EFFECTS OF GOVERNMENT REGULATIONS ON BANKS OPERATIONS

(A CASE STUDY OF FIDELITY AND ACCESS BANK)

ABSTRACT
Regulatory policy has a lot of effects on the operation of commercial banks in Nigeria. This study is very
important especially in today economic transformation of a nation. Against the backdrop of success of the
central banks, which is the apex bank, banks have a tremendous role to play. It is in the light of this that
we discuss the effects of regulatory policy on the operation of commercial banks. This study sets out to
find the effects of these policies on the operation of commercial banks. Attempts were made at receiving
the concept of regulation, the need for regulations and some banking regulations. The findings show that
in most cases, government policies enhances the performance of the banks while in other cases, it served
as a set back on the activities of banks in areas like sectional allocation, interest rate (both lending and
deposited) seemed to have restricted the activities of the banks. I also discover that, issues like
registration of banks, paid up capital, C.B.N supervisor’s role, banking laws like BOFID 1991 etc are
imperative in the discussion. From the foregoing, therefore, I recommend that the C.B.N should insist on
some basic requirements before commercial banks could start operation to avoid bank failure more so, the
federal government should implement the provision of the relevant banking laws in order to avoid the
incidence of bankrupt. Very important is the fact that bank executives should ensure to review regulatory
policy vis-visa new realities.
 CHAPTER ONE

1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY

The importance of banking sector on the economy has led to considerable increase on regulatory policies
by the federal government and the central bank of Nigeria.

Many scholars have different views on the concept of regulation of commercial banks. Nwikina (2017) and
Gbosi (2013) agreed that “the numerous incidence of bank failure necessitate banking regulations and
government policy to bring order into the system.

However, since monetary and banking activities as well as else where are intervene in several ways and
have influence on the performance of each other and both controlled the same ways and as a result of the
distress tat has be fallen the banking sector and the numerous failures. The government has to take some
necessary steps to return sanity into the system.

The aim of government so far in controlling the financial sector is to control the money stock in order to
influence domestic economic growth, the government also through the central bank of Nigeria control the
activities of the banking sector by issuing license to banks, setting up the minimum unpaid up capital and
supervision and examination of banks.

From 1991, when the BOFID, banks and other financial institutions decree was promulgated, there have
been improvement in banking sector with the amendment made in the 2001 budget speech which requires
that in the next two years, the minimum paid up capital of banks with the #1,000,000. Hopes are rising
that the regulations will bring change in the banking sector. Banking is a business vested with a public
interest. Successful operation of our commercial banks is therefore necessary for the orderly functioning of
the nations business since all the banking sector. It is not merely the concern of those who have invested
their money in the banking business, nor those who have entrusted their deposits to the bank. It is also a
matter of public concern. Distress in the financial sector which has been an issue of national concern have
also succeed in running the commercial banks, the customers have lost confidence they previously had in
the banks due to the activities of many distress banks management, but the intervention of government
and many regulatory policies which were some what late the distress would have passed the line.

Today, a lot of regulatory politics are made by the government concerning the operations of the
commercial banks. In this study, the researcher will try to analyze how these policies affect the operations
of the banks.

Finally, when laws are made they result in changes in the existing system over years several legislation
concerning the operations of the banks has been made. In this work, the researcher shall examine various
governed regulatory policies and their effects on the operations of commercial banks.

1.2 STATEMENT OF THE PROBLEM

Commercial banks are financial intermediaries helping to channel funds from surplus economic limits to
deficit ones to facilitate business transactions, deposits and undertake commercial lending for the
development of the banking system yet, due to their activities adequate profitability declaration were not
made in every fiscal year because of the following reasons:

1. The problem of credit portfolio arising from default in making payment and non-performing one.
2. Problems arising from fraud and defalcation
3. Liquidity risk arising from maturity mismatches, faulty balance sheet structure and change in
interest rate, as set prices and foreign exchange rates, fluctuations operating errors and
inefficiencies of internal control system and inexperience staff.

The study therefore undertake to study the impact of the apex banks, central bank of Nigeria regulation
and policies as it affects the profitability level of commercial banks.

1.3 OBJECTIVES OF THE STUDY

The purpose of this study is to establish how government regulatory policies affect the operations of the
commercial bank in Nigeria and to determine that effect, (positive or negative) these policies have on the
operations of commercial banks in the economy.

1.4 SIGNIFICANCE OF THE STUDY

The focus of this study is to evaluate the effect of the existing government regulatory policies, so as to
proffer ideas, which will bring about necessary modifications in the system to aid greater effectiveness and
efficiency in the banking industry.

The research work will be of benefit to the following groups:

1. The central bank of Nigeria in designing new regulatory measures to promote the banking sector.
2. Management of commercial bank will find it useful as it will inform and educate them on the need,
for regulatory policies.
3. Researchers will also find the work useful; as it will form the basis of further research in the area
dos study.

