APPRAISAL OF THE ROLE OF CBN AND NDIC IN THE MONITORING OF COMMERCIAL BANKS IN NIGERIA
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL
APPRAISAL OF THE ROLE OF CBN AND NDIC IN THE MONITORING OF COMMERCIAL BANKS IN NIGERIA
ABSTRACT
The purpose of this study was to evaluate the responsibilities of the CBN/NDIC in the management and regulation of commercial bank activities.
To achieve the aims, five banks were chosen as a sample for analysis in order to analyse financial institutions’ performance in respect to the regulatory agencies, CBN and NDIC.
Several literature and theoretical concerns were debated. Furthermore, an empirical regression and descriptive analysis were conducted to evaluate how CBN/NDIC regulation variables affect commercial bank activities in Nigeria.
The outcomes of both analyses demonstrated that CBN structure, CBN/NDIC performance, and their interaction with commercial banks had a substantial impact on commercial bank management and regulation in Nigeria.
While depositor protection was the only element that had a negligible impact on commercial bank management and regulation. The study used regression to determine that the CBN and NDIC had a considerable impact on the commercial banking sector.
It is recommended that commercial banks continuously review prudential guidelines and regulations in light of the dynamics of the operating environment, as well as enforce regulation and comply with prudential guidelines and regulations, to reduce systematic effects and prevent deterioration in the financial condition of distressed institutions.
CHAPTER ONE
1.1INTRODUCTION
Ajayi (1991) describes commercial banks as “all-purpose retail bankers.” They mobilise deposits of all quantities and from all sources in both retail and wholesale markets. They mostly engage in borrowing and lending. The lending activities of Nigerian commercial banks have gradually increased over the years, and the rate of increase has recently acquired a tempo that requires some explanation.
Bank management is the process of managing money and delivering a wide range of financial services. Beginning with management, it entails determining the ideal size and composition of a bank’s total assets and liabilities, according to Nwankwo (1991).
A well-developed and clearly stated set of rules, regulations, and sanctions in the event of a violation is a fundamental feature of a solid financial system in the banking business. Several developments in the Nigerian economy have demanded a thorough examination of the existing rules, regulations, and laws.
As a result, CBN No. 25 of 1991 (as amended) was promulgated to give the CBN broader authority to manage all banking concerns, from licencing through liquidation.
Further development and the necessity to sanitise the system prompted the CBN to issue a decree in 1997 to update the current ones. The 1997 order aimed to govern other aspects of the Nigerian financial system, with the CBN acquiring control of banks,
resulting in the establishment of a comprehensive framework for more effective supervision and optimal resolution of distressed finance situations in 1995. In this regard, the CBN has taken over some banks’ activities, cancelled others’ licences, and appointed the NDIC as receiver and liquidator of some of these banks.
However, the regulatory bodies have not done a good job over the years. They are not even working properly since an enabling atmosphere does not exist. Prior to 1988, there was no institution to cover depositors’ funds, and as the banking sector expanded rapidly, the need to insure depositors’ funds became more apparent.
Thus, by Decree 22 of June 1988, the Nigeria Deposit Insurance Corporation was founded to offer insurance cover for depositors’ funds and to supplement the CBN’s regulatory role. Currently, all CBN-licensed banks are covered by the depositors’ protection scheme.
Following that, a group comprised of representatives from the CBN and NDIC’s banking supervision and bank examination departments was formed to develop recommendations to assist banks examining in managing financial institutions.
To that purpose, this study examines, among other things, the management and regulation of commercial bank activities in Nigeria to determine their concreteness and paradigm.
1.2STATEMENT OF THE PROBLEMS/QUESTIONS
This study’s problem focuses on the significance of managing and regulating commercial banks’ activities. The following study questions are proposed for consideration in order to assess the function of the CBN and NDIC in the regulation of the Nigerian banking system.
(1) Have the regulatory agencies, CBN and NDIC, played their roles honourably?
(2) What effect has the authority structure had on the functions?
(3) Would the regulatory agencies have been able to function effectively in an enabling environment?
(4) How does the CBN protect commercial bank depositors from losses?
(5) How does the NDIC protect commercial bank depositors against loss?
(6) How effective are the CBN and NDIC as regulatory/supervising authorities?
1.3 STATEMENT OF OBJECTIVE
The goal of this research is to conduct a thorough evaluation of the regulation of commercial bank activities. Commercial banks’ primary duty is to provide short-term and medium-term loans and advances to various sectors of the economy.
As a result, it is clear that its operations do not obstruct the achievement of the objectives in regulating commercial banks in the Nigerian economy. In light of the foregoing, the study’s precise aims are as follows:
(1) To determine how well the regulatory authorities, CBN and NDIC, have performed their duties.
(2) To determine the influence of the authorities on their functions.
(3) To identify the various regulatory authorities’ functions.
(4) Determine the CBN’s loss protection for commercial bank depositors.
(5) Determine the NDIC’s loss protection for commercial bank depositors.
(6) To assess the efficacy of CBN and NDIC.
(7) To evaluate findings and make appropriate recommendations.
I believe that the initiative would be very useful to the public in understanding why commercial banks in Nigeria often have problems owing to mismanagement and weak regulation.
1.4HYPOTHESES STATEMENT
In order to address the research difficulties and questions raised above, the following hypotheses were developed and tested during the course of this study:
H0: The CBN/NDIC have not carried out their responsibilities in accordance with the enabling Acts that established them.
H1: The CBN/NDIC have carried out their responsibilities in accordance with the enabling Acts that established them.
H0: There is no positive association between CBN/NDIC structures and how well they perform their jobs.
H1: The effectiveness of CBN/NDIC structures is related to how successfully they accomplish their functions.
H0: The CBN/NDIC and BOFIA regulatory acts have not helped to protect depositors from fund losses.
H1: The CBN/NDIC and BOFIA regulatory acts have helped to protect depositors from fund losses.
1.5 SIGNIFICANCE/REGULATION OF THE STUDY
To analyse the management and regulation of commercial banks’ activities, we must assess the role of the CBN and NDIC in the banking system’s rules in Nigeria, as well as how the banking industry has performed under regulation and how it benefits.
(1) Government: It is envisaged that the findings of this research would be very valuable to the government in supervising and regulating the activities of commercial banks.
(2) Investors in the Financial Services Industry: This book may be valuable to investors, particularly entrepreneurs who want to start and run their own financial institution.
(3) The Banking Public: This research will be valuable to depositors who utilise financial institutions and invest their money in them.
(4) Future Researchers: Those who intend to conduct additional research in this field will undoubtedly find this work useful.
Need help with a related project topic or New topic? Send Us Your Topic