ABSTRACT
Accountants
have been bestowed with the role of providing information to the management
regarding the affairs of the organization in particular and to the stakeholders
in general. Internally, in manufacturing organization, management has always
relied on the management accountant for cost evaluation and performance
efficiencies of cost element. This role of management accountant to the
management has been in doubt because of incessant increase in the cost elements
of goods manufactured in Nigeria which in cause has resulted in constant
increase in the price of goods. The aim of this research study is to evaluate
the role of management accountant to cost control and profit performance in an
organization. a quasi-experimental research design was adopted for this
research study and the sample size was selected using the Taro Yamane sampling
technique. Primary and secondary sources of data were used in collecting
information which was analyzed using simple percentages. The hypothesis was
tested using chi- square statistical method at 0.05 level of significance for
validity and decision making. The findings from the analysis of the research
study depicts that organizational strategic managers should rely on management
accountant information for decision making. Management of any manufacturing
company cannot make profitable decision without quality information. The
researcher can confidently conclude based on the findings that the availability
of skilled, knowledgeable and informative management accountant in an
organizational profit performance promotes productivity. Therefore, this
research work recommends that management accountants should provide information
on time so as to hasten up in making vital decision because undue delay in
decision making will definitely undermine the firms‟ goal of profit
maximization. Also, it recommends that adequate exposure should be given to
management accountants through training programmes, appraisal and evaluation of
seminars in order to acquaint them with the new technologies in vogue and keep
pace with new knowledge.
CHAPTER
ONE
INTRODUCTION
Failure as a word means
to be unsuccessful in attempts at achieving any of the objectives or
aspirations. Another variance to the
inability, refusal-fault or weakness which prevents the achievement of any set
objectives or aspiration. Banking sector
has suffer varying failure in their inability to sustain banking growth and
this work is focusing on the impact of bank failure on the banking sector in
Nigeria.
1.1 BACKGROUND OF THE STUDY
The history of Bank
Failure in Nigeria can be traced back to the early thirty’s when the industrial
and commercial bank limited which was established in 1929 and went into
liquidation within a year it started operation as a result of its generosity
and liberty in extension of credit facilities especially to managing directors
(Ugwuanyi, 1977).
The banking industry is
so strategic to the economy that virtually everybody is a stakeholder. Banks act as lubricants of the economy and
the custodians of the payment system.
They therefore impact on every sector of the economy. Banks with high capital base perform their
traditional role of banking by financing capital projects that is in the oil
and gas sector. Banks help in mobilizing
savings through a network of branches.
By mobilizing savings, the bank channels them into investments. Thus, they help in capital formation. Other roles performed by the banks in the
economy include financing trade, agriculture, industry, consumer activities and
the help in the implementation of monetary policies. Despite the fact that there are so many
sectors in the economy that depend on banking, banks in Nigeria are yet to
realize their full potentials (Nweze, 2004).
Likewise the banking sector has a long way to go in playing its expected
roles in development and growth of the economy.
Despite the fact that the banking industry is recorded to be a strong
growing sector in the economy, the banking industry has not been performing
their traditional role of banking but have been engaged in bad ways of
practicing banking (Churchhill, 2001).
The importance of the financial sector of an economy, which comprises
banks and non-bank financial intermediaries, regulatory framework and ever
increasing financial products in stimulating economic growth is widely
recognized in the literature on development economics. A banking system that is in crisis cannot
therefore, carry out its intermediation role effectively as new lending comes
to a halt, which is known as credit crunch.
Two mechanisms can act; low capital adequacy ratios of banks and
shortfall of liquidity. The free banking
era ended when the Banking Ordinance, Nigeria experienced series if bank
failures between the period of 1952-1958.
Uzoaga (1981) observes that only 4 out of 25 indigenous banks
established during this period survived while 21 others went under. The Pre-CBN bank failures were attributed to
absence of regulation and control while the post-CBN bank failure was caused by
the factors to be discussed here under.
With the promulgation of the Central Bank Act of 1958, the banking
business came under the regulation and control of the CBN. Symptoms of distress in Nigeria financial
system was first officially pointed out by the World Bank team that examined
the financial sector shortly before the NDIC (Nigeria Deposit Insurance
Corporation) Decree #22of 1988 took off in February 1989. Ndiulor (2000) thinks that the transfer of
parastatals and Government agencies accounts to the CBN, investment mismatches,
paper profits, round tripping in foreign exchange and other rent seeking
activities are true signals of unfair wind in the industry. The period of 1994-2003 saw another round of
bank failure culminating in a good number of banks having their licenses
withdrawn by the Central Bank of Nigeria (CBN) and liquidated by the Babaola
Adeyemi, 2011. Recently, several
financial institutions in Nigeria became distressed, thus highlighting the
precarious position of the financial sector.
Between 1989 and 1996, the financial conditions of many banks and
non-bank financial institutions worsened significantly, which compelled the
authorities to take decisive steps to restore public confidence in the
financial system. During this period,
the number of banks classified as distressed increased from 8 to 52. Since then, another round of banking crisis
started at the wake of the political instability occasioned by the annulment of
the 1993 Presidential Election.
Consequently, the CBN took over the management of 17 distressed banks in
1995 and one additional bank in 1996.
The bank, in exercising it’s powers under Bank and Other Financial
Institutions Act, 1991 (as amended), announced the revocation of the banking
licenses of 26 banks with effect from January 16, 1998, which was necessitated
by their grace financial conditions.