1.5 RESEARCH QUESTIONS

1. Can government policies and regulations pose problems in the activities of the commercial banks on
their profitability?
2. To what extent do policies and regulations affect the operation of commercial banks?
3. Do the adherence of commercial banks to the enforcement of policies and regulation employed by the
CBN enhance their efficiency?
4. Does central bank of Nigeria regulations and policies on commercial banks have some negative impact
on the profitability of the bank?
5. Is regulation one of the causes of bank fraud?
6. How does the federal government through the apex bank regulate the operations of commercial banks
in Nigeria?
1.6 SCOPE OF THE STUDY

This study will cover various commercial banks to test for the impact of government regulation and
policies on the profitability. Selected commercial banks will under preferably ten (10) commercial bank
situated in Imo State as follows:

 Fidelity Bank
 Access Bank
 Union bank
 United bank of Africa
 First bank of Nigeria
 Afri- Bank
 Standard Trust Bank
 United bank (U.T.C).

1.7 STATEMENT OF HYPOTHESIS

H1: The role played by the commercial banks is fundamental to the development of rural areas in Nigeria.
H2: The commercial banks have positive impact in enhancing productivity in development of rural areas in
Nigeria.
1.8 LIMITATION OF THE STUDY

It is not gain saying that every road leading to success is littered with obstacles and thorns. It is
acknowledged that these barriers, which limited the work, cannot be over emphasized.

Limitation of course are general constraint when carrying out a research work like this, one of the
constraint faced by the researcher is the time allocated to the research topic was limited due to the brevity
of the time in the session. As a result of this, virtually the research work was done in a haste to catch up
with the time and to this effect the research work was limited to some extent. Other constraint being the
availability of materials.

Financial constraints also posed a major factor that militate against a smooth work of this nature, due to
financial constraint on my part to take care of logistic, such as transportation and other requirements.

1.9 DEFINITION OF TERMS

EFFECTS: Result produced

GOVERNMENT: means the rule, regulation and control of central bank over commercial banks.

REGULATORY: Is the principles or act by which central bank rules commercial banks.

POLICIES: Is the act of plan by central bank on commercial banks.

OPERATION: The way central bank works on commercial banks have a wide spread branch as they
handle most of the ordinary banking business in Nigeria. They are concerned with a short term borrowing
and lending and they also transfer funds.
 CHAPTER TWO
2.0 REVIEW OF RELATED LITERATURE

The importance of the banking sector, especially commercial banks in the economy have led to
considerable increase in regulatory policy by the federal government and the central bank of Nigeria.

The origin of regulations in the banking sectors dates back to the early 1950’s following failures of banking
institutions and loss of confidence in the banking industry. According to Gbosi (2013) “the banking
ordinance of 1952 was enacted in order to resort confidence in the Nigerian banking system. Further
more, the ordinance was to provide for licensing of all banks in the country and setting of the minimum
capital requirements.

Ituwe (2012) posit that through the issue of license. There government is able to control and limit, where
it is needed the number and quality of banking institutions authorized to operate in the country at any
material time.

According to Ituwe (2012), government also regulated the proportion of the paid-up capital and reserve
total deposit. The regulation which stipulated a minimum of 10% proportion between the paid up capital
plus statutory reserve on one hand, and banks total deposits on the other, is designed to compel banking
institutions to increase the shareholder’s stake in relation to the depositors in the banks investment
portfolios.

It is important to state that the underlying reason for a close regulation of the commercial bank lies in the
problem of repeated failures. In the other sector of the economy the consequences of failure, fall directly
on the owners of the business, but a banks failure brings about losses on depositors and also disrupt the
payment mechanism. It has long fact that the danger of bank failures is serious that government
regulations are necessary to forestall further occurrence.

According to Ebhaghe (2013), government regulatory policies are geared towards the following:

1. To encourage an efficient financial system

2. To ensure monetary stability
3. To protect customers’ interest
4. To ensure sanity in the financial sector
5. To prevent the collapse of the payment mechanism in the economy.

2.1 REVIEW OF SOME BANKING REGULATORS

Over the years, there have been several regulations and policies in the financial sector especially as not
concern commercial banks operations and activities. Some of the regulations are discussed below:

2.1.1 THE 1952 ORDINANCE

The 1952 ordinance came into being as a result of envisaged bank failures. It stipulated the amount of
paid up capital required to the sum of 12,500 (pounds) for expatriate banks. Nwikina (2017) stated that
banks were required to maintain a reserve fund to 20% of their paid up capital.
According to Ituwe (2012), the ordinance also favoured that the issuing of license to banks were to be
subjected to periodic examination and supervision.

