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DEREGULATION AND TREASURY ACTIVITIES IN THE NIGERIAN BANKING SECTOR AN ANALYSIS OF SELECTED MERCHANT BANKS
ABSTRACT
The Nigerian Banking sector which had been regulated
prior to 1986, witnessed a steady deregulation of both
interest rates and foreign exchange controls, from the year
1986. By 1987, ceiling on lending and deposit rates were
virtually removed, while the Foreign exchange market was
liberalised enabling Banks to determine rates outside the
official exchange rate as approved by the government. This
added a new dimension to Treasury Management; purchase,
control and management of the local currency and foreign
exchange.
Alongside these developments, certain monetary policy
statements by the authorities impacted on the developments
of money market and indeed the treasurers’ functions. The
withdrawal of government and government parastatals deposit
from the Banking system, to the Central Bank of Nigeria is a
case in point. The policy was directed at reducing the size
of money in the banking system, control of inflation and
achievement of budgetary expectations. However, the impact
of this policy statement is the astronomical jump in
interest rates witnessed, and the beginning of the crisis of
confidence in the Banking industry as many banks could not
honour their matured obligations. Interest rates remained
high and completely deregulated, while the resultant high
cost of fund was subsequently passed down to users of
– vi –
credits thus increasing their costs, and in the final
analysis increasing prices of goods.
The years 1988 – 1992 saw a greater increase in the
level of financial intermediation as many Banks were
licenced resulting in intense competition in fund sourcing
and pricing. By 1993, the competition was at its peak when
the political crisis crept in resulting in nea r economic
collapse since virtually everything in the economy stopped
especially in the South-western axis of the country. Prior
to this, the monetary authority introduced the stabilisation
securities in its attempt to further reduce or mop up
liquidity from the banking system.
However by 1994, the government reverted to the era of
regulation fixing a maximum lending rate of 21% P.A. and a
deposit rate range of 12-15% P.A., while still carrying
along the stabilisation securities application. This indeed
worsened the Banks portfolio as depositors who were used to
the high rates as offered in 1993 were uncoilling to part
with their money at such a low rate as decreed by the
government. The resultant effect is low credit to the
borrowers of funds as Banks concentrated on how to survive
in such a turbulence.
TABLE OF CONTENT
Title page- – – – – – – – – i
Approval page – – – – – – – -ii
Dedication – – – – – – – – -iii
Acknowledgement – – – – – – – -iv
Abstract – – – – – – – – – -v
Table of content – – – – – – – -vi
CHAPTER ONE
INTRODUCTION – – – – – – – -1
1.0 Background of the study – – – – -1
1.1 Statement of the problem – – – – -5
1.2 Purpose of the study – – – – – -6
1.3 Significance of the study – – – – -8
1.4 Research questions – – – – – -9
1.5 Scope of the study – – – – – – -10
CHAPTER TWO
LITERATURE REVIEW – – – – – – -11
CHAPTER THREE
Research methodology – – – – – – -39
Design of study – – – – – – – -40
CHAPTER FOUR
Presentation, analysis and interpretation of data – -48
CHAPTER FIVE
Summary of findings – – – – – – -60
Conclusion – – – – – – – – -61
Recommendations – – – – – – – -62
Suggestions for further research – – – – -64
References – – – – – – – – -65
Appendix I – – – – — – – – -68
Questionnaire. – – – – – – – -69
