FINANCIAL DISTRESS IN SOME COMMERCIAL BANKS, REASONS, ISSUES, CONSEQUENCES AND SOLUTION

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

In the Nigerian Banking system considering the last decade the Commercial Banking to be precise had under gone a rapid expansion both in terms of the number of Institution and the scope of Financial services rendered.  As bank licensing was liberalized so was the seed of instability sown in these banking system at the same time. As these expansion trend continuous, a sign of lacked vision among the investors and the directors motive of quick returns to satisfy the liquidity operation.  The word distress has been in existence but increased promptly as these institution increased due to acute shortage of resources and the massive with drawal of deposit by government agencies and other public sectors from these bank. The development threatened the Financial structure, expose and undermine the economic system which impede development of the economy. Therefore, distress places a great burden on regulatory authority, depress the economy, undermine the payment system and discourage savings.

1.2    STATEMENT OF THE PROBLEM

Some Commercial Banks have been diverted to assist in loans and advances to various sectors of the economy.  And the Commercial Banking is known as refall banking which accept deposit and make payment to his customers.  But the Financial condition of some of these Commercial Banking due to the political instability/electoral campaign that is on.  Political analyst describe this on coming election to be one of the  brutal crisis that is to come.  Therefore, there is panic with drawal of fund by these bank customers.  This institution is now bogged down by distress, insolvency, poor liquidity due to decline in deposit, and loss of confidence.  The crisis has to be averted and the urgency prompted the study.  This research work is designed to describe the financial distress in some Commercial Banking system in Nigeria.

1.3    OBJECTIVE OF THE STUDY

The objectives of the study are:

1. To describe the nature and type of Financial distress facing some Commercial Banks in Nigeria.

2. To identify some of the Commercial Banks involved in distress in Nigeria.

3. To identify the causes of financial distress in Nigeria.

4. To determine the level of distress in these Commercial Banks.

5. To find out if the distress is caused by poor management.