PROBLEMS AND PROSPECT OF CASH MANAGEMENT IN COMMERCIAL BANKS (A CASE STUDY OF UNION BANK OF NIGERIA PLC, ILORIN)

TABLE OF CONTENTS

Cover page                                                                        i

Certification                                                                ii

Dedication                                                                 iii

Acknowledgment                                                                iv

Table of contents                                                                vi

CHAPTER ONE

1.1 INTRODUCTION                                                    1

1.2 STATEMENT OF PROBLEM                                      3

1.3 RESEARCH QUESTIONS                                         4

1.4 OBJECTIVES OF THE STUDY                                   5

1.5 RESEARCH HYPOTHESIS PROBLEMS AND PROSPECTS OF CASH MANAGEMENT IN COMMERCIAL BANKS                  5

1.6 SIGNIFICANCE OF THE STUDY                                        5

1.7 SCOPE AND LIMITATION OF THE STUDY                 7

1.8 DEFINITION FOR KEY TERMS                                         8

1.9 ORGANIZING/PLAN OF THE STUDY                         9

CHAPTER TWO

2.1 LITERATURE REVIEW                                            11

2.2 HISTORICAL BACKGROUND OF UNION BANK OF NIG PLC        12

2.3 APPRAISAL OF CASH MANAGEMENT APPLICATION                14

2.4 DEFINITION OF CASH MANAGEMENT AND MOTIVE OF HOLDING CASH                 15

2.5 PRINCIPLE OF CASH MANAGEMENT                                17

2.6 INSTRUMENT OF CASH MANAGEMENT                    18

2.7 MONTERREY POLICY                                             19

2.7.1 INSTRUMENTS OF MONETARY POLICY                  20

2.7.2 FACTORS OF CASH MANAGEMENT                                21

REFERENCES                                                             22

CHAPTER THREE

3.1 RESEARCH METHODOLOGY                                    23

3.2. SOURCE OF DATA COLLECTION                              23

3.3 SAMPLE SIZE                                                                25

3.4 RESTATEMENT OF RESEARCH PROBLEM                  25

3.5 DATA ANALYSIS AND TECHNIQUES                                 26

3.6 THE DESIGN OF THE STUDY                                  27

3.7 THE POPULATION OF THE STUDY                           27

CHAPTER FOUR

4.1 DATA PRESENTATION AND ANALYSIS DATA PRESENTATION              28

4.2. ANALYSIS OF RESULTS                                         29

4.3 DISCUSSION OF RESULT                                                43

4.4 RESULT RELATING TO HYPOTHESIS TESTING          43

4.5 POLICY STATEMENT                                              47

CHAPTER FIVE

5.1 FINDINGS                                                            48

5.2 CONCLUSION                                                        49

5.3 SUMMARY                                                            50

5.4 RECOMMENDATIONS                                             52

REFERENCES                                                             54

QUESTIONNAIRE                                                                55

CHAPTER ONE

1.1 INTRODUCTION

The concept of management was evolved as a result of existence of man. Hence, it could be traced back to the evolution of money. In this case, the origin of money which brings about cash management in our contemporary commercial backs really comes as the aftermaths of the difficulties of trade by barter. Trade by barter is a system and practice where goods are exchanged for goods and services. Barter system has many defects and drawbacks. These include the difficulty of double coincidence of wants, time and energy wastage, difficulty in ascertaining the value of commodities, discouragement of large quantities and variety of purchases, deferred payment, installment and borrowing large scale production and the likes.

Having identified the defects inevitable by barter system, people were forced to fashion out a generally acceptable means of exchange i.e. money. It is worthy to note that the paper money presently in use was originated from the receipt the goldsmith issued to people who kept gold and other valuables with them. As goldsmiths were taught to be honest, merchant people started keeping their gold with them for safe custody. In retain the goldsmith gave the depositors receipts promising to return the gold on demand. These receipt of the goldsmith were substitutes for money, such paper was back by gold and was convertible on demand into gold. This ultimately led to the development of bank note and today, money has another form other than paper called coin.

Thus, money is any thing that is generally acceptable as a medium of exchange for making payment, settlement of debt or other business obligations. The qualities of money such as generally acceptability, portability, durability homogeneity, divisibility, recognizability and scarcity make money and prudent management. Paper money and coins are collectively called cash. Today, customer deposit money with banks and banks give a promise to pay on demand the amount deposited by the customer. The customer can withdraw all his or her money in cash for the purpose of settling his or her debts or he or she can issued cheque by asking the bank to transfer the stated sum form his deposit to beneficiary.

So, the continued patronage of a bank by a customer depends on some important factor among which are the following:
– Availability of cash to meet the immediate and urgent needs of customers.

– The qualities of services rendering.

– The proximity of the back to the customer’s business premises.
– The approach ability and business acquisitive of its manager e.t.c.

Of all the reasons listed above, there is one which ranks supreme to all other reasons and that is the ability to strike balance between the shareholder and customer i.e. problem of profitability and liquidity are equally the utmost. The bankers has to keep enough cash in order to meet customers demand at the time will serve the interest of the shareholder who are expecting returns over the investment.

