Below is a brief overview of this Project Work.
Format: MS WORD
| Chapters: 1-5
| Pages: 75
CHAPTER ONE I
INTRODUCTION
1.1 BACKGROUND OF THE STUDY. Monetary policy refers to any of a number of government measures undertaken to affect financial markets and credit conditions with the ultimate objective of influencing the overall behaviour of the economy. In Nigeria, monetary policy is the responsibility of the Central Bank of Nigeria, a federal crown corporation that implements its policy decisions largely through its ability to alter the Nigerian money supply. The money supply is that portion of the financial wealth of Nigerian households which has sufficient liquidity to be considered money. At the least it includes coin, currency, and checking account deposits in chartered banks, all of which have perfect liquidity in that they represent, at face value, an immediate means of payment for purchases made. Some economists broaden the money-supply definition by including additional chartered-bank deposits (e.g, savings accounts) or deposits in other financial institutions such as trust companies or credit unions. The responsibility for monetary policy formulation rests with the Central Bank of Nigeria (CBN). Monetary policy objective is couched in terms of maintaining price stability and promoting non-inflationary growth. The primary means adopted to achieve this objective is to set aggregate money supply targets and to rely on the open market operations (OMO) and other policy instruments to achieve the target. Monetary policy is the process by which the government, central bank, or monetary authority of a country controls
(i) the supply of money,
(ii) availability of money, and
(iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy Ball Laurence, 1999. Monetary theory provides insight into how to craft optimal monetary policy. Monetary policy is referred to as either being an expansionary policy, or a contractionary policy, where an expansionary policy increases the total supply of money in the economy, and a contractionary policy decreases the total money supply. Expansionary policy is traditionally used to combat unemployment in a recession by lowering interest rates, while contractionary policy involves raising interest rates in order to combat inflation. Monetary policy is contrasted with fiscal policy, which refers to government borrowing, spending and taxation. Monetary policy rests on the relationship between the rates of interest in an economy, that is the price at which money can be borrowed, and the total supply of money. Monetary policy uses a variety of tools to control one or both of these, to influence outcomes like economic growth, inflation, exchange rates with other currencies and unemployment. Where currency is under a monopoly of issuance, or where there is a regulated system of issuing currency through banks which are tied to a central bank, the monetary authority has the ability to alter the money supply and thus influence the interest rate (in order to achieve policy goals).
The beginning of monetary policy as such comes from the late 19th century, where it was used to maintain the gold standard. A policy is referred to as contractionary if it reduces the size of the money supply or raises the interest rate. An expansionary policy increases the size of the money supply, or decreases the interest rate. Furthermore, monetary policies are described as follows: accommodative, if the interest rate set by the central monetary authority is intended to create economic growth; neutral, if it is intended neither to create growth nor combat inflation; or tight if intended to reduce inflation. There are several monetary policy tools available to achieve these ends: increasing interest rates by fiat; reducing the monetary base; and increasing reserve requirements. All have the effect of contracting the money supply; and, if reversed, expand the money supply. Since the 1970s, monetary policy has generally been formed separately from fiscal policy. Even prior to the 1970s, the Bretton Woods system still ensured that most nations would form the two policies separately. Usually, the short term goal of open market operations is to achieve a specific short term interest rate target. In other instances, monetary policy might instead entail the targeting of a specific exchange rate relative to some foreign currency or else relative to gold. For example, in the case of the USA the Federal Reserve targets the federal funds rate, the rate at which member banks lend to one another overnight. The other primary means of conducting monetary policy include:
(i) Discount window lending (lender of last resort);
(ii) Fractional deposit lending (changes in the reserve requirement);
(iii) Moral suasion (cajoling certain market players to achieve specified outcomes);
(iv) "Open mouth operations" (talking monetary policy with the market). Monetary policy is primarily associated with interest rate and credit. For many centuries there were only two forms of monetary policy:
(i) Decisions about coinage;
