1.0 INTRODUCTION
The
subject of bank failure had little mention in developing economy until when the
third countries would faced with task of managing the affairs of growing
business operating in their domains encountered the effect of over
capitalization and heavy investment in fixed assets, without matching returns, financial
liquidity in most business organization, factory closures, excessive loan
default, bankruptcy resulting into bank failure.
The
indigenous entrepreneurs, motivated by the discriminating lending policies of
the existing foreign banks at that time against indigenous business and
individuals, between 1928 and 1952, when the first banking legislation was
enacted, increased the number of banks registered for business in the country
to 185. Many of the banks did not even take off while most of those that
commercial operation went down. The collapse of Farmers’ Bank and National
Trustee Bank between 1952 and 1954 nearly caused a ruin on the banking
industry.
The
absence of a central monetary authority in the country during the period as
well as lack of meaningful banking policy, through the issues and regulation of
the currency, control of credit and foreign exchange and supervision of financial
system appear to be the panacea required to put a stop, not only to under
proliferation of banks but also to bank failure as experienced in the 1930s,
1940s and 1950s.
The
emergency of Central Bank of Nigeria (CBN) on July 1, 1959 was a product of the
aforementioned 1958 Banking Ordinance. Although, the CBN was not endowed with
development roles in its interpretation and application of the statutory
objectives of the Federal Government.
The
Companies Act of 1968 also strengthened government control over activities of
banks making it obligatory for all companies operating in the country to
incorporate locally in the Nigerian Company Law.
Moreover,
a bank failure arises when losses 'on assets exceed the amount of capital and such
excess when charged against deposits makes the bank unable to repay depositors
in full. In other words, it is a situation where a bank’s financial condition
results in shareholders’ funds being completely or largely wiped out. The
overall performance of a commercial bank in its operation can be accessed on
the basis of how judiciously it invests the funds that are available whether it
will respond positively or deteriorated to a grave condition. For instance, in
1989 the inability of some banks to carry out their regulatory function is also
responsible to it, but the recent proliferation of bank: led to a cut-throat
competition and worsened by the economic recession, the regulatory authorities
have to intervene to present mass failure by controlling and monitoring their
activities through the use of monetary and fiscal measure. While some of the bank
showed remarkable improvement due to the Central Bank of Nigeria imposed
holding actions, the National Bank of Nigeria Limited failed to Nigeria Deposit
Insurance Corporation (NDIC) extended N550, 000, 000.00 (five hundred and fifty
million Naira) accommodation facilities to National Bank of Nigeria (NBN) to
see the bank out of its liquidity problem. NBN paid back out N100 million of
the bill whine nine other banks that enjoyed a similar facility fully repaid at
maturity. Consequently, after a careful evaluation of a number of options, the
CBN early in the month of January, 1992 in accordance with Section 34 of the
BOFID Decree No. 1991 took over control of the National Bank of Nigeria and
delegated the control of its affairs to NDIC, purportedly ‘to protect
depositors and other creditors as well as the soundness of system. The
incumbent board (NBN) was dissolved and the NDIC appointed (eleven men) 11 task
force to examine the books of the banks in order to ascertain its assets and liabilities
to determine is financial condition as the date of control. the NDIC 1992
annual Report stated that the president had approved the simultaneous
assumption of control and management of some banks by the corporation and for
the purpose of restructuring and subsequent sale.
1.1 OBJECTIVE OF THE PROJECT
i.
To examine the level of insurance practice satisfaction to the customers
ii.
To identify the problem hindering the effeminacy of the Insurance corporation .
iii.
To suggest possible solution to the identified summary.
1.2
STATEMENT OF PROBLEM
Like
any other business organization, various problems are associated with the
failure of some banking institution. It is therefore necessary to highlight
those problems in order to find solution to them.
Also,
there have been ranging debate on the real impacts of Nigerian Deposit
Insurance Corporation without any conclusive answer.
As
stated in the introduction that the concept of NDIC was an area brought by the
Federal Government to see to the subject of bank failure and their inability to
meet depositors demand brings no doubt that the initial problem was on some of
the institution financial liquidation in Nigeria, which paltered in the
British.
Moreover,
in spite of the details about the function of the NDIC, it has been spotted
that a number of Grey areas, its range of operation, what deposit means and the
involvement of the corporation with respect to joint and single account holder
has also being creating controversy.
For
proper clarification therefore, the publication of the corporation which
details out answers to specific questions or problems mentioned in the
proceeding paragraph areas where the research is looking in order to ascertain
whether the corporation function and objective is being realized.
1.3 RELEVANCE OF THE STUDY
Insurance
is said to be risk transfer mechanism the insurers accept the risk and received
in consideration for the risk accepted. Insurance therefore, provides solutions
to our effects of deposits insurance in relation of the Nigerian Financial
Institution. Deposit insurance is a financial guarantee instituted as a measure
of surety for the banking system to protect depositors. The deposit insurance
ensures that depositor does not lose all his money in the event of a bank failure.
Since
financial liquidity of some banks makes it impossible for them to meet
depositor’s requirement the public tends to run away from contagious and
ineffective banks licensed deposit insurance promotes the stability of the
banking system it assures the depositor that his depositors are safe and that
the failure of one bank does not mean that all banks are in danger of faulting.
The
corporation is an independent body and it act as an additional regulatory in the
supervision of banks to ensure compliance with regulations aimed at ensuring
back solvency.
The
corporation also ensures that the activities of bank found not to be in
compliance with regulation to be shut down, in order to ensure that the right
level of economic development of Nigerian is maintained at all times.
1.4
LIMITATION OF THE STUDY
The
research work on Nigerian Deposit Insurance Corporation and Banking industry
will be limited to Lagos area for various reasons among which are: .
l.
Lagos is a state where most banks have their head office and moreso, it is one
of the commercial centre’s in the country.
2.
The population of depositors in the state is greater than anywhere else in the
country.
3.
Most of the relevant statistical data available on the industry are in the
state hence would enable the researcher to have enough data for the successful
completion of this project.
It
is however pertinent to mention some problem encountered during the research of
this project. Some of these problems include:
a.
TIME CONSTRAINT: - There are limited period of time for the research work to be
looked into prepare and submitted upon the load of other academic work to be
completed.
b.
FINANCIAL: - Due to high transport fare presently in the country by increment
in the sales of oil products, substantial amount have been spent on movement
from one place to another to collect various data.
1.5 RESEARCH QUESTIONS
The
following questions were formulated to the objective of the study
1. Does
insurance have any impact on banking sector/ banking business?
2. Can
insurance be use effectively by bank staffs?
3. What
roles and responsibilities does insurance have on banking industries?
Order for full projects: #2000
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