the role of financial institution in enhancing business activities in nigeria
TRANSCRIPT
THE ROLE OF
FINANCIAL
INSTITUTION IN
ENHANCING
BUSINESS ACTIVITIES
IN NIGERIA
1
A RESEARCH PROJECT WRITTEN IN THE DEPARTMENT OF
ACCOUNTANCY, SCHOOL OF FINANCIAL STUDIES.
SUBMITTED
IN PARTIAL FULFILMENT FOR THE AWARD OF NATIONAL
DIPLOMA (ND) IN ACCOUNTANCY.
NOVEMBER 2009
COLLEGE OF ACCOUNTANCY AND COMPUTER
TECHNOLOGY
BLOCK B, FLAT 8, MASOJE ESTATE.
P.T.I ROAD, EFFURUN. DELTA STATE. NIGERIA.
2
APPROVAL
We the undersigned hereby certify that this project was carried
out by SUNDAY EFFIONG JONAH in the department of
accountancy, school of financial studies Akwa Ikwa Ibom State.
We also certify that the work is adequate in scope and quality
in partial fulfilment for the award of National Diploma (ND) in
accountancy .
DateProject Supervisor
3
Center co-ordinator Date
DEDICATION
This project work is dedicated to the Almighty God who gives
wisdom for academic excellent, and to my beloved parent who
did not deprive me from benefiting and having the light of
education.
ACKNOWLEDGMENT
4
I am most grateful to the Almighty God for giving me life,
strength and courage to sail through my educational career
despite all odds and obstacles.
In writing this project, I am indebted to Idowu Mohammed,
Tunde Bamboge for their contributions; support and
encouragement in making this project work a success.
I will like to use this opportunity to express my sincere thanks
to Comfort Umoren, brothers and sisters, relatives, friends and
loved ones for their prayers, moral and financial support
through this program.
My profound gratitude goes to my Supervisor Mr Emmanuel
N. Bassey who despite his crowded schedule, sacrificed time
to read through the manuscript without which this project
would not have seen the light of the day.
My special thanks also goes to my beloved Mrs Peters, Uche
Gunida for their advice, encouragement and assistance.
In like manner, I wish to acknowledge the effort of all my
lecturers in accounting department for their principal
knowledge imparted on me during my period of study.
With special thanks to aunty, my Pastor Kola for his endless
love shown to me during the course of my studies.
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Finally, thanks to others I cannot remember during the course
of the write up, may God reward every effort of kindness and
love shown during my academic pursuit.
ABSTRACT
Financial institutions provide service as intermediaries of the
capital and debt markets. They are responsible for transferring
funds from investors to companies, in need of those funds. The
presence of financial institutions facilitate the flow of money
through the economy. To do so, savings are pooled to mitigate
the risk brought to provide funds for loans. Such is the primary
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means for depository institutions to develop revenue. Should
the yield curve become inverse, firms in this arena will offer
additional fee-generating services including securities
underwriting, and prime brokerage.
TABLE OF CONTENT
Title page - - - - - - - - i
Approval - - - - - - - - ii
Dedication - - - - - - - - iii
Acknowledgement - - - - - - - iv
Abstract - - - - - - - - - vi
Table of content - - - - - - - vii
CHAPTER ONE – INTRODUCTION
1.0 Background of the study - - - -- 1
1.2 Statement of the problem - - - - 9
1.5.0 Limitation of the study - - - - 10
1.5.1 Material procurement - - - - - 11
1.5.2 Time constraints - - - - - - 11
1.5.3 Financial constraints - - - - - 11
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1.6.0 Hypothesis - - - - - - - 11
1.7 Objectives of the study - - - - - 12
1.8 The structure of the work - - - - 12
CHAPTER TWO – LITERATURE REVIEW
2.1 The roles of institutions in the financial system 13
2.3 Important factors in building
a stable financial system - - - - 14
2.4 Duties of banks - - - - - - 17
2.5 Data about sterling bank plc - - - - 25
CHAPTER THREE
RESEARCH METHODOLOGY AND DESIGN
3.1 Introduction - - - - - - 26
3.2 Research methodology - - - - - 26
3.3 Research design - - - - - - 27
3.4 Sources of data - - - - - - 27
3.5 Secondary data - - - - - - 27
3.6 Population description - - - - - 28
3.7 Sample size - - - - - - - 28
3.8 Instruments for data collection - - - 29
3.9 Field work - - - - - - - 29
3.6 Descriptions of data
presentation and analysis tools - - - 30
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CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 Introduction - - - - - - - 31
4.2 Data presentation - - - - - - 32
4.3 Cross-tabulated analysis - - - - - 33
4.5 Software used for data analysis - - - 40
CHAPTER FIVE
FINDINGS AND CONLUSION
5.1 Findings - - - - - - - 44
5.2 Conclusions- - - - - - - 44
CHAPTER ONE
INTRODUCTION
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1.0 BACKGROUND OF THE STUDY
In financial economics, a financial institution is an institution that
provides financial services for its clients or members. Probably the most
important financial service provided by financial institutions is acting as
financial intermediaries. Most financial institutions are highly regulated by
government bodies.
Banks and other Financial Institutions Decree 1991. Laws of the Federation of Nigeria
(1) The Central Bank of Nigeria (hereafter in this Decree referred to as "the Bank") shall
have all the functions and powers conferred and the duties imposed on it by this
Decree.
(2) The Bank shall in addition to the functions and powers conferred on it by this Decree,
have the functions and powers conferred and the duties imposed on the Bank by the
Central Bank of Nigeria Decree 1991.
(3) The Bank may authorise or instruct any officer or employee of the Bank to perform
any of the functions, exercise any powers, or discharge any of its duties under this Decree.
(4) The Bank may, either generally or in any particular case, appoint any person who is
not an officer or employee of the Bank, to render such assistance as it may specify in the
exercise of its powers, the performance of its functions, or the discharge of its duties under
this Decree, or to exercise, perform or discharge the functions and duties on behalf and in the
name of the Bank.
(5) For the purposes of this Decree, a person shall be deemed to be receiving money as
deposits -
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(a) if the person accepts deposit from the general public as a feature of its business or if it
issues an advertisement or solicits for such deposit;
(b) notwithstanding that it receives moneys and deposits which are limited to fixed
amounts or that certificates or other instruments are issued in respect of any such
amounts providing for the repayment to the holder thereof either conditionally or
unconditionally of the amount of the deposits at specified or unspecified dates or for
the payment of interest or dividend on the amounts deposited at specified intervals or
otherwise, or that such certificates are transferable.