(ii) Decisions to print paper money to create credit. Interest rates, while now thought of as part of monetary authority, were not generally coordinated with the other forms of monetary policy during this time. Monetary policy was seen as an executive decision, and was generally in the hands of the authority with seignior age, or the power to coin. With the advent of larger trading networks came the ability to set the price between gold and silver, and the price of the local currency to foreign currencies. This official price could be enforced by law, even if it varied from the market price. With the creation of the Bank of England in 1694, which acquired the responsibility to print notes and back them with gold, the idea of monetary policy as independent of executive action began to be established. The goal of monetary policy was to maintain the value of the coinage, print notes which would trade at par to specie, and prevent coins from leaving circulation. The establishment of central banks by industrializing nations was associated then with the desire to maintain the nation's peg to the gold standard, and to trade in a narrow band with other gold-backed currencies. To accomplish this end, central banks as part of the gold standard began setting the interest rates that they charged, both their own borrowers, and other banks who required liquidity. The maintenance of a gold standard required almost monthly adjustments of interest rates. During the 1870-1920 periods the industrialized nations set up central banking systems, with one of the last being the Federal Reserve in 1913. By this point the role of the central bank as the "lender of last resort" was understood. It was also increasingly understood that interest rates had an effect on the entire economy, in no small part because of the marginal revolution in economics, which focused on how many more, or how many fewer, people would make a decision based on a change in the economic trade-offs. It also became clear that there was a business cycle, and economic theory began understanding the relationship of interest rates to that cycle. (Nevertheless, steering a whole economy by influencing the interest rate has often been described as trying to steer an oil tanker with a canoe paddle.) Research by Cass Business School has also suggested that perhaps it is the central bank policies of expansionary and contractionary policies that are causing the economic cycle; evidence can be found by looking at the lack of cycles in economies before central banking policies existed. Batini, Nicoletta, 2003. Monetarist macroeconomists have sometimes advocated simply increasing the monetary supply at a low, constant rate, as the best way of maintaining low inflation and stable output growth.
However, when U.S. Federal Reserve Chairman Paul Volcker tried this policy, starting in October 1979, it was found to be impractical, because of the highly unstable relationship between monetary aggregates and other macroeconomic variables. . Therefore, monetary decisions today take into account a wider range of factors, such as: short term interest rates; long term interest rates;velocity of money through the economy; exchange rates; credit quality; bonds and equities (corporate ownership and debt); government versus private sector spending/savings; international capital flows of money on large scales; Financial derivatives such as options, swaps, futures contracts, etc. The sometimes complex financial transactions that make big business (especially international business) easier and safer would be much more difficult if not impossible. Moreover, shifting risk to different people/companies that specialize in monitoring and using risk can turn any financial risk into a known dollar amount and therefore make business predictable and more profitable for everyone involved.
1.2 STATEMENT OF THE PROBLEM The statement of problem is on the impact of government monetary policies on Banks performance in Lagos metropolis. The major problems of study lies in the levels of political instability which has a lot of adverse effects on the micro and macro-economics in a developing economy like Nigeria. Debates over targets and structure of monetary policies are as old as the economic systems that engender them. Thoughts have varied on the framework for conducting monetary policy (the rules versus discretion debate), structure of institutions supporting them, nature of policy instruments as well as the stability or otherwise of the target variables. For several decades up to the 1990s, many countries adopted base-money targeting and fixed their exchange rates. However, questions about stability of money demand, multiplier and velocity have tended to force countries to rethink monetary policy frameworks. Also, excess of importation of goods and services (both finished goods and production inputs) cost more in naira currencies. Specifically, the accelerated rise in the cost of imported raw materials and spare parts was partly responsible for the depreciation of national currency. Other factors that are responsible for unstable government policies in the Nigerian economy are the factor that causes changes in the economic growth and development in Nigeria. There are: changes in the level of national income; inflation rates movements in different countries; investment activities of both local and international; foreign exchange speculation and external debt services obligations. Therefore, the depreciation of naira currency occurs mostly when the price of a currency falls due to market forces.
