BANK FAILURE AND ECONOMIC DEVELOPMENT IN NIGERIA A CRITICAL APPRAISAL
ABSTRACT
Banks occupy the most strategic point in the financial system of the economy.  For a total of banks to between 1992 to 2002 a space of four years, means that somethings definitely is wrong.
            Certain question have been asked.  Solutions proffered and prospects for the future explained but none of them seems to have solved the problem.
            This study is not antagonistic of any other rather it is complementary.  Others works have been used here and duly acknowledged but everything is with an intent to find a lasting solution to the issue of bank failure.  The study was based upon data collected through information sifted from books, journals annuals, periodicals.  In conclusion it will be quite expedient to point out that the Nigerian economy is still under developed one and will take the astuteness of every singler Nigeria to get it out of the doldrums.
            It is only when the economy become stable that we shall have a very stable banking environment where failures might not be entirely absent but reduced to rate.  The task is not only for the authorities.  Every one has as a role to play.
TABLE OF CONTENTS
CHAPTER ONE
INTRODUCTION
1.1              The background of the study
1.2              Statement of the problem
1.3              Objective of the study
1.4              Significance of the study
1.5              Limitations of the study
1.6              Definition of term
CHAPTER TWO
LITERATURE REVIEW
2.1              Genesis of Banking in Nigeria
2.2              Similarities and differences among banks
2.3              Role of bank in economic development
2.4              The concept of bank failure
2.5              Cause of bank failure
2.6              Indices of bank failure
2.7              Effect of bank failure
CHAPTER THREE
RECOMMENDATIONS AND CONCLUSION
3.1              Recommendations
3.2              Conclusion
Bibliography
 CHAPTER ONE
INTRODUCTION
THE BACKGROUND OF THE STUDY
            Over the last couple of decades the Nigeria financial system has grown remarkable.  From the almost crude form it was characterized with in pre-colonial and colonial days.  It has become so sophisticated that economic experts today can proudly thump their chests.  With due regard to ownership structure of the institution, the regulatory framework, the instrument employed and number of established institutions, Nigeria can be said to posses the most sophisticated financial system in African.
            Within the Nigerian financial system itself, the banking institutions have been most remarkable in growth.  This is just as well in any case considering the critical position which they occupy in a complex financial position which they occupy in a complex financial system which supplies the money and credit needs of the economy.
            The world bank nor banker is nether used nor defined in the central of Nigeria (CBN) Decree No 24 of 1991 nor bank and other financial institutions Decree (BOFIO)No 25 of 1991 but section 2 of Bills of Exchange Act 1881 provides that “bankers include a body of persons whether incorporated or not who carry out the business of banking section 2 (1) of the Evidence Act defines banks banker to means “any person or persons, partinership or company carrying on the business of bankers.  Finally, the Banking Act of 1969, provides that bank means any perons who carries out the business of banking and include a commercial bank and an acceptance house.
            The role of banks is thus an important one in the process of economic development in the sense that they mobilize funds from the surplus spending and for of the economy.  In this way the increase the quantum of National savings and investment.  Secondly though an appropriate investment multiplier, the volume of good and service produced increase a result of investment projects financed by bank funds.  All of which lead to a successful promotion of an efficient system of payment, creating banking habits, development the society and providing employment opportunities.
            In view of these highlights, it becomes easily comprehensible why the failure of a bank of a bank has far reaching consequences.  The ability of banks to operate successfully rests upon how well the are able to obtain the confidence of the public if that confidence is missing, the gap will be too great for the banks to fill.  The effects of banks failure on the economic development of Nigeria can be expressed in an nut-shell to be the following.
a.                   Lack of effective and efficient financial intimidation
b.                  Loss of public confidence in the system further depression of the economy additional burden on the regulatory authorities Escalation of social vices.
For the sake of the citizenry and in the interest of economic development, there is an expedient need to devise a host of remedying situation.
            The fact that a bank fails today is not to say that incidence is systemic.  There must be a number of wap out of any sad predicament.
            The only crack is how well these remedies are fruitfully employed such remedies would include.
a.                   The cultivation of a stable political environment
b.                  The strengthening of rgualtory agencies
c.                   The taking over by regulatory bodies of all terminally distressed banks
d.                  Encouragement of banking education
e.                   Sincere pursuit by government of all economic and monetary polices.
f.                   All regulations pertaining capital adequacy, minimum paid up capital, liquidity ratio and asset quality should be reviewed in relation to inflation rate.
g.                  Privatization and commercialization of all government owned banks.
h.                  All debt owned bank by government (state, tederal and even partientals) should be paid back immediately.
i.                    All laws relating to bankruptcy and default should be reviewed and made more function.
An address like this will go a long way in remedying the situation and restoring public confidence in the system.
1.1              STATEMENT OF THE PROBLEM
In light of the vital role which bank play in developing the national economy in their capacity as vectors of fund for savings, investment and employment opportunities it will be expedient to point out that Nigeria banking system in all its advancement and sophistication has not succeeded yet in effectively achieving this mission.  The reason is not just one of the fact some banks have failed, but that some.
Factors have continued to meditate against the successful performance of banks.  The problem of economic under development in Nigeria can arguable traced to the fact that banks have note been as efficient as the ought to be.
But them a number of factors have been responsible for the conditions in which banks have found themselves today.  The effects of a bank failure range from loss of depositors finds to loss of confidence (which the spring board on which the business of banking) to a total lack of effective financial intermediation, such as reduced lending to the prority sector of the economy and a using incidence of distress in other sub-sector.
Then the problem of bank failure is not peculiar to Nigeria.  Neither is it peculiar to the third would.  It is universal and the caused are generally in the same distinct categories.  The  only difference lies in the different ways which the situation can be remedied.
The causes of bank failure are: incompetent management (both shareholder and management executives) capital inadequacy, poor internal control, poor assets quality competition and such factors as economic environment, socio-political environment and government.
1.3       OBJECTIVE OF THE STUDY
            The objective of this study is to critically appraise “Bank failure and economic development.  That is the impact which bank failures has had on the development of the Nigeria economy with a view to highlighting the implications on the depositors, the general public, the affected bank, the entire banking industry and the general macro-economy.  Subsequently an agenda will be portrayed as to how the tide could stemmed and the situation tackled in an effective manner.
            The study will go ahead to reveal the prospects of banking in the future.
1.4              SIGNIFICANCE OF THE STUDY
The study is significant in that a careful appraisal with an intent to reveal the genesis of bank failures in Nigeria, the root causes of bank failure, how to avert bank failure and in the event of an inability to avert this how to deal with the situation effectively.
            The study will be of immense benefit to scholars in the field of banking, official of regulatory agencies and intellectuals in the field of banking.
1.5              DEFINITION OF TERM
Some of the technical terms that will be used in subsequent chapter will be thoroughly defined  in this sub-section in order to facilitate assimilation of the content of the study capital adequacy.  This is the ratio of classifies loans and advance to shareholders finds asset quality.
This is the proportion of classified loan and advance to total loans and advance minimum capital ratio.  The proportion of capital a bank is meant to maintain in relation to risk assets.
Risk asset:  asset which by their nature are prone to losses.
Liquidity ratio: Ratio of liquid asset to total deposit liabilities.
Illiquidity:  this is the mobility of a bank to meet its liabilities as they mature for payment.
Insolvency:  this is when the value of realizable assets is less than total value of liabilities.
Liquidation:  the taking over of the assets and liabilities of bank by the regulatory agencies after the bank has been adjudged failed.
Holding action:  these are action which prohibit or curtail certain activities of boards and management or certain activities required of them to ensure bank safety.