Management Strategies Used in the Nigerian Banking - Research Proposal Example

An examination of contemporary performance management strategies used in the Nigerian Banking sub-sector and their relational effects on the banks’ performance after recapitalization with a cross sectional analysis of events from 2005 to 2009. 1. Introduction Insolvency is a major problem that faces any bank in the form of lack of inadequate capital for promoting profitable investments, which results in the selling of all its important assets. This is one of the major reasons for initiating acts various cases of frauds by managers and illegal business acts due to the non-availability of incentives for them to perform (Caprio, and Klingebiel, 1996). . As the performance of banks are almost obscure in comparison with any non-financial firms unless the banking operations are more information intensive their state of business cannot be easily gauged Banks could often hide their problems by neutralizing the bad loans with increased deposits in the balance sheet, future payback promises etc. (Caprio, and Klingebiel, 1996). Nigeria is a country blessed with abundant reserves of natural resources that could support the long-term growth plans of the country. Thus the banking sector holds a considerable promise in the development plans of the Nigeria into the future. This aspect was hardly been through to the focus due to various factors like unstable governance systems, soaring debts during the 1990 period. In an effort to transform the Nigerian banking sector several creative efforts and effective interventions were made in the past. The present efforts are part of the fourth phase of reforms implemented in Nigeria sine 2004. During this period it is expected that intervention of Nigerian monetary authorities could eliminate structural and operational weakness prevailing in the system besides creating avenues for private sector participation for enhancing the overall growth (.Balogun, 2007): Inspite of the best efforts taken to implement the reforms it is debated that these reforms have hardly resulted in the expected results. Thus a detailed research is undertaken to asses the present performance of the banks functioning in Nigeria and the impact of banking in the overall growth process in the country. The results from the research would give a detailed picture on the performance of the banks, the growth strategy adopted, public confidence in the banking operations. 2. Literature Review: The detailed studies have been undertaken to explore the reasons behind the failure of banking sector in the developing and transition economies. The results from these studies have clearly highlighted the warning signs and indicators relevant to this situation in details. And, these information could be effectively used for creating appropriate policies that result in better stability of banking operations in these nations (Honohan, 1997) The most remarkable step was the one initiated by the Central bank of Nigeria (CBN) which introduced the 13 point agenda. The most important among them was the requirement of the bank to have a minimum capital of 170 million USD. This have resulted in the serious consolidation measures which culminated in the final number of 24 banks with clear mandate of future course of action (Asaolu, n.d.) The clear indications are the tremendous rise in the asset growth observed across the 2006 – 2007 period. The growth jumped by atleast 50 % from the initials of 10 to 20 %. (Asaolu, n.d) Recovery of the bad debts, positioning the banks on a growth path and energizing them for undertaking effective business operations are the major objectives before the chief executives in the new era of the Nigerian banking. The Central Bank of Nigeria have also heavily supported five most sick banks in the effort to revitalize the sector. Clear message have been conveyed across the debtors like issuing their names in the newpapers or in public places etc. The changes in the management of different banks have also been carried out without creating any chaos in the operations. Creation of large banks with intense competition for business is the primary outcome of the banking reforms in Nigeria. Thus it is expected that the focus of their operations would be to reinforce the corporate interests in their operations and the societal obligations might receive the desired attention. The studies have been carried out to understand the importance of corporate social responsibility as the foremost condition in ensuring the banking stability in reforms (Achua, 2008). Based on the extensive review undertaken on the policies and practices of banking operaions in Nigeria it is reported that “self-induced vices, regulatory laxity, inauspicious macro-economic environment, and endemic corruption in the economy as the major constraints to the discharge of CSR in the Nigerian banking system” (Achua, 2008). It is also emphasized that the banking systems would refocus their attention from the shareholder’s interest to incorporate all the stakeholders in their mission towards sustainability of banking operations (Achua, 2008). The consolidation process completed in the year 2006 helped the banks to attain a higher growth rate with in a short span of 3 to 4 years. In spite of these measures it is reported that that a changed style in management or risk management operations was not very obvious. The studies undertaken on assessing the aftermath of a banking crisis gives interesting observations. Though a significant fall in the net bank deposits related to GDP is not observed the depositors are found migrating to the stronger banks than the weak ones It is also reported that the banks are found to become cost efficient and also plan the asset portfolio . (Kunt et al, 2008)The factors suggested to be considered for the evaluation of the Nigeria banking system are Core competence or operational capability, the manpower employed, reconciliation and accounting practices, new activities and volatility (Ogunbiyi, 2009). Basle accord, which gives the necessary framework for the best practices in banking emphasis on three pillars of operation like – requirement to maintaining a minimum capital, effective review of various risk involved activities, enforcing discipline like proper disclosure. The experts also comments that Nigeria banking sector too need to establish its future in line with these measures as the objective of all these development is to make Nigeria the hub of all economic activities of Africa (Soludo, 2007). The research undertaken till now have not assessed the impact of the development and policies implemented from the customers perspective. Most of the research reported have focussed their efforts in the creation or analysis of policies in banking that could result in better economic development of the nation. But the impact of the initiatives taken with reference to a time scale map is virtually absent. Thus any further assessments on the interventions would more reliability only if the current perception about the banking is undertaken based on the feedback obtained from various stakeholders like banking management, industrial owners, agriculturalist and also common citizens who depends on the bank for their personal banking needs. Also, the impact of the banking sector on the infrastructure