1.3 Objectives of the Study
The purpose of study in this research study is as follows:
Ø To determine the impact of government monetary policies on banks performance in Lagos metropolis.
Ø To determine the problems and factors affecting government monetary policies on banks performance in Lagos metropolis. Ø To determine the implications of fluctuations in government monetary policies on the performance of commercial banks in Lagos metropolis
Ø To evaluate the performances of government monetary policies on banks performance in Lagos metropolis.
Ø To proffer solutions to the problems and factors affecting government monetary policies on banks performance in Lagos metropolis.
1.4 SIGNIFICANCE OF THE STUDY
The significance of this research study is on the impact of government monetary policies on banks performance in Lagos metropolis. The outcome of this research may likely increase the commitment of managers of commercial banks in Nigeria to embrace sound interest rate management policies and minimize their exposure to interest rate risks. The significance of the study will be of benefit to the bankers, stakeholders, management, government and investors. The result of this study would also enable banking industry to assess its contribution to the growth of Nigerian economy. It would also be improve the efficiency of banking and non-banking industry to the Nigeria economy. This research is also expected to encourage Nigerian policy makers and bank regulators to implement fiscal and monetary policy regimes that will ensure interest rate stability.
1.5 RESEARCH QUESTIONS
The research questions will be as follows:
1. What are the impacts of government monetary policies on banks performance in Nigeria Economy?
2. What are the problems and factors affecting government monetary policies on banks performance in Nigeria Economy?
3. What are the solutions to the problems and factors affecting government monetary policies on banks performance in Nigeria Economy?
4. What are the implications of fluctuations in government monetary policies on the performance of commercial banks in Nigeria Economy?
5. What are the performances of monetary policies on banks performance in Nigeria Economy?
1.6 RESEARCH HYPOTHESES
For the purpose of this research study, the following hypotheses derived from the statement of the problems are rested:
(1) Ho: Effective and efficient government monetary policies does not contribute to the growth of Nigerian economy.
H1 : Effective and efficient government monetary policies contribute to the growth of Nigerian economy.
(2) Ho: There is no relationship between government monetary policies Bank Performance and
H1: There is relationship between government monetary policies and Bank Performance.
1.7 SCOPE AND LIMITATION OF STUDY
The scope of study is within the concept of government monetary policies on banks performance in Lagos metropolis Also problems and challenges being faced by the banking sector and how it has affected the economic growth and development of Nigeria. The limitation of study is as a result of time constraints and distances to be covered by the researcher. The problems of restricted information by the staff members who are the respondents also affected the research.
1.8 DEFINITION OF TERMS
Currency board: A currency board is a monetary arrangement which pegs the monetary base of a country to that of an anchor nation Bank: It is an establishment which deals in money, receiving it on deposit on demand, collecting cheques for customer and investing the surplus until it is required.
Monetary policy: this is the process by which the government, central bank, or monetary authority of a country controls
i) the supply of money,
(ii) availability of money, and
(iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy Monetary theory provides insight into how to craft optimal monetary policy.
Bills of Exchange: It is an unconditional order in writing addressed by one person to another. Signed by the person giving it, requiring to whom it is addressed to pay on demand or at a fixed or determinable future time, a sum certain in money to or to the order of specified person or to bearer.
Treasury bill: This is a short-time instrument use by the government in raising funds. They are financial asset which can be easily converted into cash.
Foreign Exchange: The mechanism by which international debts between countries under difference currencies are discharge without the passing of actual money.
Equity: The value of an asset of company after all debts, mortgages and other charges attaching to the asset have been discharged. Hence, it is the ordinary shares of companies also known as "Net worth".
Liquidity Ratio: The proportion of specified liquid asset to total deposit of a bank. The minimum proportions required of commercial banks vary from time to time under the directories of the Central Sank.
Cash Rate: This is the cash a commercial bank must hold in order to meet the cash requirement of its1 customers.
CIBN: The Chattered Institute of Swanker of Nigeria. They are professional body, which upholds and further helps in regulating and ensuring the observation of professional ethics and norms, reviewing and tackle problems confronting it members in the banking sector.