2.1.2 THE 1958 ORDINANCE

Te essential features of the 1958 ordinance were the doubling to the authorized capital for expatriate
banks where as those of indigene banks were retained. Nwikina (2017), however noted that reserve
requirement was raised from 20% to 25%. The maximum lending limit was 20% of paid up capital and for
individual borrowers. It also listed the liquid assets of banks. It also indicated the composition and powers
of the board of directors of central banks of Nigeria. Several amendments have been made including those
of 1962, 1969, & 1991.

OTHER REGULATIONS

Other regulations put in monetary are banking activities in Nigeria as well as else where are interwoven in
several ways. They have influence on the performances of each other and as both controlled in the same
authorities which promises mainly of the central bank of Nigeria and the federal government, hence both
monetary and banking activities are viewed as integrated systems.

The aim of government so far in controlling the financial sector is to control the money stock in order to
influence domestic economic growth. An appropriate monetary leads to low and positive nominal, and real
interest rate, other things being equal. This would lead to a stable exchange rate, increased savings,
investment and output.

According to S.B. Falergen (2017), the three most utilized monetary instruments of control which the
central bank uses to control commercial banks are:

1. The interest rate structures

2. The discount rate and
3. Selective credit control mechanism

He argued that opinion often differs about the success or otherwise of monetary policy action especially
when other policies are taken at the same time. Continuing, Falegan also said that direct credit control,
cash reserve requirements, stabilization securities, exclusion of deposits against latter of credits from
eligible assets, interest rate charges, credit ceiling were all brought in as policy measures to reduce banks
liquidity, credit expansion and the customers demand in order to reduce excess cash holdings by
commercial banks, they were required to maintain a minimum cash deposit with central bank of Nigeria
ranging from 5% - 12% of their total demand deposits and time deposits in which the paid deposits rate is
below 21 – 25%.

According to the central bank of Nigeria (2013) in its efforts to farther deregulate, the federal government
in 1992, reemphasized its intention to shift from the sued of direct controls to the sure of indirect market-
oriented approach to monetary and credit policy as soon as the economic environment was conclusive. As
Odozi (203) puts in an effort aimed at strengthening of the financial market, the central bank of Nigeria
decided to shift from the direct to indirect system of monetary control.
2.2 RECENT BANKING REFORMS REGULATIONS

Major reforms in banking legislation came in 1991 with the promulgation of the central bank of Nigeria
Degree 24 of 1991 and banks and other financial institution (BOFI) Degree 215 of 1991.

The banks and other financial institution (BOFI) Decree super cede the banking of 1969 and its
amendments. The two decrees of 1991 have now conferred greater powers on the central bank of Nigeria
in the areas of banks supervision and examination, monetary management and enforcement of prudential
guidelines in the Nigeria banking system.

Other provision of the decrees include: issuance of license to banking institutions with minimum capital
requirements, returned to be submitted by bank to central bank of Nigeria to conduct routine supervision
and special examinations, arrangement and control of failing banks, and powers of the central banks of
Nigeria to revoke the license banks. Banks and other financial institutions (BOFI) also provides for
penalties for failure to meet laid down procedure and protect banks from unfair competition by restricting
the business of deposit taking only to those institutions approved by the central bank.

The banks and other financial institution (BOFI) decree of 1991 was however, amended in the 1997
budget address presented by the head of state; General Sani Abacha on Saturday, 18 th January, 1997. By
these amendments, both commercial and merchant banks were required to have a minimum paid up
capital of #50 million two years. In addition to the above, a new agency to be known as financial service
coordination committee was set up. It comprises the chief executive of the following:

 The federal ministry of finance (F.M.F)

 Central bank of Nigeria (CBN)
 Nigeria deposit insurance corporation (NDIC)
 Security and exchange commission (SEC)
 National insurance commission (NIC)

The above committee should be cleared by the minister of finance, which meet frequently as decision may
demand to deliberate on the problem of coordinating the supervision and regulation of three financial
service industry.

Gbosi referred to the above mentioned institutions as the regulatory authorities in the Nigeria financial
system.

2.3 REGULATORY POLICIES

There are other regulatory policies, which the governments through the central bank uses to exercise
control over commercial banks, they are:

1. Sectorial allocation of credits

2. Interest and rate ceiling
3. Opening and closing of branches
4. Exchange rate
  SECTORIAL ALLOCATION OF CREDITS: This is an arrangement that helps channel funds to
sectors of the economy that needs to be further developed, such sector are regarded as the
preferred sector by the government; the banks are required to direct a certain percentage of their
package to the preferred sector. During the 1996 fiscal years, the agricultural and manufacturing
sectors were 15% to 35% respectively of the banks entire loan package.
 INTEREST RATE POLICY: This is an instrument of monetary policy used by government to check
the quantity of money in circulation as well as control inflationary trend in the economy. It consists
of deposit and lending rate. During the 1996 fiscal year, interest rates were pegged at 15 – 21% for
lending, while deposit attracted 12 – 15%.
 OPENING AND CLOSING BRANCHES: For any licensed bank in Nigeria to open a branch office
any where within or outside Nigeria, it must get prior written consent of the central bank. This
control is necessary to avoid too much competition between banks establishing their various branch
offices. To ensure that banks are fairly and evenly distributed to meet the needs of the rural
community the central bank has gone further to direct banks to establish their branches in specified
areas.
 EXCHANGE RATE POLICY: This involves choosing a foreign exchange rate management system
and determining the particular rate at which foreign exchange transactions will take place. This
policy also affects the level of domestic prices and also affect inflation target.

