THE ECONOMIC IMPLICATION OF ELECTRONIC BANKING IN OPERATIONS OF BANKS IN NIGERIA
 (A CASE STUDY OF FIRST BANK OF NIGERIA PLC)

TABLE OF CONTENTS
Chapter one: Introduction
1.1    Background of the study                
1.2    Statement of the problem            
1.3    Purpose/objective of the study            
1.4    Research questions                
1.5    Research hypothesis            
1.6    Significance of the study            
1.7    Scope, limitation/delimitation             
1.8    Definition of terms                        
Reference                            
Chapter two:
Review of related literature                 
2.1    Introduction                        
2.2    The Nigerian monetary transfer system     
2.3    Overview of the electronic
    monetary transfer system                    
2.4    Electronic payment instruments         
2.4.1    Automated teller machine                
2.4.2    Electronic funds transfer point of sale            
2.4.3    International money transfer        
2.4.4    Computerized inter-bank funds transfer        
2.4.5    Internet payment                     
2.5    Problems associated with the development
    of electronic banking system in Nigeria.    
2.6    Implications of the electronic banking system    
Reference                             
Chapter three:
 Research design and methodology            
3.1    Areas of study                    
3.2    Sample and sampling techniques        
3.3    Instruments of data collection            
3.4    Methods of data presentation             
3.5    Methods of data analysis                
Reference                            
Chapter four:
Data presentation and analysis                     
4.1    Data presentation                     
4.2    Data analysis                     
4.3    Test of hypothesis                    
Chapter five:
Findings, recommendation and conclusion            
5.1    Summary of findings                
5.2    Conclusion                        
5.3    Recommendation                    
Bibliography                    
    Appendix                         
CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND OF THE STUDY
    Prior to the banking emergence of a modern banking system in Nigeria, the payment or settlement of economic transaction was through the barter system. Goods and services purchased them were settled by the exchange of commodities as money was not in existence.
    However, owing to the deficiencies inherent or associated with a barter economy, the need for a generally acceptable medium of payment arose.
    Consequently, between 1850 and 1882 the introduction of British silver coins was possible through which the Nigerian economy was monetized.
    Following the introduction of British coins, the Bank of British West Africa (BBWA) was established in 1892 to facilitate the distribution of these coins. This eventually ushered in a rudimentary form or commercial banking in Nigeria. In 1912 however, the West African Currency Board (WACB) was established to take over the responsibility of the (BBWA) of currency distribution in the then West African region comprising of Nigeria, Ghana, Sierre-leone and Liberia.
    As economic activities began to rise and the need for financial services emerged banks began to spring-up in the country and between 1892 and 1959 a total of (39) banks were established but for the fact that this was a banking era, a good number of these banks collapsed. The colossal fall of the monetary system consequently led to the introduction of the banking ordinance or 1952, 1959 (subsequent amendment) to further boost the monetary system, the central bank of Nigeria (CBN) was established in 1959 to act as the “Apex” banking regulatory authority.
    Also, the banking acts or 1969, the counterfeit currency (special provisions) decree 1974 and the bills of exchange Acts cap 35 laws of the federation of Nigeria 1990 was promulgated. All these efforts were aimed at ensuring safety, stability and restoring confidence in the monetary system.
    When in 1961, the CBN established the Nigeria banks clearing house in Lagos, the use of cheques became a dominant instrument in the payment processed daily in the clearing house. An average of five million (5m) cheques were reported to be processed annually between 1961 and 1970.
    According to CBN annual report, 1999, a number of procesed cheques however, increased to 11,005.2 million in 1999. This increase eventually led to an ever-mounting flood or paper that has to be shuffled from place to place before payment is fully effected. Thus, because of frequent indirect routine, it has been estimated that each cheques written is currently handled an average of 10 times and passes through 2 1/3 commercial banks before being returned to its source (journal of Banking and finance 2000). The banking industry thereby incurs record-keeping and processing costs averaging about 20 percent per cheques, a figure that does not reflect the full cost of the present system.
    Eventually, this increase in the cost of cheques processing undermines the efficiency, reliability and cost effectiveness of the electronic banking system and with the geometric increase in the volume of cheques as to the likely reduction no clear indication costs of the processed cheques.

    The expectation that cheque processing cost will continue to soar, roughly in proportion to cheques volume is the chief motivation spuring commercial banks and the central bank of Nigeria to institute a more economical and efficient mechanism. For as long as cheques remain the dominant mode of payments, the system is intrically too labour intensive to permit much more cost cutting through further automation (Lawrence 1996:295). As a result, the only remaining way to make a meaningful impact on cost is by switching a large part of the burden to an entirely different payments methods, one that can be designed from the groudn up to take full advantage of computage technology namely the electronic banking. (Electronic money transfer system).
    Finally, according to Anyanwu (2000), electronic banking which is more commonly called the Electronic Funds Transfer System (EFTS) refers to the application of computer technology to banking especially the payments (deposit transfer) aspect of banking. The major distinct pieces of hardware comprices the Automated Teller Machine (ATM), the Point Of Sale (POS) system, and the Automated Clearing Houses (ACH). He stressed that the major merit of electronic banking lies in its ability to reduce costs given the number of cheques written in the economy each year.

