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| Chapters: 1-5
| Pages: 63
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
A typical capitalist or mixed economy is made up of surplus and deficit units. In performing their primary function of intermediation, banks collect deposit from the surplus unit of the economy and lend it out to the deficit units in form of loans and advances (Kalu, 2009). The role of the financial system in mobilizing and channeling of funds to the real sectors of the economy cannot be taken for granted. Sound financial system is recognized as a necessary and sufficient condition for rapid growth and development for every modern economy (Sanusi, 2012).
The financial system consists of institutions like banks, insurance, stock market and other financial institutions. In Nigeria, the banking system as it accounts for about 90% of the total assets in the system and about 65% of market capitalization of the Nigeria stock exchange (Soludo, 2009a). However, the banking sector has not contributed significantly to the growth and development of Nigeria economy as expected. The poor performance of the sector has been attributed to numerous problems that faced the sector such as inadequate capital, high nonperforming assets which had led to frequent distress in the sector and collapse of some banks in the past (Sanusi, 2012).
If banks cannot grant loans to the deficit economic units within their immediate operational environment, the business sector will not grow, deposit will be
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
A typical capitalist or mixed economy is made up of surplus and deficit units. In performing their primary function of intermediation, banks collect deposit from the surplus unit of the economy and lend it out to the deficit units in form of loans and advances (Kalu, 2009). The role of the financial system in mobilizing and channeling of funds to the real sectors of the economy cannot be taken for granted. Sound financial system is recognized as a necessary and sufficient condition for rapid growth and development for every modern economy (Sanusi, 2012).
The financial system consists of institutions like banks, insurance, stock market and other financial institutions. In Nigeria, the banking system as it accounts for about 90% of the total assets in the system and about 65% of market capitalization of the Nigeria stock exchange (Soludo, 2009a). However, the banking sector has not contributed significantly to the growth and development of Nigeria economy as expected. The poor performance of the sector has been attributed to numerous problems that faced the sector such as inadequate capital, high nonperforming assets which had led to frequent distress in the sector and collapse of some banks in the past (Sanusi, 2012).
If banks cannot grant loans to the deficit economic units within their immediate operational environment, the business sector will not grow, deposit will be
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