2.4 ROLE OF BANKS IN THE NIGERIA ECONOMY

The banking industry plays a strategic role in the realization from a country’s dream of economic and
social development. Banks have always been perceived as an engine of growth in an economy because
they perform a resources allocation function by mobilizing and enhancing resources from savings surplus
economic units to deficits until they help in stimulating the level of economic activities in various sectors of
the economy.

This increasing the level of utility and wants of individuals they are much more involved in the
development of the economy than any other financial institutions. Banks intermediate, generate and
distribute resources thereby stimulating development and aid performance speaking on the roles of banks,
Falae (2010: 25) described banking and finance as the handmaid and mid-wife of the economy.

Banks so to say, help to maximize the utility and wants to individuals and investment in the economy
directly or indirectly. Thus, we would agree with Orji (2019), when he said that bank occupy a strategic
position in the economy all in an effort to influence the cause of development.

Writing on the changing role of banks in the development process of Nigeria, Ahmed (2014:2) stated thus,
as banks intermediate funds between savers and investors they act as catalyst in that process of capital
formation which manage economist emphasize as the major factor governing the role of economic
performance and self reliance. As pointed out by Ahmed, the role of banks in the Nigeria economy is
changing test in recent time. Banks have witnessed the introduction of rural banking expansion
programme the requirement to all location of specific loans to their rural and a branch customers, the
change in ownership structure of banks introduction of the structural adjustment programme (SAP) among
others.
The implementation of SAP has had and will continue to have a heavy reliance on the banks but the
question remains, have banks fulfilled their roles and the expectation of the government and the nation
citizens.

In another article, Orji (2011:32) also on the role of banks, stated that: one of the basic objectives of any
banks is to generate profit. And this is realized through the bank’s ability to attract new deposits while
retaining old ones and to put into profitable use those deposited funds which the opinion of the
management are not immediately required for everyday working needs of the depositors. He added that
banks therefore deposit funds in such a way as to achieve the triple objectives of liquidity safety and
income. Among these are other specific roles played by the different banks to aid the economic growth
and development of any economy.

In view of very important role of banks in the economy, no meaningful government would over allow its
banking system to be completely free reign, because of non regulated environment. It is stated however,
that free reign breeds greater instability. The financial system of any country acts as lubricating engine of
growth has government policies.

2.5 THE EVOLUTION OF COMMERCIAL BANKS REGULATION IN NIGERIA NEEDS AND GOALS

The period 1952 – 1958, show the beginning of banking regulations in Nigeria. The first banking ordinance
in Nigeria was enacted in 1952, which provided for a system of licensing. The period 1959 – 1969
witnessed the establishment of CBN and its commencement of operations on July 1 st 1959. a number of
foregoing banks were also established during this period; prominent among them was bank of America
(now Savannah bank in 1960).

It was also during this period that bank examination began with the setting up of bank examiners unit at
the federal ministry of finance in 1960 and the subsequent transfer of functions to the central bank of
Nigeria in 1960. the companies decree of 1968 also contributed to the strengthening of banking
regulations. The period 1962 – 1976, which till date remains the status governing formation,
administration, powers and duties f licensed banks and the supervisory and regulatory roles of central
bank of Nigeria own the licensed bank.

In virtually all countries of the world whether developed or developing economy, the banking industry is
more heavily regulated than any other commercial or industrial sector. Banking is required from cradle to
gain, indeed from processing of application for licensing to as long as bank remains in business. The need
for this is not far fetched. This is due largely to the crucial role of financial banks. The role of financial
institutions of which commercial banking system occupies a central position, mobilize financial resources
from the surplus units channel than towards deficit units, those areas of the economy where they are
needed for investments. Banks solicit for and accept deposits mobilized of their stock in trade banks create
money in the economy through granting of loan and advances, at a price to be repaid along with the
principal loan.

In performing their various functions, banks are expected to ensure prudent management of assets, and
guarantee the safety of depositor funds. They are expiate to adhere strictly to safe and sound banking
practices, maintaining adequate internal control measures to prevent incidence of frauds for series and
other financial mal-practices to ensure stability and engender public confidence in the system. Here lies
the concern of the monetary authorities and have the need for and regulation by the supervising and
regulating authorities. Regulation of banking has evolved to serve many goals including protection of
depositors, ensuring monetary stability, encouragement of efficient and competitive financial system and
the protection of consumer interest.
2.6 THE CBN VS COMMERCIAL BANKS PERFORMANCE IN NIGERIA

The central bank of Nigeria as the apex regulatory institutions in the banking industry supervises banks
through its onsite & offsite supervision. This entails monitoring of banks activities through bank returns
submitted to central bank of Nigeria.