(6) Notwithstanding anything contained in this section to the contrary, the receiving of
moneys against any issue of shares and debentures offered to the public in accordance
with any enactment in force within the Federation shall not be deemed to constitute
receiving moneys as deposits for the purposes of this Decree.
2. (1) No person shall carry on any banking business in Nigeria except it is a
company duly incorporated in Nigeria and holds a valid banking licence issued under
this Decree.
(2) Any person who transacts banking business without a valid licence under this Decree is
guilty of an offence and liable on conviction to a term of imprisonment not exceeding
10 years or a fine exceeding N500,000 or to both such imprisonment and fine.
3. (1) Any person desiring to undertake banking business in Nigeria shall apply in
writing to the Governor for the grant of a licence and shall accompany the application
with the following-
(a) feasibility report of the proposed bank;
(b) a draft copy of the memorandum and articles of association of the proposed
bank;
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(c) a list of the shareholders, directors and principal officers of the proposed
bank and their particulars;
(d) the prescribed application fee; and
(e) such other information, documents and reports as the Bank may, from time
to time, specify.
(2) After the applicant has provided all such information, documents and report as the
Bank may require under subsection (1) of this section, the shareholders of the proposed
bank shall deposit with the Bank a sum equal to the minimum paid-up share capital that
may be applicable under section 9 of this Decree.
(3) Upon the payment of the sum referred to in subsection (2) of this section, the Governor
may issue a licence with or without conditions or refuse to issue a licence and the
Governor need not give any reasons for the refusal.
(4) Where an application for a licence is granted, the Bank shall give written notice of that
fact to the applicant and the licence fee shall be paid.
4. The Bank may invest any amount deposited with it pursuant to section 3(2) of this
Decree in treasury bills or such other securities until such a time as the Governor shall
decide whether or not to grant a licence, and where the licence is not granted the Bank
shall repay the sum deposited to the applicant, together with the investment income
after deducting administrative expenses and tax on the income.
5. (1) Except as provided in section 9(2) of this Decree, the Governor may vary or
revoke any condition subject to which a licence was granted or may impose fresh or
additional conditions to the grant of a licence.
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(2) Where the grant of a licence is subject to conditions, the bank shall comply
with those conditions to the satisfaction of the Bank within such period as the Bank
may deem appropriate in the circumstances.
(3) Any bank which fails to comply with any of the conditions of its licence is guilty of an
offence under this section and shall be liable on conviction to a fine not exceeding
N1,000 for each day during which the condition is not complied with.
(4) Where the Governor proposes to vary, revoke or impose fresh or additional conditions
on a licence, he shall, before exercising such power, give notice of his intention to the
bank concerned and give the bank an opportunity to make a representation to him
thereon.
(5) Any bank which fails to comply with any fresh or additional condition imposed in
relation to its licence is guilty of an offence and liable on conviction to a fine of
N100,000 and where the offence continues, to an additional fine of N1,000 for each day
during which the offence continues.
6. No bank may open or close any branch office anywhere within or outside Nigeria
except with the prior consenting writing of the Bank.
7. Except with the prior consent of the Governor, no bank shall enter into an agreement or
arrangement-
(a) which results in a change in the control of the bank;
(b) for the sale, disposal or transfer howsoever of the whole or any part of the
business of the bank;
(c) for the amalgamation or merger of the bank with any other person;
(d) for the reconstruction of the bank;
(e) to employ a management agent or to transfer its business to any such agent.
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8. (1) Except with the approval of the Bank, no foreign bank shall operate a
representative office in Nigeria.
(2) Any person who contravenes subsection (1) of this section or section 7 of this
Decree is guilty of an offences and liable on conviction to a fine of N100,000 and
in the case of a continuing offence to an additional fine of N10,000 for each day
during which the offence continues.
9. (1) The President on the recommendation of the Bank shall, from time to time,
determine, as he may deem appropriate, the minimum paid-up share capital of each
category of banks.
(2) Subject to subsection (1) of this section, the minimum paid-up share capital of a bank
shall in respect of-
(a) a commercial bank, be N50,000,000;
(b) a profit and loss sharing bank, be N50,000,000;
(c) a merchant bank, be N40,000,000;
(d) a community bank, be N250,000.
(3) Any failure to comply with the provisions of this section within 12 months from the
date of this Decree shall be a ground for the revocation of any licence issued pursuant
to the provisions of this Decree or any other Act repealed by it.
10. Notwithstanding the provisions of the Companies and Allied Matters Decree 1990 or
any agreement or contract, the voting rights of every shareholder in a bank shall be
proportional to his contribution to the paid-up share capital of the bank.
11. Notwithstanding anything contained in any law or in any contract or instrument, no suit
or other proceeding shall be maintained against any person registered as the holder of a
14
share in a bank on the ground that the title to the said share vests in any person other
than the registered holder:
Provided that nothing in this section shall bar a suit or other proceeding on
behalf of a minor or person suffering from any mental illness on the ground that
the registered holder holds the share on behalf of the minor or person suffering
from the mental illness.
12. The Governor may, with the approval of the President by notice published in the
Gazette, revoke any licence granted under this Decree if a bank-
(a) ceases to carry on in Nigeria the type of banking business for which the
licence was issued for any continuous period of 6 months or for any period
aggregating 6 months during a continuous period of 12 months;
(b) goes into liquidation or is wound up or otherwise dissolved;
(c) fails to fulfill or comply with any condition subject to which the licence was
granted;
(d) has insufficient assets to meet its liabilities;
(e) fails to comply with any obligation imposed upon it by or under this Decree
or the Central Bank of Nigeria Decree 1991.
13. (1) A bank shall maintain; at all times, capital funds unimpaired by losses, in such
ratio to all or any assets or to all or any liabilities or to both such assets and liabilities of
the bank and all its offices in and outside Nigeria as may be specified by the Bank.
(2) Any bank which fails to observe any such specified ratios may be prohibited by the
Bank from-
(a) advertising for or accepting new deposits;
(b) granting credit and making investment;
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(c) paying cash dividend to shareholders;
(3) In addition, the bank may be required to draw up within a specified time a
capital reconstitution plan acceptable to the Bank.
14. (1) Failure to comply with the provisions of section 13 of this Decree may
constitute a ground for the revocation of the licence of the bank under this Decree.