Issuing Houses: A business organization that helps companies to sell their new issue including underwriting while complying with the stock regulations.
BOFID: The Sank and Other Financial Institution Decree 1991. This was professional body established by the decree of 1991 SOFID now bank and other financial Act "SOFIA" to regulates and control banking industries and other non-bank financial institution in Nigeria.
Unit Banking: This is that system where an Individual bank undertake banking business either though a single office or through a few branches operating within a limited area.
Nigeria Deposit Insurance Corporation (NDIC): The NDIC is an agent of the Federal Government. It was established by Decree No. 22 of 15th June, 1988. The purpose is to insure the deposit liabilities of licensed banks and other deposit taking institutions in Nigeria.
1.9 HISTORICAL BACKGROUND OF CASE STUDY
UNION BANK OF NIGERIA PLC. Union bank of Nigeria pic was established in 1917 as a colonial bank with its first branch in Lagos. In 1925, Barclays bank acquired the colonial bank, which resulted in the changed of bank name to Barclays bank (dominion, colonial and overseas.). Following the enactment of the companies' act 1968 and the legal requirement for all foreign subsidiaries to be incorporated locally, Barclay bank (d c 0) in 1969 was incorporated as Barclays bank of Nigeria limited. The ownership structure of Barclay bank remains un-changed until 1971 when 8.33% of the bank's share were offered to Nigerians. In the same, the bank was listed in the Nigeria stock exchange. As a result of the Nigerian enterprises promotion act 1972,the federal government of Nigeria acquired 51.67% of the bank shares, which left Barclays bank pic London , with only 40% enactment of the 1972 and 1977 Nigeria enterprises promotion act, Barclays bank international disposed its shareholding to Nigerians in 1979. To reflects the new ownership structure and in compliance with the companies and allied matters act of 1990, it assumed the name union bank of Nigeria plc. In consonance with the government's programmes privatization and commercialization of public enterprises, the federal government in 1993 sold its shares in union bank to private individuals. Thus union bank became fully owned by Nigeria citizen and organizations.
INTRODUCTION
1.1 BACKGROUND OF THE STUDY. Monetary policy refers to any of a number of government measures undertaken to affect financial markets and credit conditions with the ultimate objective of influencing the overall behaviour of the economy. In Nigeria, monetary policy is the responsibility of the Central Bank of Nigeria, a federal crown corporation that implements its policy decisions largely through its ability to alter the Nigerian money supply. The money supply is that portion of the financial wealth of Nigerian households which has sufficient liquidity to be considered money. At the least it includes coin, currency, and checking account deposits in chartered banks, all of which have perfect liquidity in that they represent, at face value, an immediate means of payment for purchases made. Some economists broaden the money-supply definition by including additional chartered-bank deposits (e.g, savings accounts) or deposits in other financial institutions such as trust companies or credit unions. The responsibility for monetary policy formulation rests with the Central Bank of Nigeria (CBN). Monetary policy objective is couched in terms of maintaining price stability and promoting non-inflationary growth. The primary means adopted to achieve this objective is to set aggregate money supply targets and to rely on the open market operations (OMO) and other policy instruments to achieve the target. Monetary policy is the process by which the government, central bank, or monetary authority of a country controls
(i) the supply of money,
(ii) availability of money, and
(iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy Ball Laurence, 1999. Monetary theory provides insight into how to craft optimal monetary policy. Monetary policy is referred to as either being an expansionary policy, or a contractionary policy, where an expansionary policy increases the total supply of money in the economy, and a contractionary policy decreases the total money supply. Expansionary policy is traditionally used to combat unemployment in a recession by lowering interest rates, while contractionary policy involves raising interest rates in order to combat inflation. Monetary policy is contrasted with fiscal policy, which refers to government borrowing, spending and taxation. Monetary policy rests on the relationship between the rates of interest in an economy, that is the price at which money can be borrowed, and the total supply of money. Monetary policy uses a variety of tools to control one or both of these, to influence outcomes like economic growth, inflation, exchange rates with other currencies and unemployment. Where currency is under a monopoly of issuance, or where there is a regulated system of issuing currency through banks which are tied to a central bank, the monetary authority has the ability to alter the money supply and thus influence the interest rate (in order to achieve policy goals).