These activities are intended to ensure that licensed banks operate prudently in accordance with laid down
banking guidelines. Because banking prudence is a word closely associated with banking survival, by
ensuring that licensed banks operate prudently, the central bank of Nigeria is in effect guaranteeing banks
survival.

In addition to oversight activities, the central bank of Nigeria offers valuable services which enhance the
survival and performance of licensed banks.

These services are in addition to other support activities of the central bank of Nigeria such as its moral
and financial support to financial institutions training central (FITC) and the chattered institute of bankers.
The CBN, through its research department makes available to banks and the reading public, data on
economic and banking activities in country.

The CBN has responsibility for evolving a competitive environment with a deregulated economy. Banking
supervision calls for timely threatened by the activities of a few.

There most also be sufficient political will and administrative modalities in place to show some ailing
institutions that exist especially as the entrance has been relatively open.

2.7 THE PUBLIC AND THE PERFORMANCE OF COMMERCIAL BANKS IN NIGERIA

The public has quite a role to play in the survival and performance of banking institution. The public here
refers to banks customers and the potential customers, other institution both economic and philanthropic.
The public most recognize the role played by banks in the economy, and be direct financial matters, which
will either contribute to the survival or enhance the performance of the banks. Customers of banking
institutions can encourage their banks to grow. First and foremost, they most are good customers who are
willing and able to pay for bank services.

They should not be those customers who take bank loans and refuse to pay, claiming that they have taken
their share of the national cake.

Banks customer contribute to the survival and efficiency of a banking system by informing themselves
about their banks activities where customers are able to discriminate between good and bad banks and
thus patronize the good ones the banking system is likely to be better off. Unfortunately, the average
Nigeria bank customer has been either unwilling or unable to make the necessary distraction between a
good and bad bank. Even when information is freely available about their banks, many customers do not
appear to use the information for decision making. The reason is that in an extremely case, a bank may
suspend payment to depositors.

Banks customer awareness and enlightenment should lead to bank discrimination, which in turn should
help in weeding out inefficient and insolvent institutions.

Such market inducted sanitization system is met only possible but necessary in a deregulated banking
environment.
 CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1 RESEARCH METHOD USED

The method used by the research included the presentation of various techniques, approaches
instruments used in the conduct of research design.

3.2 SOURCES OF DATA COLLECTION

The researcher used primary and secondary source of data collection.

PRIMARY SOURCE: the researcher designed and distributed questionnaire to the respondents in the
selected commercial banks of study. Here the researcher distributed questionnaire directly to the banks
and collected same from them.

The said questionnaire contains 6 questions which were aimed at finding out the effect of government
regulatory policies on the operation o0f commercial bank in Nigeria. Each of this questionnaire two (2)
option of which the respondents were asked to tick good against their selected option. All the
questionnaire were fully answered and collected back from the respondents.

All the researcher use personal interview with the staffs of the selected banks within Port-Harcourt
metropolis. The respondents were also given time to give answers to oral question interview thrown to
them and information gathered by the researcher was collected to ensure that this was a master piece.

SECONDARYSOURCES OF DATA: The researcher use secondary source of data from textbooks, journal
and diaries of scholars already used.

3.3 VALIDITY AND RELIABILITY OF MEASURING INSTRUMENT

To ensure that the responses received from the interview conducted were valid and reliable, the
researcher asked the interviewers some questions differently in order to validate and test the reliability of
the respondents. However, with subject to the limitations pointed out in chapter one, the researcher
believed that the information given is reliable.

3.4 POPULATION AND SAMPLE OF THE STUDY DETERMINING SAMPLE SIZE

The total number of workers is 150 both the senior and junior staff. To determine the sample size, we use
Yaro Yemen’s formula
n = N
1 + N (e) 2
= 150
1 + 150 (0.05)2
= 150
1 + 150 (0.0025)
= 150
1 + 150 x 0.0025
= 150
1.375 = 109
From the above calculation, you will find out that out of 150 staffs representing the respondents, 90 were
managers is 53.9% while 60 representing 24% were accountants. This study was drawn using random
sampling; which is done by balloting the said 150 respondents were made to pick the paper ball one after
the other. After each picking, the paper balls were the last respondent was picked up.

3.5 METHOD OF DATA ANALYSIS

In analyzing the data collected, the researcher used tables with columns and rows to present the data.
The researcher also used percentage method for research questions.
Formular for percentage method include percentage (%)
= F x 100
N 1

DECISION RULE

Any item was regarded as agree, if it is 50% and above and disagree if it is less than 50%.
 CHAPTER FOUR
4.0 PRESENTATION AND ANALYSIS OF DATA

The analysis of the data gathered in the course of this work follows the agreement of the questionnaire,
which is attached in chapter three.