(2) Where the Bank proposes to recommend to the President, the revocation of the licence
of any bank pursuant to subsection (1) of this section, the Bank shall give notice of its
intention to the bank and the bank may within 30 days make representation (if any) in
respect thereof.
(3) Any bank dissatisfied with the decision of the Bank to recommend the revocation
of its licence under this section may, within 14 days of the decision being
communicated to it, appeal against such decision through the Bank to the
President.
(4) The President may reject or approve the recommendation of the Bank with such
modification as he may deem fit.
15. (1) Every bank shall maintain with the Bank cash reserves, and special deposits
and hold specified liquid assets or stabilisation securities, as the case may be, not less in
amount than as may, from time to time, be prescribed by the Bank by virtue of section
39 of the Central Bank of Nigeria Decree 1991.
(2) Where both assets and liabilities are due from and to other banks, they shall be offset
accordingly, and any surplus of assets or liabilities shall be included or deducted, as the
case may be, in computing specified liquid assets.
16
(3) In the case of the long-term advances to a bank or by an overseas branch or office
of a bank, the advances may, with the approval of the Bank, be excluded from the
demand liabilities of the bank.
(4) Every bank shall -
(a) furnish within a reasonable time any information required by the Bank to
satisfy the Bank that the bank is observing the requirements of subsection
(1) of this section;
(b) not allow its holding of cash reserves, specified liquid assets, special
deposits and stabilisation securities to be less than the amount which may,
from time to time, be prescribed by the Bank;
(c) not during the period of any deficiency grant or permit increases in
advances, loans or credit facilities to any person without the prior approval
in writing of the Bank.
(5) Any bank which fails to comply with any of the provisions of subsection (4) of
this section is guilty to an offence and liable on conviction to a fine of-
(a) in the case of paragraph (a) N50,000 for every day during which a default
under that paragraph (a) exists;
(b) in the case of paragraph (b), one per cent of the shortfall for each day
during which the deficiency under that paragraph exists;
c) in the case of paragraph (c), N500,000 for every offence under that
paragraph;
and the Bank may also, during the period when the bank fails to comply with any
of the requirements of subsection (4) as aforesaid, withdraw any privileges or
facilities that are nor accorded to the bank.
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(6) For the purposes of this section, specified liquid assets provided they are freely
transferable and free from any lien or charge of any kind shall, without prejudice to the
provisions of section 39 of the Central Bank of Nigeria Decree 1991, consist of all or
any of the following, that is-
(a) currency notes and coins which are legal tender in Nigeria;
(b) balances at the Bank;
(c) net balances at any licensed bank (excluding uncleared effects) and money
at call in Nigeria;
(d) Treasury Bills and Treasury Certificates issued by the Federal Government;
(e) inland bills of exchange and promissory notes rediscountable at the Bank;
(f) stocks issued by the Federal Government with such dates of maturity as
may be approved by the Bank;
(g) negotiable certificates of deposit approved by the Bank; and
(h) such other negotiable instruments as may, from time to time, be approved
by the Bank for the purpose this subsection.
1.2 STATEMENT OF THE PROBLEMIn this research project, effort will be made:
1. To determine the role of financial institution in Nigeria.
2. To investigate the role financial institution is playing in enhancing
business transaction in the country.
3. To examine various types of financial institutions available in Nigeria.
4. To investigate the vibrant financial institution
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5. To find out what are the possible means curbing financial distress in the
country.
1.4 SIGNIFICANCE OF THE STUDY
The significance of the study are many, but the following points are worthy of
mentioning.
a. the findings of the study will shed more light on combating distress
among the financial institutions in Nigeria
b. the study will lead to a deeper understanding of various types of financial
institutions in the country
c. the findings of the research will serve as decision variables or input for
managers, bankers and government agents.
d. the policy makers and professionals in the relevant fields will find the
research work useful for their policy making.
e. the study will create more awareness in the minds of its readers, about the
financial and none financial institutions available.
f. the study will serve as reference material to students of finance,
accountancy, business management, banking and economics, who may desire
an in-depth knowledge of the online business transaction and its implications.
g. it will be of a great benefit to the scholars and other researchers alike by
serving as a reference material when need arises.
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1.5.0 LIMITATION OF THE STUDY
A research work of this nature cannot come to an end without limitation. The
researcher encountered numerous problems, which affected the smooth running
of the work. These problems include, difficulty in procuring materials for the
project, time factor and financial constraints
1.5.1 MATERIAL PROCUREMENT
There was a lot of constraints as to getting information and materials for the
job. The researcher made series of consultations and visit to most renowned
institutions to acquire the needed information. Most materials used were very
difficult to come by, as there is no library with the town.
1.5.2 TIME CONSTRIANTS
Combining academic work with circular job is no doubt a thought provoking
issue, as it has to do with time. Actually, a lot of time was wasted as the
research visited the organisations and individuals together with government
agencies to obtain valuable information for the project.
1.5.3 FINANCIAL CONSTRAINTS
The researcher would have obtained more information than what is obtainable
here but due to lack of money to visit some of the firms and government
agencies located a bit further from the researcher place of resident.20
1.6.0 HYPOTHESIS
A hypothesis is a conjectural or tentative statement of the relationship between
two or more variables (Agbadudu).
In this research project, two hypotheses are to be tested as follows; that the
proportion of respondents that said yes is 90% when asked.
(1) If it is possible to combat financial distress in the country .
(2) If "banking business" means the business of receiving deposits on current and savings
accounts,
1.7 OBJECTIVES OF THE STUDY
The salient objectives of the research were the following among others:
a. to carry out an investigation on role of financial institutions
b. to empirically find out the major roles played by banking institutions in
combating this societal illness.
c. to really find out the various types of financial institutions in the country
d. To determine the benefits that business organisations, banks and
government agencies stand to gain in taking charge and in solving the
online problem.
1.8 THE STRUCTURE OF THE WORK
This research work is to be organized in five chapters as follows:
1. Introduction
2. Review of Related Literature
3. Research Methods and Procedures
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4. Data presentation and Analysis and
5. Findings, Summary and Conclusion
CHAPTER TWO
LITERATURE REVIEW
2.1 The role of institutions in the financial system
The highly justifiable focus on banks as financial institutions stems from their
fundamental role in liquidity redistribution and maturity transformation, the
implementation of monetary policy, in operating payment systems and in providing
appropriate channels for national and international financial flows, which contribute
to the overall development of the economy.
