IMPACT OF BANKING RECAPITALIZATION ON REAL ESTATE SECTOR (A CASE STUDY OF OSOGBO, THE CAPITAL OF OSUN STATE)

CHAPTER ONE

1.0    INTRODUCTION

1.1    BACKGROUND OF THE STUDY

The trend in the Nation’s economy in this recent year particularly from the dawn of the democratic salting, the would be revealed that, this has been innovation and reforms to the various sectors of the economy most especially the banking sub-sector of the economy. This development in the banking sector is what is generally known s the bank recapitalization or bank reformation whereby the former capital base of various banks existing in the country was raised from two billion naira (N2 billion) to twenty five billion naira (N25 billion). This is by far the most profound monetary policy measure, witnessed by the banking industry in Nigeria since its interception in 1892.

The key driving force behind this policy is to transform Nigeria banks from the weak, marginal players they have been, to mega banks that would ultimately perform effetivelly in the strong global competitors. The second and equally important reason is to better position these banks to cope with the vagaries of the Nigeria operating environment and endow them with the capacity to finance major project and real sector activity like their counterparts in the advance economics. This development has made the total number of bank in the country to be reduced to just twenty five.

Estate surveyors and valuers have over the recent years been able to discharged their professional duties and services prominent among which is valuation which is a bid to establishing the values of this bank so as to facilitate the merger acquisition, consolidation, asset sharing, etc on relevant bases. In order to present a comprehensive dissertation on this topic i.e the impact of the recapitalization process on the real estate sector. There is a need to build the impact from diverse and given necessary details as may be demanded.

Real estate sector (market) is a place where bundles or clusters of right are being exchanged. It could be a system of transaction between landowner, land user and estate agents.

Real property investment is a capital formation of new asset which involves creation of real estate products such as commercial building, residential building. It can also be described in the sector ranging from commercial sector, residential sector and industrial sector etc.

Since it has been said earlier that banks from the weak. Marginal players they have been in to mega banks that would ultimately transform into strong global competitors and to better the position of these banks to cope with the vagaries of the Nigerian operating  environment and endow their with the capacity of finance major industry project and real estate sector activities.

In view of this, the project work will focus on examine, identifying analyze and recommend all necessary things as regard the impact of commercial banks recapitalization process on real professions.

1.2    STATEMENT OF THE PROBLEM

In Nigerian today, research has shown that real estate sector face some challenges, which has posed problem or set back in the sector. Some of the challenges are lack: of adequate funding, high cost of building, heavy reliance on imported items and costly housing design, low returns from real estate. Since real estate is characterized by relatively large economic size, investors have traditionally relied on third party financial instruction for significant positions of fund required for investment. Control of large parcel of real property is difficult to achieve without access to borrowed fund, which have consequently become ambiguities factors in real estate investment decisions.

 Banking sector, which was the major source of development finance, reneged on it role of financing sustainable economic development by rather supporting the import dependence nature of the economy. Most of the revenues generated by bank before consolidation to the highly fragmented nature and the weak capital base of Nigerian commercial banks as at that time.

In doing this, certain questions become imperative; what is really meant by recapitalization? Why recapitalization? What are the machineries put in place? What was the state of banks in the pre-consolidation era? What was the state of banks in the post consolidation era? What is the relationship between banking industry and real estates sector? What are the impacts of the reform on real estate sector? What are likely shortcomings or challenges of this reform on real estate and banking industry? What are the probable solutions? So this project work is faced with challenges of proffering solutions to some problems that arise in the process of commercial bank recapitalization with emphasis is real estate sector.

1.3    AIM AND OBJECTIVES OF THE STUDY

The aim of this study is to evaluate the impact of bank recapitalization in real estate sector of the economy.

OBJECTIVES

–        To examine the real estate market prior to the process of recapitalization.

–        To assess the recapitalization of the affected banks in the study area

–        To examine the impact of recapitalization on the real estate sector

–        To identify the problems of the recapitalization on the real estate sector and to suggest possible solutions.