FINANCIAL DISTRESS IN SOME COMMERCIAL BANKS, REASONS, ISSUES, CONSEQUENCES AND SOLUTION
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FINANCIAL DISTRESS IN SOME COMMERCIAL BANKS, REASONS, ISSUES, CONSEQUENCES AND SOLUTION
ABSTRACT
Using secondary statistics, a descriptive assessment of financial difficulty in various commercial banks was conducted.
The purpose of this research was to describe the financial crisis in various Nigerian commercial banks. Also a causal element because it impacts Commercial Banks with a narrow coverage region.
The study also considers the nature and type of financial distress faced by some commercial banks, banks engaged in the distress, sources of distress, amount of distress, and whether bad management also causes distress.
The research also provides solutions to the five (5) research questions. It was also observed that distress is produced by inadequate management, insolvency, asset loss, shortage of capital, and so on.
As a result, recommendations for the study included proper management, enough funding, higher asset base provisions, and adequate liquidity. Such research should also be conducted in other non-financial banking institutions in West African countries.
INTRODUCTION TO CHAPTER ONE OF FINANCIAL DISTRESS IN SOME COMMERCIAL BANKS
1.1 BACKGROUND OF THE STUDY
Commercial Banking, in particular, has grown rapidly in the Nigerian banking sector over the last decade, both in terms of the number of institutions and the extent of financial services provided. As bank licencing was liberalised, the seed of instability was sowed in these banking systems.
As the expanding trend continues, it is a sign of a lack of vision among investors and directors who seek quick profits to fulfil liquidity operations. The term “distress” has existed for some time,
but it became more common as these institutions grew in size due to a severe lack of resources and a significant withdrawal of deposits from these banks by government agencies and other public sectors.
The development challenged the financial framework, exposed and undermined the economic system, and hampered economic development.
As a result, anguish puts a significant strain on regulatory authorities, depresses the economy, undermines the payment system, and discourages savings.
1.2 STATEMENT OF THE PROBLEM
Some commercial banks have been redirected to help with loans and advances to other areas of the economy. Commercial banking is also known as refall banking since it accepts deposits and makes payments to his customers.
However, the financial health of some of these commercial banks has deteriorated as a result of the ongoing political insecurity/election campaign.
Political analysts predict that the upcoming election will be one of the most violent crises in history. As a result, there is fear regarding the withdrawal of funds by these bank customers.
This institution is presently beset by difficulty, insolvency, weak liquidity as a result of deposit declines, and lack of confidence.
The study was motivated by the need to avert the crisis. This study aims to describe the financial crisis in several Nigerian commercial banking systems.
1.3 OBJECTIVE OF THE STUDY
The study’s aims are as follows:
1. To characterise the nature and type of financial hardship that some Nigerian commercial banks are experiencing.
2. To identify some of the commercial banks in Nigeria that are in trouble.
3. To identify the sources of financial crisis in Nigeria.
4. To ascertain the amount of crisis in these commercial banks.
5. Determine whether the distress is the result of bad management.
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