The experience from the restructuring process has shown that the strengthening of
domestic financial markets is strongly dependent on the efficiency of the banking
sector. The development of viable capital markets can only take place once the
privatisation of large state-owned banks, deregulation and liberalisation of domestic
banking markets have paved the way for more efficient financial intermediation.
2.2 FINANCIAL INSTITUTIONS IMPACT ON ECONOMIC GROWTH
First, on the nexus between economic growth and financial intermediation, a large
body of academic research across many countries has demonstrated the important
role that a highly developed banking sector and capital market have to play in
facilitating economic growth. Well developed financial systems allow economies to
reach their potential since they allow firms which have successfully identified
profitable opportunities to exploit these opportunities as intermediaries by
channelling investment funds from those in the economy who are willing to defer
their consumption plans into the future. 22
In general, economic growth depends on the accumulation of input factors in the
production process and on technical progress. Seeing capital and capital
accumulation as an important input factor, financial development is linked most
clearly to this source of growth. Financial development may also help to realise
faster technical progress, embedded in the capital stock, to achieve higher economic
growth.
More specifically, financial development can affect growth through three main
channels: (i) it can raise the proportion of savings channelled to investment, thereby
reducing the costs of financial intermediation; (ii) it may improve the allocation of
resources across investment projects, thus increasing the social marginal
productivity of capital; and (iii) it can influence the savings rates of households, for
example, if it induces a higher degree of risk sharing and specialisation, which as a
result stimulates higher growth.
There is clear evidence of stronger growth in those countries which are
characterised by a good legal structure. This may lower both information costs (e.g.,
through verifying the quality of disclosure of companies' accounts) as well as
transaction costs (e.g., through the better legal enforcement of contracts) for a
supplier of funds, such as banks. Furthermore, when banks are allowed to be active
in a wide range of activities, such as in the securities, insurance, or real estate
markets, and when banks can own or control non-financial firms, or vice versa, credit
may be better allocated and/or more credit may be available to entrepreneurs.
2.3 IMPORTANT FACTORS IN BUILDING A STABLE FINANCIAL SYSTEM
Most generally, a stable financial system can be described as a financial system
that is able to withstand shocks without giving way to cumulative processes which
23
could impair the allocation of savings to investments and the processing of payments
in the economy. How do we get there?
1. First, financial system architecture should be carefully planned. Different stages
of financial development require adequate institutional processes to be in place.
Here, one can refer to the sequencing laid out by IMF in recent years and to the
European experience with opening and gradually liberalising the financial sector
during the 1980s and 1990s.
2. Second, a solid micro supervision of the financial sector and individual
institutions should be in place.
3. Third, close co-operation and exchange of information between the central bank
and supervisory authorities is warranted at all times and especially in periods of
financial stress. I will refer to this more extensively in a moment.
4. Fourth, there are several, complementary public policies that are typically
needed to sustain or build up confidence in financial institutions. Let me mention:
Fiscal policy. If fiscal authorities, as in the euro area, are restricted in their ability
to run deficits or accumulate large debts, an important source of financial market
stress and financial instability is removed.
Monetary policy. As is now widely accepted, monetary authorities should in the
first place try to guarantee price stability, being the best possible contribution it
can make to growth in the medium to long-term. Indirectly, this should also be
conducive to supporting financial stability, as the economy will have less macro
uncertainties to deal with, when allocating resources. However, it goes without
saying that the central bank should take an active interest in monitoring financial
sector developments, given the importance of the sector, also from a monetary
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policy (transmission) perspective, and given its importance in the economic
system (intermediation between lenders and borrowers). In some cases, when
financial stability is threatened, monetary policy may be used as a tool to support
the financial sector. This support may come not only through interest rate policy,
but also and most powerfully through the central bank's role as a lender of last
resort, that is, in providing final liquidity when solvent commercial banks suffer
liquidity strains. In addition, some day-to-day tools are associated with
guaranteeing financial sector stability, as for example the lending and deposit
facilities at the central bank providing upper and lower bounds for money market
fluctuations and giving individual institutions a means to deal with end-of-day
liquidity imbalances, or fine-tuning operations. Similarly, public commenting or
private persuasion of market participants can at times be used for maintaining
public confidence in the banking sector.
Financial supervision. An adequate supervisory framework, as I will explain later,
helps to enhance financial stability and maintain overall confidence in the
financial system.
A financial safety net is in place in most countries with a view to protecting small
depositors in case of a bank failure. This system seems to work relatively well in
maintaining confidence in financial institutions.
Of course, a stable financial system cannot operate without market discipline of the
financial sector. In order to avoid costly bank runs and bank failures, the sector must
show some self-discipline, to meet acceptable standards and expectations of
shareholders. Banks should be able to show good performance, adopt a sound risk
management system and adhere to adequate corporate governance rules. In case of
deteriorating results, prompt corrective actions should be taken and announced to 25
the public, in order not to lose its credibility. As an external watchdog, rating
agencies provide a valuable service by monitoring the financial sector and designing
a rating system, which reflect the institution's capacity to service its debts. This has,
at times, proven to be a valuable tool to distinguish sound from unhealthy
institutions.
2.4 DUTIES OF BANKS
(1) Every bank shall maintain a reserve fund and shall, out of its net profits for each year
(after due provision made for taxation) and before any dividend is declared, where the
amount of the reserve fund is-
(a) less than the paid-up share capital, transfer to the reserve fund a sum equal not
less than thirty per cent of the net profits; or
(b) equal to or in excess of the paid-up share capital, transfer to the reserve fund a
sum equal to not less than fifteen per cent of the net profit:
Provided that no transfer under this subsection shall be made until all identifiable
losses have been made good.
(2) Any bank which fails to comply with the provisions of subsection (10 of this section is
guilty of an offence and liable on conviction to a fine of N500,000.
(3) Notwithstanding paragraphs (a) and (b) of subsection (10 of this section, the Bank
may, from time to time, specify a different proportion of the net profits of each year, being
either lesser or greater than the proportion specified in paragraphs (a) and (b) to be
transferred to the reserve fund of a bank for the purpose of ensuring that the amount of the
reserve fund of such bank is sufficient for the purpose of its business and adequate in relation
to its liabilities.
17. No bank shall pay dividend on its shares until-
26
(a) all its preliminary expenses, organisational expenses, shares selling commission,
brokerage, amount of losses incurred and other capitalised expenses not represented
by tangible assets have been completely written off;
(b) adequate provisions have been made to the satisfaction of the Bank for actual and
contingent losses on risk assets, liabilities, off balance sheet commitment and such
unearned incomes as are derivable therefrom;
(c) it has complied with any capital ration requirement as specified by the Bank
pursuant to section 13(1) of this Decree.
