DEPOSIT INSURANCE AND RISK CONTROL IN THE BANKING INDUSTRY IN NIGERIA

(Accounting)
DEPOSIT INSURANCE AND RISK CONTROL IN THE BANKING INDUSTRY IN NIGERIA
ABSTRACT

This study examined Deposit Insurance and Risk Control in the Banking Industry in Nigeria. In light of the empirical review and other discussions, a number of questions arose as to whether there is relationship between relationship between deposit insurance, risk control, total banks lending and bank capitalization. Using the Ordinary Least Square (OLS) regression technique with the aid of computer software, the empirical findings revealed among other things that there is a relationship between deposit insurance, risk control and total banks lending. Recommendations where however made by the researcher.
TABLE OF CONTENTS
CHAPTER ONE INTRODUCTION
Background of the Study                         
Statement of the Research Problem                     
Objective of the Study                             
Research Hypotheses                             
Scope of the Study                            
Significance of the Study                        
Limitation of the Study                    
CHAPTER TWO: LITERATURE REVIEW
What is Deposit Insurance?                             
Types of Deposit Insurance                        
Deposit Insurance V Conventional Insurance                
Deposit Insurance Scheme in Nigeria                    
Reasons for the Establishment of Deposit Insurance Scheme in Nigeria    
The Nigeria Deposit Insurance Corporation (NDIC)             
Achievements of the NDIC                             
Challenges Facing the Deposit Insurance Scheme in Nigeria     
Future of Deposit Insurance Scheme in Nigeria                    
An Appraisal of the Relevance of Deposit Insurance to Banking Stability
and Economic Development in Nigeria             
Risk Management in the Nigerian Banking Industry                
Risk Management in the Bank                    
Recent Development in the Nigeria Banking Industry        
References                                
CHAPTER THREE: RESEARCH METHOD
Introduction                                 
Research Design                             
Population of the Study                         
The Sample Size                        
Sampling Techniques                         
Sources of Data                         
Model Specification                             
Method of Data Analysis                        
References                                 
CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION
4.1    Introduction                             
4.2    Data Analysis and Interpretation                
CHAPTER FIVE:    SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
Introduction                             
Summary of the Finding                     
Recommendations                        
Conclusion                            
Bibliography                             
Appendix                                 
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
The origin of modern insurance are intertwined with the advent of British Trading Companies in the region and the subsequent increased inter-regional trade. Increased trade and commerce led to increased activities in shipping and banking; and it soon became necessary for some of the foreign firms to handle some of their risk locally (Adeyemi, 2005). Trading companies were therefore subsequently granted insurance agency licenses by foreign insurance companies. Such licenses made it possible for such firms to issue covers and assist in claims supervision.
The first of such agency in Nigeria came into force in 1918 when the African and East Trade Companies introduced the Royal Exchange Assurance Agency. Other agencies include Patternson Zochonis (PZ) Liverpool, London and Globe, BEWAC’s Legal and General Assurance and the law Union and Rock (Jegede, 2005).
There was an initial and slow pace of the growth of the insurance industry in Nigeria, particularly between 1921 and 1949, this has been traced to adverse effect of the World War II on trading activities both in the United Kingdom and Nigeria. As soon as the war ended, business activities gradually picked up again and insurance industry in Nigeria began to record remarkable improvement in growth (Gbede, 2003). It was not until 1958 that the first indigenous insurance company, the Africa Insurance Company Limited was established.
Insurance is a form of risk management primarily used to ledge against the risk of a contingent uncertain loss. According to Abebisi (2006) insurance is an intricate economic and social device for the handling of risk to life and property. It is social in nature because it represent the cooperation of various individuals for mutual benefits by combining together to reduce the consequence of similar risks. As every new of risk and since with every passing day, a new insurance package in amounted to take care of more and more areas of risks, the insurance booms.
Agbaje (2005) defined insurance as the business of pooling resources together to pay compensation to the insured or assured (i.e. the pooling holder) on the happening of a specified event in return for a periodic consideration known as premium. As insurance contract is usually evidenced by a document called the insurance policy which is usually signaled at the foot by the insurer or assurer or his agent.
Gollier (2003) argued that insurance involved the transfer of risk from an individual to a group, sharing losses on an equitable basis by all members of the group, the group, known as insurance company, must increase its hold on the premium and widen its profit margin to cope with the demand of their customer.
Dickson (1960) opined that insurance is designed to protect the financial wellbeing of an individual, company or other entity in case of unexpected loss. According to him, some firms of insurance are required by law, while others are optional agreeing to the terms of an insurance policy contract the insurer and the insured.          
STATEMENT OF THE RESEARCH PROBLEM
Before the advent of Nigeria Deposit Insurance Corporation many banks in Nigeria has undergo distress or had to beyond owing to regulations and fraud in banking sector, they exist no organize body that is monitoring the activities of the bank hence mismanagement and fraud because the order of the body people without solid capital base come together and form bank and this leads to distress or liquidation in the event of any slight or small shake in this capital base. The above and many more bring about the formation of deposit Insurance Corporation.
Against this backdrop, the following research questions are raised:
What is the impact of deposit insurance and risk control?
What is the relationship between deposit insurance and total banks lending?
What is the relationship between deposit insurance and bank capitalization?
OBJECTIVE OF THE STUDY
The broad objective of this study is to examine deposit insurance and risk control in the banking industry in Nigeria.
The specific objectives are:
To examine the relationship between deposit insurance and risk control.
To determine the relationship between deposit insurance and total banks lending.
To determine the relationship between deposit insurance and bank capitalization.
RESEARCH HYPOTHESES
The hypothesis for this study is;
Hypothesis I
H0:    There is no relationship between deposit insurance and risk control.
H1:    There is a relationship between deposit insurance and risk control.
Hypothesis II
H0:    There is no relationship between deposit insurance and total banks lending.
H1:    There is a relationship between deposit insurance and total banks lending.
SCOPE OF THE STUDY
This study is undertaken to examine the deposit insurance and risk control in the banking industry in Nigeria.
The population of the study consists of all the banks quoted in the Nigeria Stock Exchange, while sample size is restricted to some selected quoted banks in the Nigeria Stock Exchange.
The time frame of this study is five (5) years i.e. (2006 – 2010).
Geographically, the study will be conducted in Benin City, Edo State.
SIGNIFICANCE OF THE STUDY
There are several compelling reasons for undertaking this study. It will update existing body of knowledge by going a step forward in filling many of the obvious gaps in the controversy of deposit insurance and risk control of developing and emerging economies (Nigeria inclusive).
It is therefore expected that the study findings will be of immense benefit to policy makers, government regulatory agencies, etc. it will also prove very useful to researchers as well as members of the academia.
Besides, the findings of this study will lay the foundation for other academia and research students (both home and abroad) to know what evidence exist in emerging economies concerning the deposit insurance and risk control.
LIMITATION OF THE STUDY
The sensitive nature of the topic made it very difficult for the researcher to obtain some vital information from banks a wind who asked that we direct all question to bank executive stationed at their head offices as they were not competent to speak on such matters to see their executive necessitated traveling great distance this had as telling effect on financial and talk about the attendant risks involved considering the state of our high ways. Another constraint was that even the executive of know banks currently under liquidation refuse to admit his and so kept a lot of information from us that is as regards briefs from the CBN and NDIC. The most telling constraint however was the time, the time in our banks was very limited.  

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