APPRAISAL OF THE STRATEGIC MANAGEMENT PRACTICES IN NIGERIAN BANKING ORGANIZATIONS: SELECTED STUDIES

ABSTRACT

In this study, we undertook a critical appraisal of the strategic management practices of selected old and new generation banks in Nigeria. It is motivated by the problem of high rate of bank distresses and failures in the economy.   The objectives therefore were to ascertain the level of corporate accountability, honesty and integrity exhibited by banks’ management/directors in Nigeria; discover the level of efficiency in the strategic management of human, financial and material resources in Nigerian banks; find out the level of compliance to banking ethics and professionalism that exist in Nigerian banks.

For the research methodology, we adopted opinion survey techniques, where primary data for the study came mainly through questionnaires and personal interviews were conducted where appropriate, while the secondary data were obtained from unpublished materials, Journals and relevant articles in banking and trade newsletters/in-house journals. The data were analysed through Chi-Square statistical techniques.

At the end of the analysis, the results showed that there is a low level of corporate accountability, honesty and integrity by banks’ management/directors in Nigeria. There is also a low level of efficiency in the strategic management of financial, human resources and assets by Nigerian banks, and low level of compliance to banking ethics and professionalism by Nigerian banks’ staff and management.

TABLE OF CONTENTS

Title  Page                                                                           ii

Certification                                              iii                                                                  

Dedication                                                                         iv

Acknowledgements                                                             v

Abstract                                                                             vi

Table of Contents                                                               vii

CHAPTER ONE

1.0  INTRODUCTION                                                       1

1.1    Overview Of The Study                                                   6

1.2    Statement of the Problems                                           15

1.3    Objectives of the Study                                                       17

1.4    Research Hypotheses                                                          17

1.5    Background Of The Study Area           

1.6    Significance of the Study                                                     18

1.7   Scope of the Study                                                             19

1.8   Limitations of the Study                                               20

References                                                               21                                                                            

CHAPTER TWO

2.0 REVIEW OF RELATED LITERATURE                                   22

2.1    Concept Of  Strategy             22                                                                           

  2.2    Strategic Planning                                                       23

• Strategic and Operational Planning                                       25
• Importance Of Strategic Planning                                 26
• Commandments For Business Strategies                               29
• Criteria For Evaluating Strategies                                  31
• A 5-Year X-ray Of the Nigerian Banking Market              32

2.8   The Balance Sheet Structure and Growth Rates of Nigerian Banks (1999 – 2000).                 

2.9   OVERVIEW OF SELECTED BANKS STRATEGIC PERFORMANCE

2.10 COMMERCIAL BANKS’ FINANCIAL INDEXES IN 2001

2.11 Bank Performance Before and After the adoption of Strategic Management

Reference:                                                                 34                                                    

CHAPTER THREE

3.0   RESEARCH DESIGN AND METHODOLOGY                      36

3.1    Research Method                                                           36

3.2  Research Instrument

 3.3   Structure of the instrument                                          37

3.4  Reliability Of The Measuring Instruments                           38

3.5  Population Of The Study

3.6 Technique Of Data Analysis

• Sampling Procedure

3.8  Sampling Techniques 

3.9    Determination of Sample Size                                               37

        References                                                                39

CHAPTER FOUR

4.0 Data Presentations and Analysis                              

4.1  Data Presentation

4.2  Data Analysis

4.3  Tests of Hypotheses                                                     49

CHAPTER FIVE

5.0   Summary of Findings, Discussion of Findings,

Recommendations, and Conclusion                       

5.1    Summary Of Findings                                                  54

• Discussion of Findings                                                 54
• Recommendations.                                                     56   
• Conclusion                                                                    56

Bibliography                                                               58

Appendices                                                                        61

CHAPTER ONE

1. INTRODUCTION:

        With the devastating global economic and financial crises, which had seen to the collapse of stocks and banks in many countries of the world, it is the belief of management and financial experts that for any Nigerian bank to survive it, it must adopt a wholesome strategic management practices in its corporate governance.

Donli (2005) observed that traditionally, the role of banks whether in a developed or developing economy, consists of financial intermediation, provision of an efficient payments system and serving as conduit for the implementation of monetary policies. It has been postulated that if these functions are efficiently carried out, the economy would be able to mobilise meaningful level of savings and channel these funds in an efficient and effective manner to ensure that no viable project is frustrated due to lack of funds. The role of banks in economic development has been richly articulated in the literature. Pioneer contribution of Schumpeter (1934) was of the view that financial institutions are necessary condition for economic development. This view has been variously corroborated by other scholars like Goldsmith (1969), Cameron et al (19720, Patrick (1966).