18. (1) No manager or any other officer of a bank shall-
(a) in any manner whatsoever, whether directly or indirectly have personal interest in any
advance, loan or credit facility; and if he has any such personal interest, he shall
declare the nature of his interest to the bank;
(b) grant any advance, loan or credit facility to any person, unless it is authorised in
accordance with the rules and regulations of the bank; and where adequate security is
required by such rules and regulation; such security shall, prior to the grant, be
obtained for the advance, loan or credit facility and shall be deposited with the bank;
(c) benefit as a result of any advance, loan or credit facility granted by the bank.
(2) Any manager or officer who contravenes or fails to comply with any of the provisions
of subsection (1) of this section is guilty of an offence under this section and liable on
conviction to a fine of N100,000 or to imprisonment for a term of 3 years; and in addition,
any gain or benefits, accruing to any person convicted under this section by reason of such
contravention, shall be forfeited to the Federal Government, and the gains or benefit shall
vest accordingly in that Government.
27
(3) Every director of a bank who has any personal interest, whether directly or indirectly,
in an advance, loan or credit facility, or proposed advance, loan or credit facility from that
bank, shall, as soon as practicable, declare the nature of his interest to the board of directors
of the bank, and the secretary of the bank shall cause such declaration to be circulated
forthwith to all directors.
(4) The provisions of subsection (3) of this section shall not apply in any case-
(a) where the interest of the director consists only of being a member holding less than
five per cent of the shares of a company which is seeking an advance, loan or credit
facility from the bank; or
(b) if the interest of the director may properly be regarded by the Bank as not being
material.
(5) For the purpose of subsection (3) of this section, a general notice given to the board of
directors of a bank by a director of such bank to the effect that he is-
(a) an officer or member holding five per cent or more of the shares of a company or firm
specified in the notice; and
(b) to be regarded as having personal interest in any advance, loan or credit facility which
may after the date of the notice, be made to that company or firm, shall be deemed to
be a sufficient declaration of interest in relation to any such advance, loan or credit
facility, if-
(i) the notice specifies the nature and extent of his interest in the company or firm;
(ii) the interest is not different in nature to or greater in extent than the nature and extent
specified in the notice at the time the advance, loan or credit facility is made; and
28
(iii) the notice is given at the meeting of the board of directors or the director takes
reasonable steps to ensure that it is brought up and read at the next meeting of the board of
directors after it is given.
(6) Every director of a bank who holds any office or possesses any property whereby,
whether directly or indirectly, duties or interests might be declare at a meeting of the board of
directors of the bank, the fact and the nature, character and extent of the interest;
(7) The declaration referred to in subsection (6) of this section shall be made at the first
meeting of the board of directors held-
(a) after he became a director of the bank; or
(b) if already a director, after he came into possession of the property.
(8) The secretary of the bank shall cause to be brought up and read, any declaration made
under subsection (3) or (6) of this section at the next meeting under this section in the
minutes of the meeting at which it was made or at the meeting in which it was brought up and
read.
(9) Any director who contravenes subsection (3) or (6) of this section is guilty of an
offence under this section and liable on conviction to a fine of N100,000 or to imprisonment
for 3 years or to both such fine and imprisonment.
19. (1) No bank shall-
(a) employ or continue the employment of any person who is or at any time has been
adjudged bankrupt or has suspended payment to or has compounded with his creditors
29
or who is or has been convicted by a court for an offence involving fraud or
dishonesty, or professional misconduct;
(b) be managed by a management agent except as may be approved by the Bank.
(2) Except with the approval of the Bank, no bank shall have a director any who is a
director of -
(a) any other bank;
(b) companies which among themselves are entitled to exercise voting right in excess of
ten per cent of the total voting right of all the shareholders of the bank.
(3) No bank shall be managed by a person who is-
(a) a director of any other company not being a subsidiary of the bank; or
(b) engaged in any other business or vocation.
(4) Every director of a bank shall sign a code of conduct in such form or manner as the
Bank may, from time to time, prescribe.
(5) The chief executive of a bank shall cause all the officers of the bank to sign a code of
conduct as may be approved by the board of directors.
20. (1) A bank shall not, without the prior approval in writing of the Bank, grant-
(a) to any person any advance, loan or credit facility or give any financial guarantee or
incur any other liability on behalf of any person so that the total value of the advance,
loan credit facility, financial guarantee or any other liability in respect of the person is
at any time more than twenty per cent of the shareholders fund unimpaired by losses
30
or in the case of a merchant bank not more than fifty per cent of its shareholders fund
unimpaired by losses; and for the purpose of this paragraph all advances, loans or
credit facilities extended to any person shall be aggregated and shall include all
advances, loans or credit facilities extended to any subsidiaries or associates of a body
corporate:
Provided that the provisions of this paragraph shall not apply to transactions between
banks or between branches of a bank or to the purchase of clean or documentary bills of
exchange, telegraphic transfers or documents of title to goods the holder of which is
entitled to payment of exports from Nigeria to advance made against such bills, transfers
or documents;
(b) any advances, loans or credit facilities against the security of its own shares or any
unsecured advances, loans or credit facilities unless authorised in accordance with the
bank's rules and regulations and where any such rules and regulations require adequate
security, such security shall be provided or, as the case may required, deposited with
the bank.
