DISTRESS IN BANKS – ITS IMPLICATION FOR THE GROWTH OF THE BANKING IN NIGERIA
ABSTRACT

This study is designed to examine the concept of distress in bank, identify the causes of such phenomenon in banking and evaluate its implication for the growth of the banking industry in Nigerian economy.
In order to achieve the objective of this research, the work is divided into five(5) chapters one is introduction, chapter two, review of related  literature, chapter three is the method (methodology) used in the course of the research, chapter four is data collected and analyzed, and finally chapter five is the discussing of finding, conclusion and recommendation.
A questionnaire was designed to elicit people’s response to the nagging problem of bank distress in Nigeria. A total of 200 respondents chosen from eight (8) banks selected in Delta State gave their opinion on such issues.
Analyses of the responses showed that majority of the respondents agreed that in adequate capitalization, incompetence of bank management, fraud and other corrupt practices are major causes of distress in banks.
They also concurred to the fact that erosion of confidence engendered by recurrent distress in the banking sector will adversely affect the development of the banking industry and the macro-economy as a whole.
TABLE OF CONTENTS
Chapter One –Introduction
1.1    Background of the study                
1.2    Statement of the problem            
1.3    Purpose of the study            
1.4    Significance of the study                
1.5    Scope of the study                        
1.6    Research methodology               
Chapter Two –Review of related literature
2.1    Definition of distress in banking    
2.2    Bank failure –some antecedents
2.3    Symptoms of distressed banks in Nigeria     
2.4    Causes of bank distress                
2.5    Regulations deposit insurance and bank failure    
2.6    Banking fraud and bank distress.        
2.7    Banking Crisis of US and Other Countries     
Chapter Three – Research design and methodology
3.0    Introduction                    
3.1    Research design                 
3.2    Population of the study                 
3.3    Sample and sampling procedure        
3.4    Data collection             
Chapter Four – Data analysis and interpretation of Data
4.1    Data analysis                     
Chapter Five – Finding, conclusion and recommendation
5.1    Findings                    
5.2    Conclusion                 
5.3    Recommendations                    
References                        
Questionnaire                         

CHAPTER ONE
1.1    BACKGROUND OF THE STUDY
In any modern economy, the efficient production and exchange of good and services requires money and bank is the channel through which this is achieved. Banks play an important role in the economic life of every country, particularly a developing country like Nigeria. As an agent of developments, they provide loans and advances including a variety of contingent facilities, which could wither be short term, medium or long term.
For any meaningful research into the problem of the banking industry in Nigeria, another view of the historical antecedent is necessary.
Commercial banking operation in Nigeria started sometimes in 1981 when it became apparent that banking facilities were urgently needed especially in Lagos. The first commercial bank in Nigeria was established to cater for the distribution of Bank of England notes on behalf of British West Africa (now First Bank Plc) was established and thus registered in England as a limited liability company on 31st March, 1894.  The bank handled the import and export of mine coins until 1959 when the CBN was established. Twenty five years later, another colonial bank Barclay Bank (now Union Bank of Nigeria) was established with its first branch open in Lagos in 1917. These two foreign banks monopolized the banking seen until National Bank of Nigeria Limited; the first indigenous Bank was established in the year 1933. The first phase of banking regulation, a free banking era, another expatriate bank, the united Bank of Africa limited was established initially as the British and French Bank in 1944 and took on its present name in 1961.
Before 1952, any body theoretically could set up a banking business provided it is registered under the company ordinance. This accounted for the spate of indigenous banks in the 1930s to 40s a period regarded as a banking boom period. Out of many indigenous banks established in this period only a few of them rose up to the challenge while a host of others failed very rapidly.