1.2   STATEMENT OF THE PROBLEM

In course of the study, the research is centered on ineffective cash management in our country’s commercial banks with particular attention to Union Bank that which deprives our country’s banking industry of competing with banks of developed countries of the world.

The following recommendations are suitable for the solution to the problems of cash management.

i.      There should be experienced and honest personnel employed into the bank for effective and efficient management of cash.

ii.      The idle balance should be properly invested in economy income.

iii.     There should also be supervisor and implementation of loans by banks so as to ensure that the loan is well utilized for the intended purpose.

iv.     Cash inflow and outflow overtime period should be adequately prepared and adhered to.

v.     Adequate supervision to branches without notice should be undertaken to ascertain that they operate in efficient way to improve cash management.

1.3   RESEARCH QUESTIONS

This paper intends to find answer some questions so as to achieve its objectives and for the purpose of this research work. The question are as follows;

i.      What are the saving services of the banks and their operation?

ii.      What are the native of operation of the bank?

iii.     What are the conditions to grant loan and on what type of collateral do you grant loan?

iv.     How does cash manager meet the demand of the deposit and the shareholder?

v.     What is the policy of bank on the shortage or surplus declared by the central banks?

vi.     Does your bank has any has investment in other bank or industry?

1.4 OBJECTIVES OF THE STUDY

The main objective and aim is to examine the problems and the suggested prospects of cash management in commercial banks. It also aims to attain the following objectives.

–       To meet payment schedule.

–       To minimize the finds committed to cash balance.

–       To proffer strategies techniques to ensure efficient cash management as this could by the commercial banks as modem financial organization.

–       To determine the appropriate target cash balance.

–       To determine how cash can be manager efficiently and effectively.

1.5 RESEARCH HYPOTHESIS PROBLEMS AND PROSPECTS OF CASH MANAGEMENT IN COMMERCIAL BANKS

H0: Cash management does not have positive effect on the profitability of commercial banks.

Hi: Cash management has positive effect on the profitability of commercial banks.

1.6 SIGNIFICANCE OF THE STUDY

The study of this research work is particularly of great importance to the bank, government, and researcher and to the public.

TO THE BANK:

The study of this research work allows the bank to develop strong internal control of cash receipts and disbursement so as to manager the inflow and outflow of cash in order not be face liquidity crunch i.e. borrowing at disadvantage.

TO THE GOVERNMENT:

The study of this work gives a means of eradication of the difficulties in the implementation of monetary policy by the central bank also recommend a capacity building framework for developing countries and to find loans to some government parastatals e.g. farmers.

TO OTHER RESEARCHERS:

It gives the advantage to a researcher to look at the float management 4 techniques, disbursement control and investment of idle cash, specifically relevant data from Union Bank of Nigeria Plc

TO THE PUBLIC:

To maintain adequate level of cash to meet operational and capital requirements and to obtain the maximum yield on short term investments of pooled, idle cash and to maintain adequate monies at hand to meet daily cash requirement of the municipality while maximizing the amount available for investment and to obtain maximum earning in invested finds while ensuring their safety.

1.7 SCOPE AND LIMITATION OF THE STUDY

The scope of this study focuses attention on cash management in commercial banks problems and prospects with a case study of Union Bank of Nigeria Plc.

The researcher faced so many limitations while conducting the research which includes insufficiency of data as some officials could not respond to the questionnaire as they have to attend to their primary assignment.

Insufficiency of data is also part of the limitation faced in the course of this research work as the bank officials were unable to disclose some information.

Another problem or limitation in the course of this research work is inadequacy of fund because the researcher needs some amount of cash to do one or two thing (i.e. Transportation) in the process of the researcher work. Uncooperative attitude of respondents is another limitation the researcher faced while conducting the research work.

1.8   DEFINITION FOR KEY TERMS

COINS: – A coin is metal money with definite amount and weight issued and stamped by the central authority responsible for the issuing of money in a country.

PAPER MONEY: – As the name implies, it is a form of paper money which was originated from the receipt of the goldsmith issued to people who kept gold and other valuables with them.

BANK MONEY: – This is the money one keeps in his or her bank account for safe keeping also called deposit which can be given back to the owner or demand.

CUSTOMER: – This is refers to as an individual, organization or club who keeps money and other valuables with the bank for safe keeping and for future purpose.

BANK: – This is an institution set up purposely for safe keeping of money, valuable goods and essential documents.

CASH: – This refers to coin and paper form of money people and organization keeps in the bank for safe keeping.

CHEQUE: – This is an institution or a bill of exchange made upon a bank to pay a given sum of money to a named person or bearer at a specific date.DEPOSIT: – This entails the amount of money i.e. cash every individual or organization keeps in the bank over a period of time.

TRANSACTIONARY MOTIVE: – It is the desire of holding money in order to meet day to day needs of individual or organization.