promotion also needs to be assessed to evaluate the clear impact on the regional development initiatives. The initial reports from the consolidation process deliver considerable promise of financial security to the country. The most important among the list are increased foreign direct investment amounting to nearly USD 500 million along with largest reported investments in the non-oil sector. The increased consciousness about the capital market among the general public and the enhanced depositor confidence are the other benefits reported. On the financial monitoring of the institutions the administrations need to look into the functioning of 25 strong establishments in the place of 89 weak banks. Even on the bank operations, purely regionally located or ethnically inclined banks were abolished and global presence for all the banks becomes a prime mandate in their operations. Thus these change promises to deliver a better financial future for Nigeria. But the studies that explore critically the extend of impact into these specific details are very limited. Thus the research proposed here would investigate the potential impact of consolidation process on improving the general banking operations with based on stakeholder opinion analysis . 3. Research Methodology The selection of an appropriate research tool to address the proposed research is the most vital step in any business management investigation. This section gives adequate emphasis on the ability to understand the characteristics of the data and the techniques required to collect them. The primary objective of the data collection exercise is to generate adequate information to understand the strategies taken by various banks in Nigeria and their future course of action. The data collected through this exercise is broadly divided into two classes - primary and secondary information. The primary information refers to the direct information collected from the samples selected or chosen for the data collection process. This is carried out using either structured or unstructured interviews, discussions, questionnaire survey etc. The outcome from such exercises would result in huge volume of qualitative and quantitative information for analyzing the research objectives.. The quantitative information refers to the statistical information and the qualitative approach would relate on the broad aspects or the qualitative details about the target information. . Quantitative information is collected for establishing precise answers to the observed behavior of the sample. The results of the analysis could be represented as numbers, percentages, mean value etc. The qualitative information would be of significant advantage to understand the situation, thoughts, opinions or circumstances (Remenyi et al, 2005 ; Creswell, 2003). The secondary information, on the other hand, is collected from the already published information by judiciously choosing the most relevant aspects from the available literature or documents. The either approaches adopted in the whole process must ensure the desired level of consistency in the information collected (Saunders et al, 2000) The initial data collection exercise would be undertaken using email to all the senior mangers for the obtaining their vision on the current operational strategy in their banking establishments. As only 24 banks are presently operating in Nigeria properly planned approaches would help the researcher to collect the responses from all these institutions. In addition, the responses from industrial units, agriculture and related sectors would also be included for the data analysis segment. The information collection would focus on the issues faced by the banks on the pre-consolidation stage, the immediate issues to be handled, the long term and short focus on different sectors that need financial support. Further, the banking need of all the common citizens would also be investigated and the role played by the banks in materializing their needs would also be subjected to detailed research introspection. In addition to the online mode of data collection, personal interviews and discussions shall also be held as part of he survey process. The major source for the secondary information is the reports and publications from Central bank of Nigeria. These documents contain wealth of information on the process of consolidation and the expectations from the banking reforms in Nigeria. In addition, the annual reports from the individual would also be able to provide wealth of information that could supplement the research significantly. In addition to the extensive data collection activity, the research must also be able to judiciously interpret the survey information and adopt separate analysis - statistical and non-statistical techniques - to arrive at proper inferences. The statistical data would be analyzed through the help of SPSS software. The analysis results could be presented in the form of tables, graphs or charts. The graphical presentations in the form of charts would facilitate easy interpretations and presentation of the results.  The non-statistical data would be analyzed on the basis of knowledge and understanding of the researcher about the project and data collected. The extensive data obtained from the research need to be categorized based on the commonalities and then presented as a brief summary. Thus the final stage of the research involves preparing the data, finding concepts and themes and also figuring out the labels (Silverman, 2001). Only repeated reading and re-reading of the interview transcription could undertake the categorization of data into different aspects (Hatch, 2002). On the ethics, the research emphasizes on the sound standards of ethics to prevent any untoward incidents in this sector. Also, the right of the participants in the whole process would be protected during this activity. The entire exercise would be undertaken with the broad objective of maintaining a moral commitment to ensure advancement of human welfare, knowledge and understanding besides exploring the extent of cultural dynamics. References Achua, J.K. (2008), Corporate social responsibility in Nigerian banking system, Society and Business Review, 3(1), pp 57-71 Anonymous (n.d.), The 25 Banks That Achieved The Recapitalization Requirement, , [Online] Available at [ Accessed on 8 September 2009]. Asolou, O. (2009) , What future holds for Nigeria’s Banks, [Online] Available at [Accessed on 12 September 2009] Balogun, E. l D. (2007): Banking sector reforms and the Nigerian economy: performance, pitfalls and future policy options. [Online] Available at [Accessed on 11 September 2009] Brown, A.O. 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(2006),Beyond banking sector consolidation in Nigeria, [Online] Available at [Accessed on 12 September 2009] Soludo, C. C. (2007)., Macroeconomic, Monetary and Financial Sector Developments in Nigeria, [Online] Available at [ Accessed on 8 September 2009] Soludo, C.C. ( 2007), Strategic agenda for Nigeria, [Online] Available from [Accessed on 12 September 2007] Tomori, S. (2005); “Macroeconomics and Monetary Policy: The Nigerian Experioence” in Fakiyesi, O. O. & S. O. Akano (Eds), Issues in Money, Finance and Economic Management in Nigeria (Essays in Honour of Professor Obasanmi Olakankpo), pp. 9-34. Read More