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TREASURY OPERATIONS IN FINANCIAL INSTITUTIONS: ISSUES AND PROBLEMS

(Accounting)

TREASURY OPERATIONS IN FINANCIAL INSTITUTIONS: ISSUES AND PROBLEMS

(A CASE STUDY OF UNION BANK OF NIGERIA PLC) UBN

ABSTRACT 

Banks are regarded as the bed rock of a nation’s economy. They are the harbinger of economic development through a prudent management of both treasury operations and treasury activities. This survey was carried out in an old generation bank that is fully engaged in transaction of foreign exchange.

The study primarily looks into the treasury management operations and the impact of these management operations on treasury activities. Study exploited both the desk and primary sources of information; a structure questionnaire was designed to gather pertinent data from 32 respondents that are sratifically and randomly selected.  

The data gathered was analysed and interpreted using the simple arithmetic, percentage and inferential statistics. The result revealed that bank fraud is most prevailing risk in the banking industry. Considering the exposure techniques and strategies hedging technique was perceived to be a very vital technique in risk exposure strategy.

 

TABLE OF CONTENT

CHAPTER ONE

1.0   Background of the study

1.1      Introduction

1.2      Statement of problem

1.3      Objectives of the study

1.4      Research Questions

1.5      Hypothesis

1.6      Scope of the study

1.7      Significance of the study

1.8      Limitation of the study

1.9      Definition of terms

 

CHAPTER TWO

2.1      Review of related literature

2.1   literature Review

2.2   Theoretical review of related literature

2.2.2        Treasury operations in commercial banks

2.3   Treasury management activities in banks

2.4   Measures introduced by central bank of Nigeria

2.4.1        Responsibilities of bank’s treasury department

2.4.2        Liquidity Management in bank

2.5   Summary of related literature review

2.6   Empirical review of related literature

 

CHAPTER THREE

3.0   Research design and methodology

3.1      Research design 

3.2      Area of study

3.3      Population of study

3.4      Sources of data

3.5      Sampling method

3.6      Research instrumentation

3.7      Validity and reliability of research instrument

3.8           Methods of data analysis and investigation

CHAPTER FOUR

4.0   Presentation and analysis of data

4.1   Presentation and analysis of results

4.2   Test of Hypothesis

 

CHAPTER FIVE

5.0   Summary of findings, conclusion and recommendation ..39

5.1      Finding

5.2      Conclusion

5.3      Recommendation

Bibliography

Appendix       

CHAPTER ONE

1.0   BACKGROUND OF THE STUDY 

1.1      INTRODUCTION

    Banking can be classified as both a profession and a trade. As a trade, banking business involves  the buying and selling of services. On the other hand, banking could be referred to as a profession because of its distinct body of knowledge which distinguished it from other aspects of human endeavours.

   Today, treasury professionals are demanding a better system for bank administration beyond Microsoft Excel and Access. The ability to globally research signers, add or update, automatically generate confirmation letters and consolidate supporting documentation are at the top of the list. Not only does it promote efficiency and increase controls, but also aids in regulatory compliance.

    Naturally, treasurers will normally restrict their dealing to top quality financial institutions. These institutions will have their own professional codes of conduct and can  therefore  be expected to avoid conflicts of interest. Banks are normally involved only as distributors dealers and as issuing and paying agents        

Further more the ability to hand operation at an international level is crucial to any major financial institution. The same is also true about the need for automating the production delivery of treasury services. For treasury activities to be effectively carried out computers, communication and artificial intelligence must provide gateways to planning, execution and control. There is for instance the need for comprehensive system of limit on all unmatched foreign exchange positions and for diversification of currency portfolio so as to ensure that potential losses from foreseeable exchanges rate kept to a minimum.

   The Nigerian banking industry started in 1892 when the African banking corporation was incorporated from there other banks evolved. For any government to achieve the national objective of stable prices and sound economic growth, the banking system should be one that was well developed with the depth, breath, which would make financial intermediation efficient, effective and productive.