This chapter therefore analyses the data collected and the result of the interview conducted. The aim is to
reveal the importance of the data-collected to real situation.
4.1 DATA PRESENTATION
The sample data used in carrying out this research in order to get adequate information needed to
evaluate impact of commercial bank in the development of rural areas of Nigeria is shown below.
RESPONDENTS QUESTIONNAIRE DISTRIBUTED RESPONSES UNRETURNED
Access Bank 40 29 11
Fidelity Bank 40 31 9
Total 80 60 20
Source: Field Survey, 2023
In carrying out this research work, a survey was carried out and questionnaires were distributed to senior
and junior staff of my case study banks.

A total of seventy (70) questionnaires were distributed. Out of these, a total of fifty (50) responses were
received.
TOTAL QUESTIONNAIRE ADMINISTERED NO. 80 PERCENTAGE 100%
Questionnaires completed and returned. 60 75%
Questionnaires not returned 20 25%
Total 80 100%
Source: Field Survey, 2023

4.2 ANALYSIS OF DATA

The analysis and testing of hypothesis are therefore based on the 71% or 50 questionnaires returned.
QUESTION 1
What does the real sector of the economy stand to gain from the Nigerian banking industry?
Response Variable Access Bank Fidelity Bank Total %
Credit facilities 6 2 8 13
Investment advice 2 2 4 7
Safe custody 5 4 9 15
 Referee 7 3 10 17
All of the above 9 20 29 48
Total 29 31 60 100
Source: Field Survey, 2023

From the table above, 48% of the respondents were of the opinion that all the response option are what
the real sector stand to gain from the banking industry while 15% supports safe custody, 17% referee,
13% credit facilities and 7% investment advice.
QUESTION 2
Does commercial bank play any role in the development of rural areas in Nigeria?
Response Variable Access Bank Fidelity Bank Total %
Yes 29 31 60 100
No - - - -
Total 29 31 60 100
Source: Field Survey, 2023

100% of the respondents as seen from the table above responded to “Yes”.

QESUTION 3
To what extent has the various reforms in the banking sector stabilized the economy of Nigeria?
Response Variable Access Bank Fidelity Bank Total %
To a very great extent 17 14 31 52
To a great extent 11 15 26 43
To an extent 1 2 3 5
No extent - - - -
Total 29 31 60 100
Source: Field Survey, 2023

From the table above, 52% of the respondents supported all the response options while 43% said to a
great extent and 5% for to an extent.
QUESTION 4

In which of the following ways can you rate the contributions of commercial banks in the development of
the economy.
Response Variable Access Bank Fidelity Bank Total %
30% - - - -
40% 6 8 14 23
50% - 3 3 5
60% and above 23 20 43 72
Total 29 31 60 100
Source: Field Survey, 2023

From the table above, 5% of the respondents rated it be 50% while 23% of the respondents rated it 40%,
72% rated it 60% and above.

QUESTION 5
Do you agree that the role played by commercial banks is fundamental to the development of rural areas
of Nigeria?
Response Variable Access Bank Fidelity Bank Total %
Agree 10 12 22 37
Disagree 1 2 3 5
Strongly agree 18 15 33 55
Strongly disagree - 2 2 3
Total 29 31 60 100
Source: Field Survey, 2023

From the table above, 37% of the respondents agree, 55% strongly agree, 5% disagree.

QUESTION 6
Can you specify some of the roles you think banks play in the development of Nigerian economy?
Response Variable Access Bank Fidelity Bank Total %
Credit facilities 10 10 20 33
Referees 2 2 4 7
Investment advice 7 2 5 15
All of the above 10 17 27 35
Total 29 31 60 100
Source: Field Survey, 2023
From the table above, 45% of the respondents supported all the response options while 33% said credit
facilities, 15% investment advice and 7% for referees.
QUESTION 7
Does the banking sector have any positive effect on the growth and development of the country’s
economy?
Response Variable Access Bank Fidelity Bank Total %
Yes 29 31 60 100
No - - - -
Total 29 31 60 100
Source: Field Survey, 2023

As seen from the table above, 100% of the respondents responded to “Yes”.

QUESTION 8
Has the roles played by the Nigerian banking industry in the growth and development of the economy so
far been satisfactory?
Response Variable Access Bank Fidelity Bank Total %
Yes 22 25 47 78
No 2 2 5 9
To some extent 4 4 8 13
Total 29 31 60 100
Source: Field Survey, 2023

From the table 78% responded to “Yes” while 9% to “No” and 13% to “it depends”.

