CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

        It is an incomecoercible that the banking system is the engine of growth in any economy its function of financial intermediation through this function, bank facilitate capital formation, lubricate the production engine eurbaries and promote economic growth.

        However, bank ability to enginder economic growth and development deponds on the health, soundness and stability of the sop ean. The need for a strong, reliable and viable banking agssum is underscore by the fact the industry is one of the few sector in which the shareholders fund is only small portion of Liabilities of the enterpsies. It is therefore not supervising that the banking industry is one of the most regulated sector in any economy.

        It is against this background that the control bank of Nigeria in the maiden address of its current government prof charles soludo, outline the first phase of its banking sector design a diversified, strong and reliable banking industry. This research work reviews the reason, strategies and the effect of recent reformation in the banking industry.

        the primary objective of the reforms is to guarantee an efficient and sound financial system the reforms are designed to enable the banking system develop the required resilience to support the economic development of the nation of efficiently performing its function as the fulcrum of financial intermediation (Lemon 2005) This, the reform were to ensure the safety of depositors money, position banks to pla active development roles in the Nigeria economy and become major players in the sub-regional and global financial markets.

        The key elements of the thirteen (13) points reform programme include.

• Minimum capital base of N25 billion with a deadline date of 31st of December, 2005
• Recapitalization of banking institution through mergers and acquisition.
• Phased withdrawal of public sector funds from bank beginning from July 2004.
• Adoption of a risk focused and ruler based regularly frame work.
• Zero tolerable for weak curate governences, misconduct and lack of transparency.
• Accelerated completion of the electronics financial analysis surveillance system.
• The establishment of an asset management company.
• Promotion of the enforcement of dominant laws.
• Revision and updating of relevant laws.
• Closer collaboration with the EFCC and the establishment of the financial intelligent units.

Two of the above reform elements which have since generate some concern and reactions from various stake holders are requirement that the minimum capitalization of banks should be N25 billion with full compliance by 31st December, 2005.

        Recapitalization of banking institutions through merger and acquisition.

        Since the first phase of the banking sector recapitalization programme had been concluded, the main focus of their research work it to examine implementation of the programme

1.2   STATEMENT OF THE PROBLEM

The focus of this study by the researcher is for indentify the effect of the recent capitalization on Nigeria banking industry Hence in the course of the study, efforts has been made to find solution to the following research problems

1. What is the historical background and conceptual issue on banking sector recapitalization in Nigeria?
2. What are the rationable for the current banking sector recapitalization in Nigeria.
3. What are the policy framework for bank recapitalization?
4. What are the strategies adopted by Nigeria bankers for bank recapitalization.
5. What are the objective of the banking sector recapitalization in Nigeria.
6. What are the challenges face by banks in the recent recapitalization.

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