PROJECT TOPIC- IMPACT OF THE BANKING REFORM ON THE NIGERIAN ECONOMY
In international legal laws; banking reforms in Nigeria (page 1 of 4).
We have eight to nine banks, many of them have a capital base of less than $10 million us Dollar. Because of this they set out some of the factors that necessitate the need for major sector reforms that is stronger banks sector, through financial intermediation, banks are supposed to facilitate capital formation and promote economic growth by operating in a safe and sound manner.
In the past some financial institution showed glaring inability to maintain an efficient flow of funds within the economic system. The sharp practice of some banks together with the unseriousness of others led to a wide spread of financial sector distress and losses to depositors. The consolidation of the banking sector is base on the rational that, strong banks will propel sector development by facilitating deposit mobilization.
These reforms became a reality when Prof. Charles Soludo the Governor of the Central Bank of Nigeria (C.B.N) at the meeting held on the 6th July 2004 emphasizing the need why the nations banking sector should be reform. Stating widely the consolidation of the banking industry in order to build a strong and reliable banking sector. By these the sector would ensure the safety of the depositor’s funds, play an active role in the development of the Nigerian economy and be a competent player in the global arena, and to ensure long head office.
Productivity and higher returns to shear holders over time and enhance Nigeria’s entrepreneur’s access to finance. That is to say if Nigeria banks were stronger they would have performed better in promoting economic growth of the country, we have to take a look at the pre-consolidation era of the industry to see the facts that supports this assertion. The C.B.N has recognized that all over the world and given the internationalization of finance size has become an ingredient for success in the globalizing world. The last few years have witnessed the creation of the world’s banking group mergers and acquisitions, and as a result of this the C.B.N stipulates that the only legal modes allowable are mergers and outrist acquisition or take over. These doesn’t mean that banks that like themselves can arrange themselves for the purpose of meeting the 25, Billion Naira capital base, but that all banks that have other banks as subsidiaries or have common ownership are encouraged to merge.
The following are the incentives for banks that consolidate:
- Authorization to deal in foreign exchange
- Permission to take public sector deposits and recommendations to the Authorities for collection of public revenue.
- Provision of team of experts to provide technical assistance to the banks.
- Take incentives in the areas of capital allowance, company income tax and stamp duties.
- Reduction in transaction cost.