CHAPTER ONE

INTRODUCTION

1.1Background to the Study

The role of the banking system as an engine of economic growth is appreciated by the functions, the constituency performs. The banking sector provides liquidity that services the needs of the economy, facilitates the mobilization of surplus funds from both domestic and foreign sources and optimally allocates such mobilized resources to deficit economic limits for product investment. The banking system also provides infrastructure for monetary policy transmission among other thing. In recent years the Nigerian banking sector has been hit by three major trends namely deregulation and privatization the introduction of new technologies and new products and the entry of new competitors. These trends were the outcome of forces of globalization.

According to Fajigbesi and Ozughalu (2003), globalization is faced with some challenges which do affects the banking sector especially the immensely baking system from this a consensus has emerged in recent decades emphasizing the critical role of globalization in the process of Nigerian banking sector development.

Globalization implies that there will be massive presence of foreign banks in Nigeria with the influx of foreign banks, there will be tremendous increase in the degree of competition in the degree of competition in the Nigeria banking sector. Indeed, the banking sector in Nigeria is bound to face global financial system, the survival of banks in Nigeria will be to a large extents depend on hour well they understand the intricacies of globalization and how well they are prepared to operate with in the new system.

Until recently, Nigeria banking system have not performed impressively when compare to other region for instance power and energy has not grow to the expected level, technologically Nigeria is still behind in operation, basically the imfrastral system of the country is yet to be upgraded to a necessary standard. However, Nigeria banking sector experience significant gains in the current re-capitalization of Nigeria banks. These changes took place within the context of globalization/ internationalization policies and reflect part effort by Nigeria government to integrate Nigerian banks into the global financial market.

The recent concern about growth of Nigeria Banking Sector is the impact of globalization to the sector as revealed by Obadan (2003). The Banking sector plays a critical role in liberating a country’s wheels for beneficial participation in the dynamics of globalization.

Undoubtedly, globalization has impacted on most factors identified in the literature to be determinants of changes in the banking sector. The nature of these relationship need to be ascertained the study of these type, is therefore warranted since it’s major objective is to examine empirically the impact of globalization the Nigeria banking sector.

1.2   Statement of Problem

The crux of this study is to find out the impact of globalization in Nigeria banking system, and how Nigeria banking sector can benefit and manage the cost of globalization, with regards to the above researcher one of the view to review existing literature and fill the gap that exist by proffering possible solutions is to identify problem.

1.3   Objectives of the Study

The main principal objective of this study is to empirically investigate the impact of globalization on Nigerian banking system. Specifically the objectives of the study will also include.

1.     To identify the major globalization indicators that affect Nigerian banking system.

2.     To identify the cost and benefit of banking sector globalization.

3.     To find out the pre-conditions for globalization in the Nigerian Banking Sector.

4.     To evaluate the penetrator of foreign bank on Nigerian Banking System.

5.     To appraise policy measure of government towards ensuring Nigeria banks benefits from globalization.

1.4   Research Questions

1.     What are the globalization factors that affect the Nigerian Banking Sector?

2.     What are the cost benefits of globalization to Nigerian Banking System?

3.     What are the preconditions for banking sector globalization?

4.     To what extent has foreign banks penetrated Nigerian banking system?

5.     Does foreign and domestic banking behave in the same way?

1.5   Statement of Hypotheses

In order to achieve the objectives of this study the following hypothesis are stated.

Hypothesis One

Ho:  There is no significant relationship between banks capital base and economic growth.

HI:    There is significant relationship between banks and capital base and economic growth.

Hypothesis Two

Ho:  There is no significant relationship between bank capital base and foreign private investment.

HI:    There is a significant relationship between bank capital base and foreign private investment.

1.6   Scope of the Study

These research works cover Nigeria. To capture the Impact of globalization on Nigeria Banking System substantially with special attention to Zenith Bank Plc and make statements that is based on facts and figures (objectives) and to enhance unbiasedness, a period of 36years encompassing serve as the time horizon for the study. The constraints encountered in articulating this work include the difficulties and financial constraints involved in getting date, the time spent on solving and organizing the work combined with normal academic activities and other logistics problem. A poor response from expert in the field was also a factor at limits this study.

1.7   Significance of the Study

The importance of knowing how globalization impact on Nigerian banking system can be over emphasized. This study is very important as it would examine to what extent certain global variables explained what happens to Nigeria banking sector.

In fact, this research work will add to the ready-made shelf of well-structured publicly researcher projects which would be a hard tool for bankers, and policy makers in making decisions on how to influence banking sector development through benefiting from the outcome of globalization. Student in Nigeria and in other less developing countries interning to broaden their knowledge about the nexus of globalization and banking sector development.

Research will also find this material useful for subsequent research work on the issue. Government and financial regulators would also find this research work handy especially in the areas of policy formulation and stimulation.

1.8   Limitations of the Study

There have been lots of challenges carrying out this research work, which has led to the limitation of the study, busy schedules of managers and staff of the organization which we needed to source for information which made my trips numerous, some information tagged “top secret” were not disclosed.

1.9 Definition of Terms

Banking: This is the provision of payments facilities, credit and capital to individuals, firms and government universal banking combines these functions in the same banks, as for example in European countries including Germany. Modern banking is increasingly adding further functions including stock broking and port folio management.

Banking System: This is the network of institutions responsible for providing banking services are actual banks providing services to the general public which may be universal bank or specialist institutions dealing with particular types of banking business.

Globalization:  This is the process by which the whole world becomes a single market i.e. goods and services capital and labour are treaded on a world wide basis and information and results of research flow readily between countries. The rise of the internet and the start which has been made on liberalizing international trade in services will continue this movement in the 21st century.

Financial Sector: This is the part of the economy concerned mainly with lending and borrowing long or short term loan which includes banks, non-bank financial intermediaries such as building societies.

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