The beginning of monetary policy as such comes from the late 19th century, where it was used to maintain the gold standard. A policy is referred to as contractionary if it reduces the size of the money supply or raises the interest rate. An expansionary policy increases the size of the money supply, or decreases the interest rate. Furthermore, monetary policies are described as follows: accommodative, if the interest rate set by the central monetary authority is intended to create economic growth; neutral, if it is intended neither to create growth nor combat inflation; or tight if intended to reduce inflation. There are several monetary policy tools available to achieve these ends: increasing interest rates by fiat; reducing the monetary base; and increasing reserve requirements. All have the effect of contracting the money supply; and, if reversed, expand the money supply. Since the 1970s, monetary policy has generally been formed separately from fiscal policy. Even prior to the 1970s, the Bretton Woods system still ensured that most nations would form the two policies separately. Usually, the short term goal of open market operations is to achieve a specific short term interest rate target. In other instances, monetary policy might instead entail the targeting of a specific exchange rate relative to some foreign currency or else relative to gold. For example, in the case of the USA the Federal Reserve targets the federal funds rate, the rate at which member banks lend to one another overnight. The other primary means of conducting monetary policy include:
(i) Discount window lending (lender of last resort);
(ii) Fractional deposit lending (changes in the reserve requirement);
(iii) Moral suasion (cajoling certain market players to achieve specified outcomes);
(iv) "Open mouth operations" (talking monetary policy with the market). Monetary policy is primarily associated with interest rate and credit. For many centuries there were only two forms of monetary policy:
(i) Decisions about coinage;
(ii) Decisions to print paper money to create credit. Interest rates, while now thought of as part of monetary authority, were not generally coordinated with the other forms of monetary policy during this time. Monetary policy was seen as an executive decision, and was generally in the hands of the authority with seignior age, or the power to coin. With the advent of larger trading networks came the ability to set the price between gold and silver, and the price of the local currency to foreign currencies. This official price could be enforced by law, even if it varied from the market price. With the creation of the Bank of England in 1694, which acquired the responsibility to print notes and back them with gold, the idea of monetary policy as independent of executive action began to be established. The goal of monetary policy was to maintain the value of the coinage, print notes which would trade at par to specie, and prevent coins from leaving circulation. The establishment of central banks by industrializing nations was associated then with the desire to maintain the nation's peg to the gold standard, and to trade in a narrow band with other gold-backed currencies. To accomplish this end, central banks as part of the gold standard began setting the interest rates that they charged, both their own borrowers, and other banks who required liquidity. The maintenance of a gold standard required almost monthly adjustments of interest rates. During the 1870-1920 periods the industrialized nations set up central banking systems, with one of the last being the Federal Reserve in 1913. By this point the role of the central bank as the "lender of last resort" was understood. It was also increasingly understood that interest rates had an effect on the entire economy, in no small part because of the marginal revolution in economics, which focused on how many more, or how many fewer, people would make a decision based on a change in the economic trade-offs. It also became clear that there was a business cycle, and economic theory began understanding the relationship of interest rates to that cycle. (Nevertheless, steering a whole economy by influencing the interest rate has often been described as trying to steer an oil tanker with a canoe paddle.) Research by Cass Business School has also suggested that perhaps it is the central bank policies of expansionary and contractionary policies that are causing the economic cycle; evidence can be found by looking at the lack of cycles in economies before central banking policies existed. Batini, Nicoletta, 2003. Monetarist macroeconomists have sometimes advocated simply increasing the monetary supply at a low, constant rate, as the best way of maintaining low inflation and stable output growth.
