 

 

 

PROPOSAL

The topic “Evaluating the Impact of Bank Distress on the profit Growth of Commercial Bank, (A case study of selected Commercial banks)

The Topic “Evaluating the impact of Bank Distress on the Profit Growth of Commercial Banks” is posed to appraise the effect of distress on the profit growth of commercial  banks. It measures the way in which distress affects the profit of commercial banks negatively or otherwise.

For effective execution of this work a ten year profit trend of some selected banks will be evaluated. This ten year profit will cover the period of distress and after distress for a proper appraisal of the work.

Meanwhile the profit of these banks will be collected using a primary data source (Annual Report) and secondary sources of information and there primary data will be analysed using the most appropriate statistical tools for an accurate result.

However, there will also be a formulation of hypothesis which is based on the known negative implication of distress. Though, this hypothesis and also there will be a formulation of research questions which will be sample in relative to the objective of the work for the best result.

After all, an inference will be drawn based on the outcome of our statistical test. Based on the results obtained in our tests there will be a recommendation thereof.

The distress in a bank made the banks to have lower profit during distress period and higher profit after distress permit, meanwhile, generally, banks made lower profit during distress period, due to the insufficient cover of losses from the profit generate internally was unable to generate internally positive capital.

The bank or some banks also experience illiquidity or insolvency, this is resulting in a situation whereby the banks could no longer met its liabilities and all there brings about illiquid. These is also insolvent in the bank when the value of its realizable assets is less than the total value of its liabilities.

Furthermore, the inability of a financial institutions to bridge its primary obligation of creating credit and loss of liquidity or the liability of the bank to turn assets into cash to meet any abnormal demand for cash by their customers.

 

CHAPTER ONE

 

INTRODUCTION

BACKGROUND OF THE STUDY

In any modern economy, the efficient production and exchange of goods and services requires money and bank is the instrument for affecting it. The last few years have been both traumatic and revolutionary for the banking industry. The industry produced the largest number of technically insolvent and under capitalized banks. The magnitude of distress in the nation’s banking industry reached on unprecedented level making it an issue of concern to the government, the regulatory authority, the bankers and the general public.

The Nigeria banking scene was characterized by changes designed to promote banking in the country. The changes may be categorized into phases, but due to the nature of our work we will consider two phases: namely, the era of laissez-fair banking (1894-1952), the era of limited banking regulator (1952-1958). During the first phase, banking industry was monopolized by foreign banks, principally the African banking corporation which was the precursor of the (BBWA) British Bank for West African the present First Bank of Nigeria the Barclays bank DCO (Dominion Colonial and Overseas) the present day Union banks, and the British an French Bank, the for-runner of the present United Bank for Africa. Although discrimination against Nigerians by these banks led to the establishment of some indigenous banks which unfortunately offers litter or no competition to the foreign banks essentially because of their weak capital base or poor managerial capacity. Consequently, all but three of the indigenous banks failed. The survived includes the National Bank of Nigeria established in 1933, the Agbomagbe Bank (now Wema Bank) established 1945 and the Africa Continental Bank 1947.

A commission of inquiry headed by G.D. patron set up in 1948 to investigate the business of banking in Nigeria. Their report led to the enactment of the first banking legislation in Nigeria, the banking ordinance of 1952. The 1952 ordinance laid down the standard and procedure for the conduct of banking business by prescribing the mandatory minimum capital requirement for banks both expatiates and indigenous banks at the tune of ∑100,000 and ∑12,500 respectively and it also introduced regulations to check bank failure. However, all the indigenous bank established in the country during this period also all failed. The bank failures of this era were attributed largely to the monopolistic structure of the banking industry, which allowed the foreign banks to enjoy exclusive patronage from British firms. The indigenous banks that survived was able to make it because of the support they got from their state government.

The distress phenomenon in Nigeria banking industry is of recent origin. The manifestation became discernable with some policy shocks starting in 1988 with the Central Bank of Nigeria (CBN) directive to banks that naira backing for foreign exchange application be lodged with CBN. Thus was followed in 1989 by another directive requiring public sector deposits to be transferred to CBN. These two directives exposed the precious liquidity position of some banks and the distress they have subterraneous harbored. What was thought to be a temporary liquidity problem for few banks soon caught up with  a lot more banks.