1.2    STATEMENT OF THE PROBLEM
    As earlier pointed out, the present payment system is saturated with large volumes of paper work. This obviously is responsible for the delay in cheques clearance in the house. Hence, the need for the adoption of an electronic banking. However, the introduction of electronic banking in place of the existing system has some propounding implications.
    First, such a payment mechanism will involve nationwide computer networks linking together virtually all households, business firms and government units. These pre-suppose investing a chunk or large amount of financial resources in computer technology. Obviously, the resource is in short supply in Nigeria, coupled with the high level of poverty.
    For an efficient functioning of electronic payment system, the availability of infrastructural facilities such as electricity and telecommunication network are indispensable. However, power supply is epileptic and there is still constant failure links in Nitel lines.
    Thirdly, Lawrence (1976) and Uche (2000) noted that the introduction of electronic banking system by banks may lead to a decline in the importance of branch offices and eventual closure of some branches. This likely development is what Woheren (2000) called “Brandless banking system”. A development which wills not angur well for the banking industry as it may affect banking customer relationship.
    Finally, the introduction of electronic banking system will alter the definition of money supply and the behaviour of velocity thereby creating problems for the CBN in formulating a sound monetary policy.

1.3    OBJECTIVES OF THE STUDY
This study is set out to find out the following:
(1)    To determine the extent of automation in payment of the bank.
(2)    To identify the various electronic payments of the bank under study.
(3)    To evaluate the major problems associated with the development of electronic banking system in the Nigerian economy in the bank.
(4)    To examine the effect of electronic banking system on banks profitability and operational efficiency
(5)    To evaluate the impact of electronic payment system on monetary control.

1.4    RESEARCH QUESTIONS
In order to elicit information from respondents, the following research questions were formulated.
1.    To what extent has automation enhanced the payment system of the bank?
2.    What are the various electronic payment instruments of the bank?
3.    What are the major problems associated with the development of electronic banking system in the bank?
4.    What effect has this system on the bank’s profitability and operational efficiency?
5.    How has this system affected branch banking and the bank’s customer relationship?
6.    What impact has this system on monetary control of the bank?

1.5    RESEARCH HYPOTHESIS
On the basis of the objectives of the study the following hypothesis have been formulated.
Hypothesis 1
Ho: Autemation does not enhance the payment system of the bank.
H1: Automation enhances the payment system of the bank.
Hypothesis 2
Ho: Automated Teller Mcachine (ATM) does not facilitate payment.
H1: Automated Teller Machine (ATM) facilitates payment.
Hypothesis 3
Ho: The V-SAT online-realtime does not constitute a major problem to transfer payment system.
H1: The V-SAT online-realtime constitute a major problem to transfer payment system.
    Ho – null hypothesis
    H1 – alternative hypothesis

1.6    SIGNIFICANCE OF THE STUDY
In the era of electronic banking, automated money transfer system in our economy is a welcome development.
    The desired impact of this research on the Nigerian society is over-whelming and cannot be over-emphasized. So, the work is significant in so many respects as thus:
1.    It would expose vividly the strength and weakness of electronic banking.
2.    It would expose motivate banks and other economic agents to computerize their services.
3.    It provides a practical suggestion to and policy formulation by monetary authorities.
4.    Knowledge in the area of electronic banking (monetary transfer) will be advanced.
5.    Apart from contributing to the knowledge of electronic banking, it forms a reference for future research in this area.

1.7    SCOPE, LIMITATION AND DELIMITATION
    An evaluation of a particular influence on a research situation like the Nigerian economy requires an observation of some entities or economic agents. Such economic agents and government limits which include banks, business fims and households.
    In this research endeavour, the topic had been restricted to first bank of Nigeria plc in Enugu metropolis. Hence, banks are the major agents of electronic banking/monetary transfer, the bank has been considered and approved for this project.
    Furthermore, there are some delimitations or constraints associated with this study as follows:
    The time required to distribute questionnaires within the bank in Enugu was a scarce resource given the congested nature of academic work on campus.
Collection and collation of materials for the project write-up was an up-hill task owing to the fact that some materials pestinent to the work were not easy to get and the researcher is left with no better option than to do with what is obtainable.
    The financial back-up with which to execute the work also constituted a major constraint.

1.8    DEFINITION OF TERMS
i.    Cheque – according to Orjih (1996) p 48 “A cheque is an order in writing drawn on a banker, signed by the drawer, requiring the banker to pay on demand a sum certain in money to the order of a specific person or to the bearer, and which does not order any act to be done in addition to payment of money”.
ii.    Automation – this is the use of automatic equipment in an industry.
iii.    Automated clearing System – according to (Ikamenam, (2001) p. 193. This is a system of clearing where all the banks are linked with the CBN and the clearing settlements are made within 24 hours.
iv.    Electronic banking – according to Anyanwu (2000) this refers to the application of computer technology to banking especially the payment (deposit transfer) aspects of banking. It is also defined as a system of banking with an electronic communication network which permits on-line processing of the same day credit and debit transfers of funds between member institutions of a clearing system.
v.    Point of sale System(POS) – this is an electronic or computer based mode of payment a system which involves goods and services being paid for at the point of sale.
 
REFERENCES
Anyaneu J.C. (1999): Concept and theoritical frame work of the Nigerian payment system; Onitsha, Hybrid pub. Ltd.
Anyanwu J.C.(2000) Monetary Economics Theory, policy and Institutions.
Evans E. woherem (2000): Internation Technology in the Nigerian Banking industry, Ibadan,spectrum books ltd.
Orjih J. (1998) Seminar in banking and finance Enugu; bot bullion publishers.
Orjirh J. (1999) Business Research methodology. Enugu; meteson publishers.
Orjih J. (1996): Banking operations in Nigeria, Enugu; Je-Hohi publishers.
Ubaka J.O. (1999): International to project writing  
Ukaemenam C.O. (2001) Pratise of banking for students and professionals Enugu; Oktek publishers.