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PROJECT TOPIC: THE EFFECT OF N25BILLION NAIRA MINIMUM CAPITAL BASE ON THE BANKING SECTOR IN NIGERIA

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CHAPTER ONE

INTRODUCTION

The central bank of Nigeria announced a new capital requirement for Nigeria banks of 25 billion Naira (about US & 181milion)  this reflects an increase of from its previous 2billion Naira (Us & 14.5 million) The banks governor has explained that by this he plans to encourage merger and acquisition among the 89 banks currently operating in the country to consolidate and strengthen the nations banking industry. He also hoped that this development would ignite investors confidence on the banks force down interest rate which currently pages at 35% thereby making funds cheaply available to borrowers.  The directive to increase the capital base of Nigerian bank in an attempt to make banking more stable . The perception was that a number of small banks were too    prone to unaccountability and corruption it is likely that many banks would merge and Nigeria would end up with a relatively  small number of better capitalized more accountable banks. These banks would be able to make more longer terms loans that before enhancing Nigerians ability to finance developed project locally part of the challenge is to build confidence in the process if banking in Nigeria clearly the banking system in Nigeria is evolving that is its’  in a transition phase between being a basically short term local colonial system to a bigger operation that can be seen as a facilitator of western style development it seems clear that there is a whole lot of money in the informal sector” that the banking industry would like to see get deposited.

It seems likely that the reorganization of Nigerian banks will lead to a drop in real estate value for some time because less  mortgage money will  be available.   But ultimately the hope is that Nigeria banks will have the where withal to finance large projects that hither to have always had to go abroad for capita.


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