ANALYSIS OF THE CAUSES AND EFFECTS OF DISTRESS BANK ON THE AGRICULTURAL SECTOR OF THE NIGERIAN ECONOMY

 

 

 

Financial service industry such as financial institutions, instruments and market plays a crucial role in the development process of a country. The basic economic activity of the financial sector is intermediation, that is, acting as a conduit for the efficient transfer of resources from net service to net borrowers. This process engenders an increase in capital accumulation through institutionalization of savings as well as investment. The gains to real sector of the economy depend on how efficiently the financial sector performs this basic function of financial intermediation.

 

In the financial sector, the major channel for mobilizing saving is the banking system which mobilizes financial resources from surplus spending economic agent or allocation to the deficit spending units. In addition, banks serve as channels, for implementing monetary policies. But banks like other business, carry the risk of bankruptcy with depositor losses capable of undermining public confidence in the banking system. The macroeconomic setbacks that such loss of public confidence could precipitate included disintermediation, depletion of money stock, slow, ex cetera. The country witnessed a rapid growth of indigenous banks between the period of 1947 and 1952. The increases in the number of indigeneous banks were followed by a high rate of failures of such banks. By 1954, twenty one (21) out of twenty five (25) indigenous banks operating in nigeria had collapsed.