QUESTION 9
Does bank allocation of funds to different sectors improve the economy in any way?
Response Variable Access Bank Fidelity Bank Total %
Yes 27 28 55 92
No 2 3 5 8
Total 29 31 60 100
Source: Field Survey, 2023

As seen from the table, 92% of the respondents to “Yes” 8% responded to “No”
QUESTION 10
How would you access the services offered by the Nigerian commercial banks?
Response Variable Access Bank Fidelity Bank Total %
Very good 20 10 30 50
Good 6 13 19 32
Fair 3 8 11 18
Total 29 31 60 100
Source: Field Survey, 2023

From the table above, 32% responded “Good” 5% “very good” and 18% responded “fair”

QUESTION 11
Has the consolidation of commercial banks in any way improved the services of the banking industry and
the economy?
Response Variable Access Bank Fidelity Bank Total %
Yes 29 31 60 100
No - - - -
Total 29 31 60 100
Source: Field Survey, 2023

As seen from the table, 100% of the respondents to “Yes”.

QUESTION 12
Do you agree that the growth and development of the economy depends on the Nigerian banking
industry?
Response Variable Access Bank Fidelity Bank Total %
Strongly agree 22 9 31 52
Agree 6 19 25 42
Disagree 1 3 4 6
Strongly Disagree - - - -
Total 29 31 60 100
Source: Field Survey, 2023

From the table above, 52% of the respondents Strongly agree, 6% Disagree, 42% Agree, and none for
strongly disagree.
QUESTION 13
Do you think commercial banks have positive impact in enhancing productivity in the real sector of the
economy?
Response Variable Access Bank Fidelity Bank Total %
Yes 15 25 40 67
No 14 6 20 33
Total 29 31 60 100
Source: Field Survey, 2023

As seen from the table above, 67% of the respondents responded to “Yes” while 33% responded to “No”.

QUESTION 14
What are the challenges confronting commercial banks in the development rural areas of Nigeria?
Response Variable Access Bank Fidelity Bank Total %
Poor savings culture 14 12 26 43
Public risk aversion 3 - 3 5
Poor corporate governance 2 2 4 7
All of the above 10 17 27 45
Total 29 31 60 100
Source: Field Survey, 2023

45% of the respondents supports all the options while 7% were for poor corporate governance, 43% for
poor savings culture, and 5% were for public risk aversion.
QUESTION 15
Do you think that the measures put in place by the CBN is adequate in ensuring the development of the
economy?
Response Variable Access Bank Fidelity Bank Total %
Yes 28 29 57 95
No 1 2 3 5
Total 29 31 60 100
Source: Field Survey, 2023

From the table above, 95% of the respondents responded to “Yes”, while 5% responded to “No”.
 CHAPTER FIVE
5.0 SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 SUMMARY OF FINDINGS

In the recent times, there has been considerable fall in the number of banking institutions in Nigeria.
There is also an impeding fear that bank failures will continue unabated. It is therefore against this
background that this work emanated.

In the course of this study, it was discovered that government regulatory policies have gone a long way in
curbing the excesses in banking institution and with regulatory mechanism, the failed bank tribunal in
place, banks failure will be a thing of the past.

In addition, political policies of the country also affected the banking industry, for instance most
commercial banks had their foreign investors fund withdrawn when the June 12 election of 1993 was
annulated, the effect are still suffered by bank due to distress sign caused by this negative policies, some
commercial bank were closed down while others lost a reasonable number of customers. The need for
transparency in the system led to the establishment of the failed bank tribunal, which has been able to put
some sanity into the system. Also, the deregulation of interest rate is an added advantage to the bank as
the forces of demand and supply will be allowed to play its role of determining the rate of 9interest for
funds in the financial markets. Further study on this area is suggested to find out the effect of this policy
will have on the banking industry and economy as a whole. Currently, the system has been put under the
charge of a committee headed by the minister of finance while central bank of Nigeria is just a member
and the issue of distressed bank has been taken over by the Nigeria Deposit Insurance Corporation
(NDIC). This will adversely affect the banking industry as the central bank of Nigeria will no longer be able
to have all the say in the affairs of the banks while the committee is in better position to decide for the
industry.

The shortcomings in the system have reduced their effects on the economy with improved economic
environment and create appreciation of government directives. With more regulations, commercial banks
will contribute more to country’s economic development.

The study is not entries in its findings as daily government industry at large. There is currently policy on
the paid up capital which is being raised from 50 million, and nit expires the year ending 1998. This has
raised a lot of questions in the industry as to who cannot pay. Can existing commercial banks mist up?
Can new banks even measure up? There is speculation as to sure mergers, emulation and outright buying
over of so many small banks by the bigger ones.

The purpose for banks regulation is:

1. ENSURING MONETARY STABILITY:

By implication, lit altogether proved that the regulation has affected the banks. In addition, the
government regulatory policies has affected the profitability of banks to a large extent
 2. PROTECTION OF DEPOSITOR:

Is making sure that money deposited by customers are protected because in the past, experience has
shown where banks are liquidated by the government as a result of bad management.