This has been the terrible situation of the sector up till July 2004
when the Central Bank governor came up with the N25 billion recapitalization
policy for banks in Nigeria. A cursory
look at this development would suggest that the banking sector in Nigeria had
been operating in an unsafe and unhealthy manner, thus, exposing the fragility
of the system and further erosion of public confidence. The belief that the sweeping reforms of
2004-2005 would usher in a new era of banking in Nigeria, especially in the
area of enhanced capital base/shareholders funds has turned out to be a
mirage. The revelations from the sector
in late 2009 have confirmed the fear that this endemic crisis that has been ravaging
this sector over the years has not been decisively dealt with. The ugly situation of the huge sum of
non-performing loans culminating in the capital erosion of 9 out of the 24
banks in the country great danger to the system and requires drastic approach
to be embarked upon by the current governor.
1.2 STATEMENT OF PROBLEM
Every country attempts
how to maintain a healthy financial system because of its importance in
economic growth and development in the society.
From the beginning of banking in Nigeria there have been serious crisis
of bank failure in the industry. This no
doubt constitutes a set bank in our quest for economic growth and
development. Such a situation should not
be allowed to continue. To this causes
of bank failure as the logical step towards formulating realistic policy to
arrest the trend.
Financial sector
distress has been described as a situation in which a sizeable proportion of
financial institutions have liabilities exceeding the market value of their
assets which may lead to runs and other portfolio shifts and eventual collapse
of the financial system (Adegbite, 2005).
Put differently, distress in the financial system occurs when a fairly
reasonable proportion of financial institutions in the system are unable to
meet their obligations to their financial, operational and managerial
capabilities which render them either illiquid and or insolvent (CBN,
1997). The period from 1952 to 1958 saw
the first round of bank failures while an-other round of bank failures occurred
between 1994 and 2003. The
recapitalization policy of 2004/2005 ended up with 14 out of the 89 deposit
money banks disappearing from the scene as a result of their inability to meet
up with the minimum capital base requirement.
Although there appears
to be many factors attributed to the incidence of bank failure in Nigeria, a
good number of authors have not really established the key ones. While Ogundina (1999) sees ownership
structure as a factor accountable for bank failure, Ogubunka (2003) identifies weak/ineffective
internal control system, poor management among others as causes of bank
distress/failure. However this work is
an attempt to narrow the scope of the causes of bank failure in Nigeria to the
key ones such as capital inadequacy, lack of transparency and non-performing
loans and sharpen the potency of each of these key causes. The author also attempts to establish whether
the other factors may also be accountable for bank failure in Nigeria.
1.3 OBJECTIVE OF THE STUDY
The aim of this study
is to determine the impact of bank failure on the banking sector in Nigeria.
i.
To show whether the bank failure in
Nigeria has impacted negatively on public confidence of the banking sector
ii.
To show whether poor management played a
significant role in the banking crises in Nigeria
iii.
To determine whether fraud played a
significant role in the bank failures in Nigeria
iv.
To determine whether the regulation and
supervision have been effective in detecting and curbing banking crises in
Nigeria
1.4 RESEARCH QUESTION
i. Has
bank failures impacted significantly and negatively on public confidence of the
banking system
ii. Has
poor management played a significant role in the banking crises in Nigeria
iii. Has
fraud played a significant role in the bank failures in Nigeria
iv. Has
regulation and supervision been effective in detecting and curbing crises in
Nigeria
1.5 RESEARCH HYPOTHESIS
Ho: Bank failure has not significantly
and negatively affected public confidence of the banking system
Ho: Poor management has not played a
significant role in the banking crises in Nigeria
Ho: Fraud has not played a significant
role in the bank failures in Nigeria
Ho: Regulation and supervision has not
been effective in detecting and curbing banking crises in Nigeria
1.6 SIGNIFICANCE OF THE STUDY
The finding of this
research work on the impact of bank failures on the banking sector in Nigeria
is mainly designed to achieve a great success in contributing the little the
researcher can, if not a great deal in solving the bank failure problem in
Nigeria. It is a well hope that this
research work will definitely enlighten the staff and management of banks in
banking sector. In addition the finding
will also bring about more profitability contribution and improvement to every
other bank nationwide to know their problem and locations, furthermore, this
study will serve as means to tackle most of the inherent problems effectively.
This study will also be
of greater help in the society at large in the even or to be as favourable side
of the failures syndrome on Nigeria banks is eradicated completed.
1.7 DEFINITION OF TERMS
Central
Bank of Nigeria (CBN): This is the apex bank within the
Nigeria financial system, which is responsible for the regulation named
supervision of the activities of the banks and other financial institutions
operating within the system. It was
established by the Central Bank of Nigeria ordinance of 17th March,
1958. It commenced operation on the 1st
of July, 1959.
Nigeria
Deposit Insurance Corporation (NDIC): Established in 1988 by
decree no 22 to add weight to the existing supervisory and control capacities
of the monetary authorities to insure the deposit liabilities of licensed banks
in the country, provide financial and technical assistance to them.
Banking
System: It is subset
of the financial system which comprises of all banks operating in money and
capital market.
Non-Banking
Institution (NBI): They are those institutions that are
not banks but engaged in financial intermediation within the financial system,
these include, insurance companies, financial companies, discount houses and so
on.