The influence of universal banking concept on the provision of financial services
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The influence of universal banking concept on the provision of financial services
ABSTRACT
The study sought to assess the influence of the universal banking idea on Nigerian financial service delivery, with a focus on First Bank of Nigeria Plc. To tackle the research challenge, both primary and secondary data were gathered. The study’s population included employees of the First Bank of Nigeria, customers of the bank, and officials of the Nigerian Central Bank.
Questionnaires and oral interviews were utilised to collect data for the study. Tables, frequencies, and percentages were utilised to show and analyse the obtained data. The researcher discovered, among other things, that the universal banking scheme has resulted in the creation of a level playing field for operators in both what was then the merchant and banks sub – sector, as well as the elimination of the industry’s dualism.
That universal banking programme has resulted in enormous economies of scale for the financial industry as a whole, and for first bank plc in particular. The findings suggest that, while universal banking has its limitations, the First Bank of Nigeria Plc should develop policies to sustain the progress made thus far.
CHAPTER ONE:
Background of The Study
Banking practise in Nigeria was largely regulated with clearly defined functions from 1891, when the first banking institution was created, to 1986, when the Structural Adjustment Programme (SAP) was adopted. With SAP, a more favourable policy climate resulted in an exceptional growth in the number of banks registered in the country.
The origins of universal banking in Nigeria may be traced back to the banking industry’s distress syndrome, which was exacerbated by deregulation, resulting in expansion and strong rivalry among existing banks and new entrants. The constant struggle of individual banks for survival and growth also played a significant role.
Many banks, like a drowsy person grabbing any straw, agitated for broadening their reach, believing that the wider the scope, the greater the capacity to produce activity and opportunity to maximise profit or minimise losses.
Following policies aiming at progressively reducing the regulatory framework, the previously firmly entrenched division between commercial and merchant banking operations was removed. Apparently, in an effort to fine-tune the financial climate, merchant banks were compelled to maintain a minimum of 20% of their total credit in the medium to long term category in an economy characterised by short term deposits,
which made the playing field more roughed or even unrealistic. Because of their lack of checking facilities, these types of banks were also denied admission to the clearing house. Merchant banks were also denied access to CBN overdraft facilities due to their failure to participate in clearing house activities. They were also prohibited from mobilising tiny savings.
In arguing for merchant banks, some have claimed and loudly argued that their superior performance stems from direct access to cheque clearing facilities and large idle funds of customers who maintain interest-free or low-earning balances with commercial banks. Commercial banks, on the other side, in retaliation, disputed merchant banks’ exclusive right to capital market activities that clearly offer risk-free fee income.
As valid as these arguments are, proper consideration should be given to the pre-requisition for the effective implementation of universal banking, that is, an analysis of the existing and additional resources required for effective delivery of omnibus services,
especially if the practise of universal banking is to become a reality in Nigeria. Financial, infrastructural, and human aptitude, appropriateness, and adequacy are examples of these resources.
The failure of macroeconomic management policies, which have heated up the financial system. Give credibility to requests for financial system overhaul through absolute emancipation of institutions and functions.
The country’s unfriendly operational climate, combined with the growing trend towards globalisation and financial emancipation, prompted calls for the implementation of universal banking.
Universal banking, long thought to have begun in Germany in the 1850s, has already extended to most of continental Europe, with banks serving as financial supermarkets in the world’s top financial centres.
First Bank Of Nigeria Plc’s Brief History
For over a century, First Bank of Nigeria Plc has distinguished itself as a prominent financial institution and a vital contributor to Nigeria’s economic success and development.
Sir Alfred Jones, a shipping magnate, established the bank as a limited liability company on March 31, 1894, with its head office in Liverpool. It began operations in the office of Elder Dempster & Company in Lagos under the corporate name of the bank for British West Africa (BBWA) with a paid up capital of 12,000 pounds sterling, after absorbing its predecessor, the African Banking Corporation, which was established earlier in 1892.
In its early years of existence, the bank grew rapidly and collaborated closely with the colonial government in executing traditional central bank functions such as specie issuance across the West African sub-region.
In order to explain its west African coverage, a branch was established in Accra, Ghana in 1896, followed by another in Freetown, Sierra Leone in 1898. This was the beginning of the bank’s worldwide banking operations. In 1900, the Bank of Nigeria opened its second branch in old Calabar, and two years later, service was expanded to Northern Nigeria.
The bank had undertaken restructuring initiatives at various periods in order to reposition itself and capitalise on opportunities in a changing environment. It changed its name from the Bank of British West Africa in 1957. In accordance with the Companies Decree of 1968,
the bank was incorporated domestically as the Standard Bank of Nigeria Limited in 1969. In 1979 and 1991, the bank’s name was changed to First Bank of Nigeria Limited and First Bank of Nigeria Plc, respectively. The bank implemented a decentralised structure with five regional administrations in 1985.
Statement of the Problem
The movement for universal banking began when certain merchant banks requested authorization from Nigeria’s central bank to convert to commercial banks in reaction to what they viewed as a skewed structure of the banking system, which rewarded commercial banks in most situations. This, among other issues, fueled calls for a level playing field and universal banking in Nigeria.
For years, merchant banks created a lobbying group to advocate for this system so that they could compete competitively with commercial banks that they saw as having an unfair edge over them. According to the CBN,
some requirements such as continuous macroeconomic stability, effective management of banking system distress, and strengthening bank capital bases must be met and completely implemented for the concept to succeed.
However, in its monetary credit, international trade, and exchange guidelines issued in 2000, the CBN declared that it had assessed the operating environment for universal banking and had so approved the system in principle.
Since then, so many actions have occurred in Nigeria’s financial system that an in-depth analysis is required to bring to light the influence of universal banking on financial service delivery in Nigeria. This is the problem statement.
The Purpose of the Research
The study’s goals include, among other things, highlighting the
The Importance of a Universal Banking System in Nigeria
The effect of universal banking on financial service delivery in Nigeria
Monetary authorities face regulatory obstacles as they implement universal banking.
Emerging tendencies in Nigeria’s universal banking system.
Research Questions
For the purposes of the study, the following research question will be administered.
What are the core concepts of universal banking’s benefits?
What are the advantages of implementing a universal banking system?
What are the operating principles of the UB system?
What regulatory problems are anticipated to be imposed by the introduction of the UB system?
What is the anticipated impact of the UB system on financial service delivery in Nigeria?
The Significance of the Research
The research will be useful to
Monetary authorities are proactively preparing themselves for the problems of the universal banking system.
Operators in the Nigerian financial system must reap the full and symmetric benefits of the universal banking system
Academic community provides an excellent starting point for further research on the universal banking system.
Definition of Terms
In the context of the research investigation, the following concepts are defined.
Universal banking: This is a system or arrangement in which a financial institution can provide the full range of financial services, either directly or through a subsidiary.
Universal banks: These are financial institutions that can serve as a one-stop shop for the supply of a wide range of financial services.
Deregulation entails the elimination or dismantling of regulation or the reduction of control, as well as the expansion of free business.
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