5.2 CONCLUSION

Based on the foregoing we can rightly assert that with regulatory mechanism, Nigeria decree no. 24 of
1991 and the provision in the 1997 and 1998 budgets respectively, there is hope that commercial banks
activities will in the very near future be advance.

The study went further to find out to what extent regulatory polices have affected the performance of
commercial banks and public banking services generally. It was discovered from the periodical that there
was a positive friendly communication of central bank of Nigeria regulations to commercial banks
profitability. Also, despite CBN’s numerous regulations, there is a friendly banking service.

Unless stricter measures are taken, the alarming rate of non-strict conformity of government policies
would completely erode the stability of the banking industry. Though it cannot be completely adhered to,
but could be reduced considerably.

5.3 RECOMMENDATIONS

The federal government should implement the provision in the relevant banking law so as to avoid
incidence of bank failure.

Also, some policies like the interest rate sectional allocation and foreign exchange transactions should be
left to the forces of demand and supply to determine. It is also important that the central bank of Nigeria
officials should be constant to avoid corruption. Also, banks executive should regularly try to review
regulatory policies so as to keep it in tune with realistic.

Furthermore, the central bank of Nigeria should insist on banks having full basic requirement before
starting operations. More so, commercial banks in Nigeria should endeavor to operate within the limits
given by the central bank.
 BIBLIOGRAPHY
Adewanyi E. (2008). The element of Banking in Nigeria. Third (3 rd) edition Lagos, F and H publishers.

Agu C.C. (2006). Management and measurement of bank profit and profitability.

Agu C.C. (2007). Nigeria banking structure and performance

Ahmed A. (2008). The role of bank in achieving a self-reliant economy. Bullion Vol. 13 No. 1, January/
March.

Baridan D.M. (2010). Research method in administrative science (bank publishers port Harcourt).

Benston G. (2013). Federal regulations of banking analysis and policy recommendation of banking.

Central bank of Nigeria (2013). Annual report and statement of account Lagos.

Central bank of Nigeria (2015). Economic financial review Vol. 29.

Ebhodagbe J.U. (2011). Regulatory activities within the Nigerian financial services industry, the expected
role of NDIC vis-avis other bodies

NDIC quarterly Vol.3 No. 3 Lagos.

Falegan S.B. (2012). Redesigning Nigeria’s financial system. University press ltd Ibadan.

Gbosi A.N. (2010). Monetary economics and the Nigeria Financial system. Pam unique publishers, Port
Harcourt.

Nwikina C.G. (2004). Fundamentals of money and banking analysis of issues and institutions. Sring field
publication Owerri 2nd edition.

Odozi U.A. (2003). “recent monetary policy development and measures to attract foreign investment in
Nigeria” economic and fianacial review. Vol. 17 No.2

Orji h.O. (2009). “appraisal of the Nigerian financial system; bullion Vol. 13, No. 3 March/ April.
 APPENDIX

Department of Business admin & mgt.

Imo State Polytechnic,
Omuma - MbanoCampus,
Imo state.
27th July, 2023.

Dear Sir,

APPLICATION FOR RESEARCH UNDERTAKEN IN YOUR BANK

I am a final year student of business Administration and management of the Imo State polytechnic
Omuma.

Please find attached questionnaire, which is design purely of an academic research work on the topic
“Effect of government regulations on banks operation in Nigeria”. In partial fulfillment for the award of
National Diploma (ND) in business administration and management.

Please feel very free to give any additional information, which in your opinion would help in the research
work.

Thanks

Yours faithfully,

………………………………
(Researcher)
 QUESTIONS

TOPIC: EFFECT OF GOVERNMENT REGULATORY POLICIES ON BANKS OPERATIONS.

Please respond by ticking (√) in the box that signified your opinion having in mind that theme as no
correct/ wrong answers.

SECTION A
1. DEPARTMENT:
2. LENGTH OF SERVICE:
3. SEX:
a. Male
b. Female
4. AGE:
a. 18 – 24
b. 25 – 30
c. 31 – 35
d. 36 – 40
e. 40 and above

5. MARITAL STATUS:
a. Married
b. Single
6. EDUCATIONAL QUALIFICATION
a. primary
b. WASSCE (O/ L)
c. ND
d. P.G. fuel professional
SECTION B
7. Can government policies and regulations pose problems on the activities of the commercial banks on
their profitability?
a. Yes
b. No
8. To what extent do policies and regulations affect the operation of commercial banks?
a. Yes
b. No
9. Do the adherence of commercial banks to the enforcement of policies and regulation employed by the
CBN enhance their efficiency?
a. Yes
b. No
10. Does central bank of Nigeria regulations and policies on commercial banks have some negative impact
on the profitability of the bank?
a. Yes
b. No
11. Is regulation one of the causes of bank fraud?
a. Yes
b. No
12. Does the federal government through the Apex bank regulate the operations of commercial banks in
Nigeria?
a. Yes
b. No