ASSESSMENT OF THE EFFECTS OF
BANKING REFORMS IN THE DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISE IN KADUNA
NORTH LOCAL GOVERNMENT
TABLE OF CONTENTS
Title page - - - - - - - - i
Declaration - - - - - - - -- ii
Approval page - - - - - - - - iii
Dedication - - - - - - - - - iv
Acknowledgement - - - - - - - - v
Abstract - - - - - - - - - vii
Table of contents - - - - - - -- viii
of the study- - - - - - - 1
of the Problem - - - - - - 2
of the study - - - - - 3
Hypothesis - - - - - - 3
of the study - - - - - - 3
1.6 Scope and
Limitation of the study - - - - 4
of Terms - - - - - - -5
- - - - - - - - 7
of Banking - - - - - - 7
of the Nigerian Banking Sector - - - 8
History of banking consolidation on the Financial
and Economic Development - - - - 10
2.4 Review of
trend of thoughts on banking reform - - 13
of the Nigerian Banking Industry Before
Consolidation Programme - - -- - - 15
2.6 Need for
Consolidation - - - - - - 16
Sector and the Economic - - - - 17
that Militate Against the 2004 Banking reforms, 18
way out of the Banking reform of 2004 - 20
Problems and Challenges of an efficient
system in Nigeria - - - - - 21
2.11 The Impact
of Nigerian banking Industrial on Economic
Growth and Development - - - - - 22
THREE- Research Methodology
- - - - - - - 25
Design - - - - - - - 25
Population - - - - - - - 26
and Sampling Technique - - - - 26
3.4 Source of
Data Collection - - - - - 26
3.5 Method of
Data Collection - - - - - 27
3.6 Method of
Data Analysis - - - - - 27
FOUR- Data Presentation and Analysis
4.0 Introduction - - - - - - - - 28
of Data and Interpretation - - - - 28
4.2 Test of
Hypothesis - - - - - - - 35
4.3 Summary of Finding - - - - - - 38
FIVE: Summary, Conclusion and Recommendation
- - - - - - - 39
5.1 Summary - - - - - - - - - 39
5.2 Conclusion - - - - - - - - 40
5.3 Recommendations - - - - - - - 42
Bibliography - - - - - - 44
Appendix I - - - - - - - 45
of the study
is incontrovertible that the banking system is the engine of growth in any
economy, given its function of financial intermediation. Through this function,
banks facilitate capital formation, lubricate the production engine turbines
and promote economic growth. However, banks’ ability to engender economic
growth and development depends on the health, soundness and stability of the
system. The need for a strong, reliable and viable banking system is
underscored by the fact that the industry is one of the few sectors in which
the shareholders’ fund is only a small proportion of the liabilities of the
enterprise. It is, therefore, not surprising that the banking industry is one
of the most regulated sectors in any economy. It is against this background
that the Central Bank of Nigeria, in the maiden address of its current
Governor, Prof. Charles Soludo, outlined the first phase of its banking sector
reforms designed to ensure a diversified, strong and reliable banking industry.
The primary objective of the reforms is to guarantee an efficient and sound
financial system. The reforms are designed to enable the banking system develop
the required resilience to support the economic development of the nation by
efficiently performing its functions as the fulcrum of financial intermediation
(Lemo, 2005). Thus, the reforms were to ensure the safety of depositors’ money,
position banks to play active developmental roles in the Nigerian economy, and
become major players in the sub-regional, regional and global financial
markets. The key elements of the 13-point reform programme include: Minimum
capital base of N25 billion with a deadline of 31st December, 2005;
Consolidation of banking institutions through mergers and acquisitions; Phased
withdrawal of public sector funds from banks, beginning from July, 2004;
Adoption of a risk-focused and rule-based regulatory framework; Zero tolerance
for weak corporate governance, misconduct and lack of transparency;
Statement of the
The Nigerian banking sector witnessed
dramatic growth post-consolidation. However, neither the industry nor the
regulators were sufficiently prepared to sustain and monitor the sector’s
explosive growth. Prevailing sentiment and economic prevailing attitude all
encouraged this rapid growth, creating a blind spot to the risks building up in
The following question was raised for
this research work
Does a large and sudden capital inflow lead to Macro-economic
Does bank consolidation
lead to major failures in corporate governance at banks?
Are weaknesses in the
business environment attributed to bank reform?
of the Study
The objective of this study is to
evaluate the prospects of banking reforms in the development of small and
1.3.1 General objective
To investigate the effects of
corporate governance of the banking system of performance of small and medium
enterprises in Nigeria.
1.3.2 Specific objective
To find out the causes
of macro-economic instability during the banking reforms.
To identify reasons for
corporate governance failure in banks.
To examine the business
environment in relation to bank reformation.
1.4 Research Hypothesis
hypotheses are formulated.
Hypothesis 1: Banking reforms leads to
development of small and medium enterprise
Hypothesis 2: Bank reforms have led to
weaknesses of small and medium enterprise
1.5 Significance of the Study
industry has aided small and medium enterprise and business development
attracted public and press criticism and has been a much complicating issue. It
is obvious therefore, that this study will be significant in pointing out the
need the weaknesses and strength of bank consolidation.
study will show the banks investment and services have helped small and medium
enterprise development and the investors will benefit from this study by
knowing the provision (loans, advances etc) which the banks offer.
it will identify the effect (positive or negative), which the banks roles have
on the small and medium enterprise growth and development. Amongst others,
government will greatly benefit from the findings of this study, in that with
the knowledge of the positives effects that the banks reforms of 2004 have on
the small and medium enterprise decisions and policies which are favourable to
bank and the economy as whole.
study will be useful for future researcher, as it will serves as a source of
1.6 Scope and Limitations of the
This study is
to evaluate the prospects of banks during the consolidation era. Also the
effect such reformation has on the development of small and medium enterprise .
The study will also cover the period of 2004 – 2009.
It is expected that this study may experience
the following limitations.
work will not be able to study all the public sectors in Nigeria as such this
may in a way limit the scope of this study.
expected that the management and staff of the Kaduna north local government may
not want to divulge certain data required for the study and this may in way
reduce the quality of data for the study. However, the researcher will try his
best to mitigate these limitations and others unforeseen ones. This will be done
by structuring and designing the instrument for data collection to elicit non
sensitive information from them.
1.7 Definition of Terms
Bank Credit: It is a major determinant
of the money supply and it embraces the amount of loans and advances given by the
financial institutions of Nigeria – Commercial banks and Merchant banks to
Capital adequacy ratio: This ratio is defined as
the total qualified capital to total risk weighed asserts.
Cost of Capital: Is the cost incurred in
securing funds or capital for productive purposes.
Bureau De Change: this is financial
institution licensed to buy and sell foreign exchange to small scale users e.g.
individual and businesses.
Balance of Payment (BOP): These are records of
economic and financial transactions between the residents of a country and the
rest of the world during a given period of time. Discount House: Is a financial institutions that trades in
government securities both at the primary and secondary segments.
Exchange Rate: this is the price of one currency
expressed in terms of another.
Spot Rate: Is the interest rate
submitted by dealers at which they can buy securities.
Open Market Operations: This involves the
discretionary power of the Central Bank of Nigeria to purchase or sell
Treasury Securities: are money market
instruments created by government for financing short – term fiscal operations.
Prime Lending Rate: This is the
interest rate applied to loans made to customers with the highest rating for
each bank rate also represents the minimum lending rate.