In view of the importance of the banking sector in economic development and the imperfections of the market mechanism to mobilise and allocate financial resources to socially desirable economic activities of any nation, governments the world over, do regulate them more than any sector in an economy. These underscore the need for banking sector regulation. However, in addition, the nature of banking business (being highly geared and conducted with greater secrecy when compared with other real sector businesses) provides added reason for strict supervision. This is to constantly beam a search-light on the sector’s activities with a view to ensuring that operators play by the rules of the game and imbibe sound and safe banking practices. Furthermore, such an oversight is intended to assist supervisory authorities in timely identification of deterioration in bank financial conditions before it degenerates to threaten the stability of the banking system or even the economy.

Nwakoby (2004:156) observes that the Nigerian commercial banking system dates back to 1892 with the establishment of African Banking Corporation (ABC). The British Bank for West Africa took this over in 1894. This is today known as first Bank of Nigeria plc. Then came Barclays Bank in 1917 which is todays Union Bank of Nigeria. According to Uche (1997:3) “these institutions were registered in, had their head offices in, and were control from London, and consequently fell under the regulatory jurisdiction of London.

Nwakoby (2004:156) again reported that there was strong accusation among Nigerians that these expatriate banks, were discriminating against Nigerians and their businesses, by denying them banking services and loans. This brought about wide agitations for the establishment of indigenous banks.

Hence, came in indigenous banks into the Nigerian financial system, but most of these banks collapsed with the speed with which they were established, going down with billions of naira worth of innocent depositors’ funds. Some poor Nigerian depositor had been recorded to have committed suicide at the liquidation/closure of those banks, while others died gradually in their homes at the pains of such financial losses.

Even though, the former Central Bank Governor, Professor Chukwuma Soludo, tried out what he termed ‘Banking Consolidation by raising the liquidity ratio of a bank in Nigeria to N25 billion and thus squeezing out the crowd of many sick and small banks, recent revelations by the new Central Bank Governor, SanusI (2010) shows there is more cause for worry. According to his findings, the Nigerian banking industry is riddled with high-level corruption, mismanagement of depositors’ funds and falsehood in annual reports. From that, the breeze has blown and Nigerians have seen the anus of the fowl, that bank directors are actually feeding fat on depositors’ funds through some wicked boardroom manipulations and shady deals. For instance, Sanusi (2010) on a Nigeria Television interview reported that it is known to Nigerians that the Ibrus hold majority shares at Oceanic Bank. But during his recent investigation, it was revealed that the bank was actually registered with the name of Ibru’s housemaid and lawyer, and loans worth billions of naira withdrawn in the name of the said housemaid. Thus, revealing that the lender and the borrower were one and the same person (Ibru).

It is mindful of this that Uche (1997:11) catalogued some of the causes of distress or failure of Nigerian banks as follows:

• Outright embezzlement of depositors funds by bank directors.
• Poor management and accounting procedures in the banks.
• Poor capital base, leading to bank’s inability sometimes to meet customers withdrawals and other financial demands.
• Political interference and regulatory constraints.
• The asset quality of many banks went down progressively as the directors engage in personal aggrandizement.
• Huge operational costs, in order to maintain a false image of bigness and liquidity
• Finally, the prevailing global economic crisis, which has drastically reduced the Gross Domestic Product (GDP) growth rate, heightened inflation and reduced citizen’s disposable income.

Indeed, in the United States of America in 2008-2009 alone, 200 banks collapsed, while others needed government bail out to stay afloat, as reported on CNN (2009) and Voice of America (2009). So, this is not an isolated Nigerian problem.

        However, our focus in this study is to empirically assess the claims that the application of strategic management practices could help Nigerian banks to weather the storms of the prevailing global financial crisis and still remain solvent while it lasts. To do this effectively, we have isolated two old generation banks and two new generation banks for the analysis. They are the First Bank of Nigeria Plc, Union Bank Nigeria Plc, Zenith Bank Plc and Intercontinental Bank Plc, respectively.

1.2  STATEMENT OF PROBLEM