The insigne of the banking distress was first experienced in Nigeria. The failure experienced by the indigenous banks then was attributable to under capitalization, poor or mismanagement and the absence of regulatory environment.
The massive bank failure of the 1930s and 1040s was enough justification of the modern regulatory framework. The banking ordinance of 1952 was the first attempt to provide regulatory framework for the development of a sound banking in Nigeria. Following was the birth of central bank of Nigeria in the year 1959. at independence so many other banks were also established while many other foreign ones came to take advantages of the opportunities ushered in by the political independences.
The Patson commission of inquiry (1948) provided antedates to the problems plaguing the industry. In addition to the Banking ordinance, it also recommended that no new bank without adequate capitalization would be allowed to establish in the country and that existing banks after three years period of grace to satisfy the new requirements fold up.
By 1970, there were seventeen commercial banks increased in Nigeria. Ten were foreign owned, five were indigenous and two were party owned by Nigerians and by non-Nigerians. The period from 1970 marked a new phase in the evolution of banking in Nigeria. This period witnessed the indigenization of Nigerian Banking.
In 1973, the federal government in pursuance of its indigenization acquired the percent ownership in three largest expatriate commercial banks. In the second phase of the exercise in 1976, the government reduced the foreign interest in all commercial banks to 40 percent and proceed to acquire the share of banks necessary to bring Nigerian share holding to 60 percent the state governments owned the indigenous banks, this also witnessed a renewed boom in indigenous banking this time.
The Pius Okigbo’s financial review commission report of 1976 led to a spate of establishment of bank branches especially in the rural areas. This rural banking scheme increased the branch network form 472 in 1972 to 1483 in 1976. Furtherance of the rural banking scheme, the people’s banks, a federal government outfit was also established in 1987 and in established (now micro finance bank), six years later the number of community banks established all round the country rose to about 774 banks.
To further sharpen the regulatory framework, the federal government in 1991 instituted the banks and other financial institution degree No1991 (BOFID) to curtail the sharp practices in the banking industry in Nigeria. The decree empowered a tribunal of inquiry to bring before it any persons or group who criminally defraud the banks and other financial houses of public fund.

1.2    STATEMENT OF THE PROBLEM
The implications of banking failures are usually grave in any economy. The problems are that many depositors, the banking public are to forego their earned wealth to fraud star in banking industry. This is why even today there is a growing rise of confidence in the banking industry.
Again, it affects investment climate of the country. Since banks are important arms of the development process any lack of confidence in the industry will also reduce investment, especially foreign investment that is so much needed to inject fund into the economy. The micro economic implication of this is obvious it will affect the overall growth and development process of the economy.
On the part of government, banks failures result in financial instability, and indication of the failures of regulatory apparatus.
Again, there is the fear that such bank crises will lead to a banking recession of the overall economy.

1.3    PURPOSE OF THE STUDY
The purpose of this research work is to:-
1.    Investigate into the reasons for bank failure in Nigeria.
2.    Have overview of the historical attendance of this phenomenon in banking, bank failure otherwise known as distress in banking.
3.    Examine the implications of bank distress in the micro economy of Nigeria and the development of the banking industry in Nigeria.
4.    Proper suggestion as a to curtail this ridiculous phenomenon in banking.

1.4    SIGNIFICANCE OF THE STUDY
This study is of great significance because it will help this situation and restore confidence in the banking industry. It is also needed to guarantee the investing public and more especially the foreign investors of a stable investment climate that could enable them to do in the banking industry could lead to sustained development in the overall economy the outcome of this research is great importance.
To the government, the recommendation and the findings of this research would be considered valuable in the bid to stabilize the banking industry and the economy as a whole.

1.5    SCOPE OF THE STUDY
While the banking industry in Nigeria will theoretically serve as the population of study, only banks in Delta State will be sampled for survey. The subject of study will include sampled bank equity bank management, bank workers and bank Clientele.

1.6    RESEARCH METHODOLOGY
The researcher hopes to use sets of questionnaire to be administered to both staff and customers of those banks. The questionnaires will be used to elicit information as regards the researcher from the staff and customers who are directly concerned with the operations of the bank.
As practitioner in the banking industry the staff questionnaire would provide information as to the causes of banking distress and how distress effects the banking industry. The customer’s questionnaires would corroborate or otherwise the staff claims on issue and perhaps provide an external assessment of the bank.