(2) A bank shall not, without the prior approval in writing of the Bank-
(a) permit to be outstanding, unsecured advances, loans or unsecured credit facilities, of an
aggregate amount in excess of N50,000-
(i) to its directors or any of them whether such advances, loans or credit facilities are
obtained by its directors jointly or severally;
(ii) to any firm, partnership or private company in which it or any one or more of its
directors is interested as director, partner, manager or agent or any individual firm,
partnership or private company of which any of its directors is a guarantor;
31
(iii) to any public company or private company in which or anyone or
more of its directors jointly or severally maintains shareholding of not
less than five per cent either directly or indirectly;
(b) permit to be outstanding to its officers and employees unsecured advances, loans or
unsecured credit facilities, which in the aggregate for any one officer or employee, is an
amount which exceeds one year's emolument to such officer or employee;
(c) engage, whether on its own account or on a commission basis, in wholesale or retail
trade, including the import or export trade, except in so far as may exceptionally be
necessary in the course of the banking operations and services of that bank or in the
course of the satisfaction of debts due to it; so however that nothing in this paragraph
shall be construed as precluding a bank from undertaking equipment leasing business or
debt factoring provided that the foregoing provisions of this paragraph shall not apply to
a bank in the circumstances permitted under section 21 of this Decree;
(d) without prejudice to the provisions of section 21 of this Decree, acquire or hold any part
of the share capital of any financial or commercial or other undertaking except-
(i) any shareholding approved by the Bank in any company set up for the purpose of
promoting the development of the money market or capital market in Nigeria or of
improving the financial machinery for financing economic development;
(ii) any shareholding approved by the Bank pursuant to sub-paragraph (i) of this paragraph,
the aggregate value of which does not at any time exceed twenty-five per cent of the
sum of paid-up share capital and statutory reserves of that bank;
32
(iii) all shareholding acquired by a merchant bank while managing an equity issue:
Provided that the aggregate value of such acquisition does not at any time exceed the
sum of the paid-up share capital of that merchant bank or ten per cent of its total assets,
excluding contract items, whichever is higher and that this paragraph shall not apply to
any nominee company of a bank which deals in stock and shares for or on behalf of the
bank's customers or clients or majority interest acquired by a merchant bank in a
company while managing an equity issue;
(e) remit, either in whole or in part, the debts owed to it by any of its directors or past
directors;
(f) purchase, acquire or lease real estate except as may be necessary for the purpose of
conducting its business including provisions for foreseeable future expansion or
housing of its staff or other exceptional circumstances, where the agreement of the
Bank is obtained;
(g) sell, dispose or lease out any real estate.
(3) Notwithstanding the foregoing provisions of this section, a bank may secure debt on
any real or other property, and in default of repayment, may acquire such property and
exercise any power of sale, as may be provided for in any instrument or, by law
prescribed, immediately upon such default or soon thereafter as may be deemed proper.
(4) In paragraphs (a) and (b) of subsection (2) of this section, the expressions "unsecured
advances and loans" or "unsecured credit facilities", mean advances, loans or credit facilities
made with security, any part thereof which at any time exceeds the market value of the assets
constituting the security, or where the bank is satisfied that there is no established market
value, the value of the assets as determined on the basis of a valuation approved by the bank.
33
(5) In paragraphs (a) and (e) of subsection (2) of this section, the expression "director"
includes director's wife, husband, father, mother, brother, sister, son, daughter and their
spouses.
(6) All the directors of a bank shall be liable jointly and severally to indemnify the bank
against any loss arising from any unsecured advances, loans or credit facilities under
paragraph (a) of subsection (2) of this section.
(7) Any bank which, after the commencement of this Decree , enters into any transaction
inconsistent with any of the provisions of subsection (1) and (2) of this section is guilty of an
offence and liable on conviction to a fine of N1,000 for each day during which any such
transaction continues.
21. (1) A bank may acquire or 'hold part of the share capital of any agricultural,
industrial or venture capital company subject to the following conditions, that is-
(a) the venture capital company is set up for the purpose of promoting the development of
indigenous technology or new venture in Nigeria;
(b) the shareholding by the bank is in small or medium-scale industries and agricultural
enterprises as defined by the Bank;
2.5 DATA ABOUT STERLING BANK PLC
The Lagos office the bank is located at 20 Marina ,Lagos. While Warri branch is at opposite
Urhobo College, Effurun/Sapele Rd. Effurun by Odibo Housing Estate.
Warri branch personnel
Ufuoma Amrasa branch manager
Idowu Mohammed assistant manager
Aghe Fidelix head of marketing
34
Uche Ginika Michael CSO
Tunde Bamiboje F.T.O.
CHAPTER THREE
RESEARCH METHODOLOGY AND DESIGN
3.1 INTRODUCTION
It is customary to design and spelt out the method by which an intended
research work is to be conducted by the researcher.
The research design was aimed at enhancing the effectiveness of the
study thus paving way for a meaningful and systematic approach to the
study. It is on this ground that this chapter had being devoted to the
explanation of the research procedures, method of data collection, sources
of data collected, and the instruments employed. The chapter also
presents the methods used in analysing the data collected.
3.2 RESEARCH METHODOLOGY
There are different approaches or methods often adopted in conducting a
research. Some of these methods include experimental method,
econometric method, comparative, etc. It is worthy to note here that the
methodology to be adopted in the collection of presentation and in
analysing a research data depends on the objectives of the study.
35
In this chapter, the methodology employed in this study, were
meticulously explained in the various sub sections that made up this
chapter. The main objective of this study has been to examine internet
fraud and it effect on the economy.
3.3 RESEARCH DESIGN
The study is empirical in nature and falls within the realms of macro
economic problems This situation made the use of historical data
inevitable. The techniques adopted in the research involved a
combination of statistical, mathematical and econometric techniques.
The use of historical data for the study, was informed by the need to
make use of authenticated and authoritative data computed from
published materials to give the study a more objective approach.
3.4 SOURCES OF DATA
The source of the data collected and used in the course of this study were
mainly secondary sources.
3.5 SECONDARY DATA
The secondary data were gathered from a variety of sources such as text
books, journals, magazines, papers delivered at symposia and seminars by
eminent scholars, statistical and economic bulletins, as well as other 36
related sources.
In searching for the relevant and necessary data needed for the research
the researcher also embarked on using internet resources.
3.6 POPULATION DESCRIPTION
The population, in this study is the totality of the senior and junior staff of Sterling
Bank PLC. Warri. The sample size is 200 and this number of respondents were
chosen from the population. The rationale for studying a sample rather than the
population includes that:
1. Most empirical research work in the social science involves studying a
sample in place of the population.
2. Statistical Laws reveal that statistics composed from the sample data are
usually reasonably accurate.
3. Luckily, it is usually possible to estimate the level of confidence that can be
placed on the results. We should note that above is only possible if the probability
sample size is large enough.
3.7 SAMPLE SIZE
Spiegel (1992) observes that sampling theory is a study of the relationship existing
between a population or universe and the samples drawn from it. The population in
this study is from the senior/ junior staff of the firm. In order to make conclusions of
sample theory and statistical references to be valid, a sample must be selected as to
be representative of the population (Spiegel,1992). One way in which a representative
sample may be got, is by the process of stratified random sampling. In this research
37
work, the technique of simple random sampling is used to select the sample of 100
respondents from each group of the personnel, making a total sample size of 200.