However, when U.S. Federal Reserve Chairman Paul Volcker tried this policy, starting in October 1979, it was found to be impractical, because of the highly unstable relationship between monetary aggregates and other macroeconomic variables. . Therefore, monetary decisions today take into account a wider range of factors, such as: short term interest rates; long term interest rates;velocity of money through the economy; exchange rates; credit quality; bonds and equities (corporate ownership and debt); government versus private sector spending/savings; international capital flows of money on large scales; Financial derivatives such as options, swaps, futures contracts, etc. The sometimes complex financial transactions that make big business (especially international business) easier and safer would be much more difficult if not impossible. Moreover, shifting risk to different people/companies that specialize in monitoring and using risk can turn any financial risk into a known dollar amount and therefore make business predictable and more profitable for everyone involved.
1.2 STATEMENT OF THE PROBLEM The statement of problem is on the impact of government monetary policies on Banks performance in Lagos metropolis. The major problems of study lies in the levels of political instability which has a lot of adverse effects on the micro and macro-economics in a developing economy like Nigeria. Debates over targets and structure of monetary policies are as old as the economic systems that engender them. Thoughts have varied on the framework for conducting monetary policy (the rules versus discretion debate), structure of institutions supporting them, nature of policy instruments as well as the stability or otherwise of the target variables. For several decades up to the 1990s, many countries adopted base-money targeting and fixed their exchange rates. However, questions about stability of money demand, multiplier and velocity have tended to force countries to rethink monetary policy frameworks. Also, excess of importation of goods and services (both finished goods and production inputs) cost more in naira currencies. Specifically, the accelerated rise in the cost of imported raw materials and spare parts was partly responsible for the depreciation of national currency. Other factors that are responsible for unstable government policies in the Nigerian economy are the factor that causes changes in the economic growth and development in Nigeria. There are: changes in the level of national income; inflation rates movements in different countries; investment activities of both local and international; foreign exchange speculation and external debt services obligations. Therefore, the depreciation of naira currency occurs mostly when the price of a currency falls due to market forces.
1.3 Objectives of the Study
The purpose of study in this research study is as follows:
Ø To determine the impact of government monetary policies on banks performance in Lagos metropolis.
Ø To determine the problems and factors affecting government monetary policies on banks performance in Lagos metropolis. Ø To determine the implications of fluctuations in government monetary policies on the performance of commercial banks in Lagos metropolis
Ø To evaluate the performances of government monetary policies on banks performance in Lagos metropolis.
Ø To proffer solutions to the problems and factors affecting government monetary policies on banks performance in Lagos metropolis.
1.4 SIGNIFICANCE OF THE STUDY
The significance of this research study is on the impact of government monetary policies on banks performance in Lagos metropolis. The outcome of this research may likely increase the commitment of managers of commercial banks in Nigeria to embrace sound interest rate management policies and minimize their exposure to interest rate risks. The significance of the study will be of benefit to the bankers, stakeholders, management, government and investors. The result of this study would also enable banking industry to assess its contribution to the growth of Nigerian economy. It would also be improve the efficiency of banking and non-banking industry to the Nigeria economy. This research is also expected to encourage Nigerian policy makers and bank regulators to implement fiscal and monetary policy regimes that will ensure interest rate stability.
1.5 RESEARCH QUESTIONS
The research questions will be as follows:
1. What are the impacts of government monetary policies on banks performance in Nigeria Economy?
2. What are the problems and factors affecting government monetary policies on banks performance in Nigeria Economy?
3. What are the solutions to the problems and factors affecting government monetary policies on banks performance in Nigeria Economy?
4. What are the implications of fluctuations in government monetary policies on the performance of commercial banks in Nigeria Economy?
5. What are the performances of monetary policies on banks performance in Nigeria Economy?
1.6 RESEARCH HYPOTHESES
For the purpose of this research study, the following hypotheses derived from the statement of the problems are rested:
(1) Ho: Effective and efficient government monetary policies does not contribute to the growth of Nigerian economy.
H1 : Effective and efficient government monetary policies contribute to the growth of Nigerian economy.
(2) Ho: There is no relationship between government monetary policies Bank Performance and
H1: There is relationship between government monetary policies and Bank Performance.