   Treasury operations started in Nigeria in April 1960 with the central bank of Nigeria which was the market place. It initiated the market with the first batch treasury bills. The combinations of earning and liquidity were especially relevant for treasury managers the world over. This was because the ultimate objective of a commercial bank is to make profit for its shareholders.

   Union Bank of Nigeria (UBN) is one of the lending and oldest financial services group in Nigeria and also one of Nigeria apex Commercial Banks.

 

1.2   STATEMENT OF PROBLEM

   The miscellaneous overheads and operating cost of most banks have had to be on the increase over the past decade due to high rate of lending and depositing in fixed deposits. The depression brought a number of survival strategies to banks to enable them manage their find collection and utilization.

   in any case this research work addressed the following problems:

(a)         Placement of inexperienced personnel in the bank can constitute a problem in treasury operations.

(b)         Lack of diversification of investments can create problem and efficiency of liquidity level.

 

1.3   OBJECTIVES OF THE STUDY

        The objectives of the study are as follows:

(a)         To determine whether the efficiency of treasury operation is based on the treasury personnel employed in union Bank of Nigeria (UBN).

(b)         To determine whether investment diversification depend on effective treasury management activity.

 

1.4   RESEARCH QUESTIONS

        This project work attempts to find suitable answers to the following questions:

(a)         In what ways does the effectiveness and efficiency of treasury operation depend on the calibre of personnel in existing bank.

(b)         In what ways and manner does investment diversification depend on effective treasury management activity.

 

1.5   RESEARCH HYPOTHESES

        The key assumptions guiding this study are as follows:

(a)         HO:  There is no efficiency of treasury operation based on          

the calibre of personnel employed in the bank.

HI:    There is efficiency of treasury operation based on the calibre of personnel employed in the bank.

(b)         HO: There is no investment diversification which depend on              

effective treasury management activity.

HI:  There is investment diversification which depend on effective treasury management activity.

 

1.6   SCOPE OF THE STUDY

        Commercials Bank had encountered a lot of treasury operation problem. For the purpose of this study the research work is limited to Union Bank of Nigeria (UBN). The study will primarily direct its attention on its problems and challenges and it will attempt to give recommendations for further studies.

 

1.7   SIGNIFICANCE OF THE STUDY

        The study has both practical and Academic significance as documented below:

PRACTICAL SIGNIFICANCE

Treasury operation in practical or real life significance is important and relevant to the banking industries because it will identify the major sources of funding financial institutions. It will also find out the various ways those industries could be organized in order to lender effective and efficient services to their customers.

        Finally, the study will enable the federal government to formulate the right policies for banking industries.

 ACADEMIC SIGNIFICANCE

The impact of treasury operation in education process is of paramount important to higher institutions and to an individual for the upgrade of his/her educational qualification. It is also important to the Non governmental organization, the government and the entire public e.t.c.

 

1.9   DEFINITION OF TERMS

i.          INVESTING

This is the purchase of assets (both financial and other wise) that offer the expectation of income and capital gains for the purpose of increasing the investors wealth base.

 

ii.        TRADING

These involves buying and selling of goods and services with minutes or hours rather than months to take advantage of a prevailing situation.

 

iii.     BILL OF EXCHANGE

This is a Written order to pay a sum of money to a particular person on a particular date.

 

iv.      FOREIGN EXCHANGE

This is an asset earned through export of goods and services as well as the flow of foreign investment, external grant and loans.

v.         ARBITRAGE

This is obtainable when a bank buy at a lower price in one market and sell simultaneously at a higher price in a second market to earn a risk less profit.

vi.      TREASURY MANAGEMENT

This is where banks and other financial houses, acting as financial inter medians provide linkage between deficit economic units and surplus economic unit.

vii.    LIQUIDITY MANAGEMENT

These involves determine the total amount of cash and marketable securities the firm hold.

viii.   CASH MANAGEMENT This is concerned with the planning and controlling of cash flow into and out of the firm and cash balance held by the firm at a period in time for financing deficit or investing surplus of it.

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