It is important to stress in this work that banking system was already in distress by the time NDIC was established. By them, about 7 (seven) banks were known to be technically insolvent. The government at that time, did not embark upon a clearing exercise that would have removed from the system that distressed institutions because it was feared that such an action would lead to loss of public confidence and flight of foreign capital more so there was no deposit insurance institution to expeditiously manage such bank closures. The NDIC was nevertheless required to insure all banks. That means that the corporation has been involved in managing distressed banks even before it could settle down and minister enough resources for this important task.

The intermediating role of banks and their relevance both in the transmission of monetary policies and in the payment system underscore their importance as well as the problem that bank distress at the prevailing dimension in our economy could precipitate. Arising from their intermediation banks generate financial resources ad put these at the disposal of deficit economic growth in the form of increased employment of otherwise idle resources and this in  turn leads to increase output. Therefore, an industry wide insolvency of banks, such as the one experienced in Nigeria, should be expected to retard the economy’s rate of capital formation, reduce its level of employment and output, and ultimately the pace of economic growth.

1.2     STATEMENT OF THE PROBLEM

A serious problem posed by widespred distress among banks is the threat to banking habit and the development of an efficient payment mechanism. The loss of confidence, the after math of the distress that hit the banking sector forced several business to take ferver risks by taking back their fund to well established safe havens dominated by older generation banks.

This research wok is therefore concerned with “Evaluating the impact of bank distress on the profit growth existing of commercial banks. Using ( A vase study of selected Commercial banks).

 

1.3     PURPOSE/OBJECTIVE OF THE STUDY

The main purpose/objective of this study is to have an overview of the effect of bank distress on the profit growth of commercial banks. Investigate into the reasons for bank failure in Nigeria.

Other objectives include:

1. To evaluate the causes of bank distress in Nigeria. To find out the impact.
2. To find out the possible prevention strategies or failure resolution options of bank distress.

 

1.4     RESEARCH QUESTIONS

• What are the causes of bank distress?
• What is the impact of bank distress?
• What is the profit growth rate of existing commercial bank during distress.
• What are the effects of bank distress?
• What are the possible solution options to this phenomenon in the banking scene?

 

1.5     RESEARCH HYPOTHESIS

H1:    Distress has no effect on the average profit of commercial

bank

Ho:    Distress has effect on the average profit of commercial

banks.

 

1.6     SIGNIFICANCE OF THE STUDY

This research project will be of importance of the following persons –

1. New generation banks, which may wish to know the implication of banks distress in the banking industry and how to restore the confidence of the customers and uphold efficient payment mechanism.
2. Nigeria deposit insurance corporation: The work could be of immense help to NDIC in the area of distress management and prevention strategies. And also in the area of failure resolution option in banking industry.
3. Students who may wish to know the extent of distress in the banking industry and the trend of distress as it affect the modern banking will also benefit from this work.

 

1.8     SCOPE, LIMITATIONS AND DELIMITATIONS:

While the banking impact distress in Nigeria will theoretically serve as the population of study. The project is designed to appraise the impact of bank distress on the profit growth of Union Bank of Nigeria Plc, First Bank of Nigeria, United Bank for Africa and Guarantee Trust Bank. It will also analyse the trend of these banks profit within a period of 10 years (1992-2001).

 

1.8     DEFINITION OF TERMS

What is Distress? It can be defined as an extreme suffering caused by lack of money or a state of danger, calamity and misfortunate acute poverty.

What is an Evaluation? This can also be defined as form of idea or judgment of something and also to work out something in numerical value.

What is Impact? This can be define as a strong effect or impression to bank. It is also a situation whereby something will be to be press closely or firmly together.

 

REFERENCE

 

Anyanwokoro M. (2000)        Banking operation, Enugu

Hosanna publications.

Ebhodane (1999)           Causes and Resolution of Distress

in Nigeria Financial Institution, Lagos. Ompress Publication.

Ogundele F. (1999)                  “Roles of Regulatory Authority”,

Lagos, Nigeria Deposit Insurance Corporation (NDIC) Publication.

Anenlimbor, A. E (1999)         “A study of Distress in the Nigeria

financial system” Lagos Nigeria Deposit Insurance Corporation publication (NDIC).

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