THE EFFECT OF GLOBAL FINANCIAL CRISIS ON
NIGERIA’S BANKING SECTOR
THE ROLE OF CENTRAL BANK OF
NIGERIA (CBN)
TABLE OF CONTENTS
Title Pages
Title
Certification
Dedication
Acknowledgement
Table of Content
CHAPTER ONE
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Objective of the Study
1.4 Justification of the Study
1.5 Research Question CHAPTER TWO
2.1 Literature Review and the Theoretical
Framework
2.2 Definition
2.3 Causes of Financial Crises
2.4 Effects of Financial Crises
2.5 Impact of Financial Crises on Banking Sector
2.6 Theoretical Framework
2.7 Marxist Theory on Global Financial Crises
2.8 Minsky’s Theory on Global Financial Crises
2.9 Coordination Games Theory on Global Financial
Crises
2.10 Herding and Learning Models Theory on
Financial Crises
2.11 Monetarist View on Global Financial Crises
2.12 Debt – Reset Theory on Global Financial Crises
CHAPTER THREE
3.0 Methodology
3.1
Data
Collection
Study
Area
3.3 Sampling Techniques
3.4 Method of Analysis
References
CHAPTER FOUR
4.0 Data Presentation, Interpretation and Analysis
4.1 Data Presentation
4.2 Data Analysis and Interpretation
4.3 Testing of Hypothesis
CHAPTER FIVE
5.0 Summary, Conclusion and Recommendation
5.1 Summary
5.2 Conclusion
5.3 Recommendation
References
CHAPTER ONE
BACKGROUND OF THE STUDY
The Nigeria banking sector had witnessed lots of distress, uncertainty
and anxiety prior the banking sector consolidation exercise that began
in 2005. Investors’ and depositors’ funds were not guaranteed, eroding
public confidence in many of the banks becoming distressed due to
capital inadequacy. These problems greatly impaired the quality of the
bank’s assets as non-performing assets become unbearable and become huge
burdens on many of the banks. The financial intermediation role of the
banks becomes heavily impaired while the microeconomics activities
seriously slowed down. It was against this background, that the Central
Bank of Nigeria (CBN) announced a major reform in the entire banking
industry. The recapitalisation of the capitals base of bank
consolidation process in Nigeria in 2005. The primary objective of the
reform initiative was to have an efficient and effective banking
industry that could guarantee rapid economic growth and sustain
development. But the global finance crisis which started as financial
crisis in America and Europe and letter spread to other part of the
world has undermined the banks’ ability to play its development role in
the Nigeria economy.
This statement is relevant in the
turnout of events leading from the global financial crisis of 2007. Like
the Central Bank of Nigeria (CBN), the continuous reform of the Nigeria
banking sector had been necessitated from the crash which the banks
experienced largely due to the effect of the global financial crisis at
the end of the first quarter of 2008. Several authors have defined the
financial crisis in various ways. The CBN defines it as a situation
where financial institutions or assets suddenly lose a large part of
their value. Eichengreen and Portes (1987) defined it as a sharp change
in asset prices that leads to distress aiming financial market
participant.
The crisis can be in form of a banking
crisis, speculative bubble, international financial crisis and economic
crisis. The financial crisis destabilized the global financial system
and led to a major economic crisis in 2008. Following the reform carried
out between 2003 and 2008 in the Nigeria banking sector, the capital
market deepened and public awareness and involvement increased
significantly. This development indicates that the relationship between
CBN and banking sector cannot be understated.
The crisis
has gone deep in all the sectors of the Nigeria economy, the Nigerian
external reserves for instance, was pretty strong before the time of the
crisis, it has now crumbled right before our very eyes within months.
The exchange rate of the naira to all the currencies in the world
especially its US dollars remain extremely volatile since the crisis
erupted. Oil prices have gone down due to the reduced demand of oil
commodities in the global market because consumer nations are trying to
cut the consumption of the commodities that engulfs virtually most of
the spending due to the financial crisis.
The level of
poverty before the crisis and now has tripled and this is due to the
fact that commodity prices are higher than before, clearly showing the
rate of inflation is soaring and also that the level of consumption of
goods and services has reduced, mostly due to the deficiency in demand,
since people cannot afford this expensive commodities that would
probably not be enough for them. Due to the reduced demand for oil in
the global market, the level of revenue that was streaming in to the
monocultured economy of Nigeria started dwindling.
Statement of the Problem
- It
is important to note that the global financial crisis constitutes a
huge problem to world economies and thus it is worth researching. The
global financial crisis has affected the financial sector of all major
economies in the world; in fact, most of the economies have had their
financial sector totally crippled by the financial crisis. - Another
problem that is imposed by the financial crisis is the psychological
effect of the crisis on the people with their banks. Nobody is confident
of banks or any financial institution any more. The recent crisis in
the banking sector has not boosted their confidence at all, nobody wants
to invest in stocks anymore. - The government of different
countries in the world have responded in different manners to the
financial crisis, while some at first lived in denial og the effects of
the financial crisis in the country e.g. United States and Nigeria, but
since the countries have been able to bring in different packages to
help curb the effects of the crises in their economy.
Objective of the Study
The
major objectives of this research is to determine the main causes of
the financial crisis in Nigeria banking sector, determine the extent of
the impact of the global financial crisis on the Nigeria banking sector
and to look at various available options to forestalling future
occurrence.
Also, the broad objective is to analyze the
effect of the global crisis in Nigeria banking. The specific objectives
are;
- To highlight the causes of the global and the Nigeria financial crisis.
- To determine whether there is significant difference in the selected banks before and during the global financial crisis or not.
- To identify the different strategies being adopted by Nigeria banks to cope with the financial crisis.
- To
identify the various measures adopted by the Nigeria government in
order to curb or reduce the effect of the financial crisis.
Justification of the Study
This research is out to provide a detailed analysis of the major
effects of the global financial crisis on Nigeria banking sector. And
such a research of this nature could become a good source of raw
material for students, policy makers and economist who may want to know
the extent that the financial crisis affected banks in some years to
come. The finding of the study is going to go beyond the hearsay that
global financial crisis caused the present unimpressive performance of
the Nigeria bank, the study intended to express quantitatively the
extent that the financial crisis affected the various banks in Nigeria.
Research Question
Missing
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