The list of all senior and junior staff of the firm is from the personnel department of
the company. The numbers were written on a piece of paper, put in a basket and the
papers were folded to cover the numbers and one of the pieces of paper was selected
at a time without replacing it and any name corresponding to the number becomes a
number of the sample. This method of sampling without replacement was done until
the sample of 100 respondents per group of personnel was arrived at.
3.8 INSTRUMENTS FOR DATA COLLECTION
Due to the macro nature of the problem under investigation. the use of the
basic or traditional research instruments of questionnaire, interviews,
observations, etc were precluded. However, the research relied on
published (secondary)materials from where the data considered necessary
for the purpose of this study, were completed and extracted.
3.9 FIELD WORK
The researcher and three other field data collectors did the fieldwork. The field data
collectors were other classmates also offering the Part-time ND program, who have
also offered research methodology. They had no problem gaining entrance into the
office under consideration since one of them has a friend working in the same Zenith
Bank. They were to be trained by the researcher on how to greet the respondents and
how to tick the questionnaire correctly and honestly.
38
3.6 DESCRIPTION OF DATA PRESENTATION AND ANALYSIS TOOLS
The data presentation tools are simple bar charts, histograms, and pictorial tables. The
most important parts of a table include;
(a) Table numbers
(b) Title of the table
(c) Caption
(d) Stub or the designation of the rows and columns
(e) The body of the table.
(f) The head note or prefatory note or explanatory just before the title.
(g) Source note, which refers to the literally or scientific source of the table (Mills
and Walter 1995)
39
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 INTRODUCTION
In the previous chapter, the research methodology and design have been
handled. In this chapter the data presentation and analysis are to be done. The
data is to be presented by means of tables; two simple bar charts, one histogram
and one pie chart to make it amenable for further analysis. By analysis is meant
the act of noting relationship and aggregating the set of variables with similar
attributes and also breaking the unit of their components (Mills and Walters
1995).
In this research work, the research accepts the contention of Podsakoff and
Dalton (1995) that the factual information from the data can be used as a basis
for reasoning, calculation and discussion. Apart from the heading above, the
other headings in this chapter include:
Data Presentation,
Percentage analysis
Cross-tabulated analysis
Hypothesis testing
40
4.2 DATA PRESENTATION
TABLE 4.1THE SUMMARY OF THE PERSONAL DATA
OF THE RESPONDENTS
1
2
3
4
SEXMale
FemaleTotal
Marital StatusMarriedSingleTotal
AGE21-30 years31-40 years41-50 years51-60 years
Total
HIGHEREDUCATIONAL
QUALIFICATIONDIPLOMA
ONDHND
FIRST DEGREESECOND DEGREE
NIMTOTAL
FREQUENCY15050200
13070200
90901010200
103080204020200
Anglessubtendedin degree
1854144367236360
The marital statuses of the 200 respondents: It is found that 130 of them
are married while 70 are single. For the ages of the 200 respondents, there
are 21-30 years, 31-40 years, 40-50 years, 51-60 years with frequency of
90,10 respectively. For the educational qualification of the 200 respondents
there are diploma, OND, HND, First Degree, Second Degree, NIM. and
they have frequencies of 10, 30, 80, 20, 40 and 20 respectively.
41
Figure 4.1 below shows the simple bar chart of the data on the sex of the respondents.
FIGURE 4.1: THE SIMPLE BAR CHART OF THE DATA ON THE SEX OF THE RESPONDENTS
GENDER OF THE RESPONDENTS
TABLE 2. GENDER OF THE RESPONDENTS
Source: from data in table 1 (generated from SPSS) statistical package for social science.
From figure 4.1 above, it is shown that male respondents have the modal
frequency of 150 out of the 200 respondents while the female respondents
have a frequency of 50.
Frequency percentage Valid Percent
Cumulative Percent
MALE 150 75.0 75.0 75.0FEMALE 50 25.0 25.0 100.0
Total 200 100.0 100.0
42
160
140
120
100
80
60
40
20
0
-
-
-
-
-
-
-
-
-
MALE FEMALE
Fre
que
ncy
Gender
Figure 4.2 below shows the simple bar chart of the data on the marital
statuses of the respondents.
FIGURE 4.2: THE SIMPLE BAR CHART OF THE DATA ON THE MARITAL STATUSES OF THE RESPONDENTS
TABLE 4.3. MARITAL STATUS OF THE RESPONDENTS
From figure 4.2 above, it is shown that the married respondents have the
modal frequency of 130 out of the 200 respondents while the single
respondents have the frequency of 70 of them.
Status frequency Percentage Valid Percent
Cumulative Percent
MARRIED 130 65.0 65.0 65.0
SINGLE 70 35.0 35.0 100.0
Total 200 100.0 100.0
43
140
120
100
80
60
40
20
0
-
-
-
-
-
-
-
-MARRIED SINGLE
Fre
que
ncy
Marital status
FIGURE 4.3: THE HISTOGRAM OF THE DATA ON THE AGES OF THE RESPONDENTS.
AGES OF THE RESPONDENTS
TABLE 4. AGES OF THE RESPONDENTS
SOURCE: From the data in Table 1.44
Categories(years)
Frequency
Percentage
ValidPercentag
e
Cumulative Percent
21 TO 30 90 45.0 45.0 45.0
31 TO 40 90 45.0 45.0 90.0
41 TO 50 10 5.0 5.0 95.0
51 TO 60 10 5.0 5.0 100.0
Total 200 100.0 100.0
020
4060
8010
0
1.0 2.0 3.0 4.0
Fre
que
ncy
Age group
From figure 4.3 above, it is shown that the age classes limit are 20.5-30.5
years, 30.5-40.5 years, 40.5-50.5 years and 50.5-60.5 years with
frequencies of 90, 90, 10, and 10 out of 200 respectively. This shows that
this is bi-modal distribution as the age classes of 20.5-30.5 years and 30.
5-40.5 years have a frequency of 10.
Figure 4.4 below shows the pie chart of the data on the highest
educational qualifications of the 200 respondents.
FIG.4.4 THE PIE CHART OF THE DATA ON THE HIGHEST EDUCATIONAL QUALIFICATIONS OF THE 200 RESPONDENTS
45
540
180
360
1440
360
720
FIRST DEGREE
OND DIPLOMA
FIRST DEGREE
OND
SECOND DEGREE
HND
TABLE 4. 5 EDUCATIONAL QUALIFICATION OF THE RESPONDENTS
SOURCE: from the data in table 1.
