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PROJECT TOPIC: A STUDY OF THE IMPACT OF FINANCIAL DISTRESS OF COMMERCIAL BANK OF NIGERIA

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CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF STUDY

            A bank can be defined as an organisation whose principle operation is concerned with the accumulation of temporarily idle money of the general public from the purpose of advancing to others for expenditures.

            John Paget defined a bank as “A corporation or person(s) who accepts money on current account pays cheques on such account on demand and collects cheques for customers”

            Oxfords advanced learners dictionary defined a bank as an organisation or place that provides a financial service or a place where something is stored ready for use.

            The establishment of modern banking in Nigeria dates back to the colonial era when the African banking corporation was formed in 1892 to distribute currency notes of bank of England for the British Treasury subsequent developments were encouraged by colonial trade.  In the bid to address the credit needs of indigenous enterprenurs, Nigerian later ventured into the banking business, initially through private individual initiatives and later through deliberate government policy.

            The problem of distress in the financial sector, including outright bank failure, has been observed in Nigeria as far back as 1930 when the First Bank failure was reported.  Indeed, between 1930 and 1958 when the Central Bank of Nigeria was established, over 21 banks failure were recorded.

            However, the degree of intensity and scope of the distress has never been as serious as had been observed since June 1989 when the government directive to withdraw deposits of government and other public sector institutions from bank to the CBN exposed the weak financial condition of most financial institution and the severity a problem has progressively increased.

    The distressed condition has been traced to a wide range of causes, some of which are listed on literature review.

 Eventually, when distress come into the scene, tears of loosing fund to the banks influenced negatively, in the commercial bank.


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