1.7 SCOPE AND LIMITATION OF STUDY
The scope of study is within the concept of government monetary policies on banks performance in Lagos metropolis Also problems and challenges being faced by the banking sector and how it has affected the economic growth and development of Nigeria. The limitation of study is as a result of time constraints and distances to be covered by the researcher. The problems of restricted information by the staff members who are the respondents also affected the research.
1.8 DEFINITION OF TERMS
Currency board: A currency board is a monetary arrangement which pegs the monetary base of a country to that of an anchor nation Bank: It is an establishment which deals in money, receiving it on deposit on demand, collecting cheques for customer and investing the surplus until it is required.
Monetary policy: this is the process by which the government, central bank, or monetary authority of a country controls
i) the supply of money,
(ii) availability of money, and
(iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy Monetary theory provides insight into how to craft optimal monetary policy.
Bills of Exchange: It is an unconditional order in writing addressed by one person to another. Signed by the person giving it, requiring to whom it is addressed to pay on demand or at a fixed or determinable future time, a sum certain in money to or to the order of specified person or to bearer.
Treasury bill: This is a short-time instrument use by the government in raising funds. They are financial asset which can be easily converted into cash.
Foreign Exchange: The mechanism by which international debts between countries under difference currencies are discharge without the passing of actual money.
Equity: The value of an asset of company after all debts, mortgages and other charges attaching to the asset have been discharged. Hence, it is the ordinary shares of companies also known as "Net worth".
Liquidity Ratio: The proportion of specified liquid asset to total deposit of a bank. The minimum proportions required of commercial banks vary from time to time under the directories of the Central Sank.
Cash Rate: This is the cash a commercial bank must hold in order to meet the cash requirement of its1 customers.
CIBN: The Chattered Institute of Swanker of Nigeria. They are professional body, which upholds and further helps in regulating and ensuring the observation of professional ethics and norms, reviewing and tackle problems confronting it members in the banking sector.
Issuing Houses: A business organization that helps companies to sell their new issue including underwriting while complying with the stock regulations.
BOFID: The Sank and Other Financial Institution Decree 1991. This was professional body established by the decree of 1991 SOFID now bank and other financial Act "SOFIA" to regulates and control banking industries and other non-bank financial institution in Nigeria.
Unit Banking: This is that system where an Individual bank undertake banking business either though a single office or through a few branches operating within a limited area.
Nigeria Deposit Insurance Corporation (NDIC): The NDIC is an agent of the Federal Government. It was established by Decree No. 22 of 15th June, 1988. The purpose is to insure the deposit liabilities of licensed banks and other deposit taking institutions in Nigeria.
1.9 HISTORICAL BACKGROUND OF CASE STUDY
UNION BANK OF NIGERIA PLC. Union bank of Nigeria pic was established in 1917 as a colonial bank with its first branch in Lagos. In 1925, Barclays bank acquired the colonial bank, which resulted in the changed of bank name to Barclays bank (dominion, colonial and overseas.). Following the enactment of the companies' act 1968 and the legal requirement for all foreign subsidiaries to be incorporated locally, Barclay bank (d c 0) in 1969 was incorporated as Barclays bank of Nigeria limited. The ownership structure of Barclay bank remains un-changed until 1971 when 8.33% of the bank's share were offered to Nigerians. In the same, the bank was listed in the Nigeria stock exchange. As a result of the Nigerian enterprises promotion act 1972,the federal government of Nigeria acquired 51.67% of the bank shares, which left Barclays bank pic London , with only 40% enactment of the 1972 and 1977 Nigeria enterprises promotion act, Barclays bank international disposed its shareholding to Nigerians in 1979. To reflects the new ownership structure and in compliance with the companies and allied matters act of 1990, it assumed the name union bank of Nigeria plc. In consonance with the government's programmes privatization and commercialization of public enterprises, the federal government in 1993 sold its shares in union bank to private individuals. Thus union bank became fully owned by Nigeria citizen and organizations.
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