From figure 4.4 above, the Educational Qualifications are Diploma, O.N.D, First
Degree, Second Degree and NIM and the subtended angles in degrees are equal to
180, 540, 1440, 360, 720 and 360 and respectively at the center of the circle.
4.3 CROSS-TABULATED ANALYSIS
Table bellow show the analysis of the statuses of the 200 respondents
TABLE 6. CROSS- TABULATION 1
Educational level Frequency Percentage Valid Percentage Cumulative Percentage
DIPLOMA 10 5.0 5.0 5.0
OND 30 15.0 15.0 20.0
HND 80 40.0 40.0 60.0
FIRST DEGREE 20 10.0 10.0 70.0
SECOND DEGREE
40 20.0 20.0 90.0
NIM 20 10.0 10.0 100.0
Total 200 100.0 100.0
46
DIPLOMA OND HND
FIRST DEGREE SECOND DEGREE NIM
Total
If it is possible to combat financial distress
in the country .
YES NO DON’T KNOW
NOANSWER
Total
61960
-3121
100
2
3110
43
2
9
11
2
7
9
39
12 19
91
263121
200
939
The above table shows that the total of 100 respondents (out of 200 said YES.
This proved that it is possible to combat financial distress in the country .
TABLE 7. Cross-tabulation 2
Is it possible to combat internet fraud? .
(2) Is it possible for individual to avoid Internet investment scams?
The above table indicates that it is possible for individual to avoid
investment scams. 104 respondents out of 200 said yes. While 40 did not
agree with the fact.
4.4 HYPOTHESIS TESTING
In attempting to arrive at decisions about the population, on the basis of
sample information, it is necessary to make assumptions or guesses about
the population parameter involved. Such an assumption is called
statistical hypothesis, which may or may not be true. The procedure,
which enables the researcher to design on the basis, of samples regarding
whether a hypothesis is true or not is called test of hypothesis or test of
significance.
47
DIPLOMA 10 10 OND 19 19 HND 14 30 47 91
FIRST DEGREE 10 9 19 SECOND DEGREE 40 40 NIM 21 21
Total 104 40 47 9 200
Is it possible for individual to avoid Internet investment scams?
YES NODON’TKNOW
NOANSWER Total
The null hypothesis asserts that there is no significant difference between
the statistics and the population parameters and what ever is observed as
difference there, is merely due to fluctuations in sampling from the same
population. Null hypothesis is denoted by the symbol H0. Any
hypothesis, which contradicts the H0, is called an alternate hypothesis
and is denoted by the symbol H1. The researcher used chi-square
analysis.
CHI-SQUARE TEST
The C is one of the simplest and most widely used non-parametric test in
statistical work. It makes no assumptions about the population being
sampled. The quantity c describes the magnitude of discrepancy between
theory and observation i.e, with the help of c test we can know whether a
given discrepancy between theory and observation can be attributed to
chance or whether it results from the inadequacy of the theory to fit the
observed facts. If c is zero, it means that the observed and expected
frequencies completely coincide. The greater the value of c the greater the
higher the discrepancy between observed and expected frequencies.
The formula for computing chi-square is –
c =(O-E)2/E
Where,O=Observed frequency
E=Expected or theoretical frequency48
4.5 SOFTWARE USED FOR DATA ANALYSIS:
For the data analysis and the interpretation, the researcher has adopted
advanced version of SPSS (statistical package for social science). This
application software has facilitated the researcher to construct the
frequency table, various types of charts and to find out the valid
percentage responses from the sample. This automated data analysis has
minimized the researcher’s time constraints and reduced human error to
give accurate outlay of information.
Chi-Square Test (1)
If it is possible to combat financial distress in the country .
ObservedF
ExpectedF
Residual Decision
YESNO DON’TKNOW NOANSWERTotal
10043
39
18 200
50.050.0
50.050.0
50.0 -7.0
-11.0
-32.0
AcceptReject
Reject
Reject
49
Chi-Square Test (2)If "banking business" means the business of receiving
deposits on current and savings accounts.
Residuals
The observed value of the dependent variable minus the value predicated
by the regression equation, for each case. Large absolute values for the
residuals indicate that the observed values are very different from the
predicted values.
SOURCE: From the questionnaires administered.
The formulated hypothesis that is subject to statistical test is at 5% level
of significance in testing hypothesis, the calculated value of the test
statistics is usually compared with tables of value. The critical values of
the test statistics serve as criterion value, it affords the basis for rejecting
the null hypothesis as a function of the value of the tested statistic.
Reject the null hypothesis if the calculated value of the test statistic is
greater than the critical value.………………………………………….
ObservedF
ExpectedF
Residual Decision
YESNO DON’TKNOW NOANSWERTotal
10440
47 9 200
50.050.0
50.0
50.0
54.0 -10.0
-3.0
-41.0
AcceptedRejected
Rejected
Rejected
50
Accept the null hypothesis if the calculated value of the test statistic is
less than the critical value.
TEST STATISTICS
note: df = degree of freedom
4.6 SUMMARY OF RESULT
Level of significance……….0.05
Critical value………………………43.0
Calculated value……………………73.880
From the above analysis, it could be seen that in the first test, it is
possible to combat financial distress in the country, the calculated value is
greater than the critical value so we reject the hypothesis.
In the second test which state that "banking business" means the business of
receiving de posits on current and savings accounts, the level of significance is
0.05, the critical value is 44 while the calculated value from the test statistics
If it is possible to combat
financial distress in the
country .
If "banking business"
means the business of
receiving de posits on
current and savings
accounts.
Chi-Squaredf
73.880 3
94.120 3
51
table is 94.120. Analysis the data above, it is very clear that the calculated
value is greater than the critical value so we reject the hypothesis.
52
CHAPTER FIVE
FINDINGS AND CONCLUSION
5.1 FINDINGS
Through this research, the researcher has been able to discover and
established the fact that: financial institution is an institution that provides
financial services for its clients or members. Probably the most important
financial service provided by financial institutions is acting as financial
intermediaries.
5.2 CONCLUSION
Financial institutions provide service as intermediaries of the capital and debt
markets. They are responsible for transferring funds from investors to companies, in
need of those funds. The presence of financial institutions facilitate the flow of money
through the economy. To do so, savings are pooled to mitigate the risk brought to
provide funds for loans. Such is the primary means for depository institutions to
develop revenue. Should the yield curve become inverse, firms in this arena will offer
additional fee-generating services including securities underwriting, and prime
brokerage.
53