THE IMPACT OF THE N25 BILLION RECAPITALIZATION BY THE CENTRAL BANK OF NIGERIA ON COMMERCIAL BANKS

THE IMPACT OF THE N25 BILLION RECAPITALIZATION BY THE CENTRAL BANK OF NIGERIA ON COMMERCIAL BANKS

CHAPTER ONE

INTRODUCTION

Central bank of Nigeria is the apex financial institution in Nigeria charged with the responsibility of maintaining fiscal and monetary. Stability in the economy. The CBN has its headquarters in Abuja (F.C.T) with some zonal offices in Lagos, Kaduna, Enugu and Ibadan. It is located in Enugu zone at Opara Avenue. In this study, the researcher’s mind it to know the impacts of the B25billion re-capitalization by the CBN on the commercial banks in Enugu state off Nigeria, also banks nation-wide. The researcher wants to know the problems that has caused this new directives also, assume the ways the commercial banks can take-up to meet up with the new directives. The researcher also, wants to know if this new directives by the CBN will help improve the banking and Nigerian economy.

1.1  BACKGROUND TO TH STUDY

The central bank of Nigeria was established in 1958 under the CBN act of 1958 which was repealed thereby reenacting the CBN act of 191 (decree No 24). The CBN owes its existence to the act and it was set up with certain cardinal objectives in mind, e.g (i) to issue legal tender currency in Nigeria.

(ii) to promote monetary stability and a sound financial system in Nigeria etc.

regulations often times take the forms of either rules or directive from the central bank and that is why it has been given the power to:

(a) From time to time, issue directives by circulars requiring each banks to maintain at all times in the form of cash reserves with the bank at its office a sum equal to a prescribed ratio of the bank deposit liabilities, etc section 39 (i)..On the recommendation from the president of the deferral republic, determine what shall be the minimum paid up share capital of each category of banks. Section 9 (1). It has a management team headed by the governor of the bank, deputy governors and directors of the diverse sectors. The governor is an sever-able to the board of directors for its acts and decisions.

1.2  STATEMENT OF THE PROBLEMS

In this section, the researcher focused on the impacts of the N25 billion re-capitalization (new directive) by the central bank of Nigeria (CBN) on the commercial banks in Enugu metropolis and nation-wide. The re-capitalization is viable of yielding some positive reactions or effects on the commercial banks which are as follows:

1. Globalization

2. Merger & Acquisition and consolidation.

3. Increased professional.

4. Stable economy.

According to CBN governor, Prof. Charles Soludo, We affirms that the re-capitalization is a more to strengthen the capital base and introduce multi functional face into the industry. January 4, 2005: This Day News.

1.3  OBJECTIVES OF THE STUDY

The fundamental objectives that prompted the researcher to going into this topic are as follows:

a. To know the reason why the central bank of Nigeria (CBN) came up with such directive (N25 billion re-capitalization).

b. To find out how the commercial banks in Enugu state and nation-wide will raise or meet up with the new directives.

c. To find out the impacts of the new directives on commercial banks.

d. The re-capitalization, will it help Enugu state and the Nigerian economy?

1.4  SIGNIFICANCE OF THE STUDY

The significance of this study is to achieve a great success in contributing the little the researcher can, if not a great deal in expressing the impacts of the new directive (N25 billion re-capitalization) by the central bank of Nigeria on the commercial banks which will bring about an immense knowledge and enlightenments with particular reference to the banks in Enugu state. Hopefully thought, this research work will ultimately broaden the scope of the staffs and management of commercial banks in Enugu state. Also, bring about more noticeable contribution and enhancement to both headquarters and other branches nation-wide to know the benefits and impacts. Conclusively, though the researcher limited the study to Enugu state and banks, the result of the findings will be of great benevolence to all commercial banks in Nigeria likewise, students conducting similar research work on the same topic or related ones.

1.5  LIMITATION OF THE STUDY

In this study, limitation was not really necessary for the researcher because majority, the commercials banks in Enugu state are all branches whose headquarters are in Lagos state and Abuja (FCT) and this study is based on the entire commercial banks in the nation, so the researcher had a universal study through reading of newspapers, magazines (related), symposia from the library (literature search). Moreover, through CBN website to complement the study.

1.6  DEFINITION OF TERMS

IMPACTS: This is the reaction or the drive of the policy on the financial transactions in the diverse levels of banks operating in the nation.

RE-CAPITALIZATION: This is a policy majority by the central bank of Nigeria (CBN) which creates a gradual change in the nation.

It is also the slight differences in bank’s capital base either higher or lower depending on the policy of the CBN.