GOVERNMENT INTERFERENCE IN MANAGEMENT OF FINANCIAL INSTITUTE( A CASE STUDY OF UNION BANK OF NIGERIAN PLC)

ABSTRACT

There has been series of bank failures which was seen traced to poor and improper management of banking activities.

Government interference through CBN instrument of monetary polices has gone a long way in bringing some problem under control in financial institution. Therefore a literature review was made bearing in mind on this regulations and polices. To achieve this, questionnaires and interviews method were intensively employee in this study. They were supported by personnel observation during collection of data. The collect data was presented in table which proof that government interference has contributed major role in sanitizing government system† in Nigeria.

Furthermore, the study would clearly add to the existing knowledge on government interference in management of financial institution.

This study strongly advocate for government to have a hand in selecting and recruiting top management staff of the financial institution to reduce fraudulent act. Central bank of Nigeria should not be so rigid, they should strike a medium between financial liberation and occasional intervention aim at correcting financial failures.

TABLE OF CONTENTS

Chapter one

Introduction ††††††††††††††††††††††††††††††††††††††††††††††††

1.1         Background of the study †††††††††††††††††††††

1.2         Statement of the problem

1.3         †Purpose of the study †††††††††††††††††††††††††

1.4         Scope of the study †††††††††††††††††††††††††††††

1.5         Significance of the study †††††††††††

1.6         Definition of the terms††††††††††††††††††††††††

Chapter two

Literature review ††††††††††††††††††††††

2.1         Central bank of Nigeria policies of financial institute

2.2         Nigeria financial review in the financial institute ††††††††

2.3         Union bank of Nigeria operational rules and regulations

2.4         Government new policy on financial institution

2.5         Government roles in financial institution ††††††††††††††††††

References ††††††††††††††††††††††††††††††††††††††††

Chapter three

Summary of the study†††††††††††††††††††††††††††††††††††††††††††††

3.1         Analysis of data and presentation of result† ††††††††††††††

3.2         Finding ††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††

3.3         Conclusion ††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††

3.4         Recommendation††††††††††††††††††††††††††††††††††††††††††

References† †††††††††††††††††††††††††††††††††††††††

CHAPTER ONE

INTRODUCTION

Management has been defines the process of combining and utilizing organization resources of man material to accomplish organization objective. It is the process of doing through end with people what then do we actually mean by interference? Interference according to websters dictionary is to take an active but unwelcome part in some else activity.

In this study, is has been revealed that this interference on financial institution by government as a whole is noble in the right direction. The Nigeria financial system is very vibrant and highly competitive. They have four basic product line in the banking industry such as deposit base product, lending-based product fee vase products and technology based product. This was instituted by the observation during the research that financial institution benefited immensely by the government on the financial institution

It is a well know fact that number of services financial institution offers have increased but risk taking which is fundamental nature of their business remains unchanged. This has led to the conclusion that management is financial institution is surrounded with risk management which involves mismatches of asserts and liabilities on other side and it is cost borrowing and lending on the other side.

The economy end to nurture it along the path of development. The role of financial institution mostly bank has been constrained by a number of fact in too past. Price to now, the industrial sector has been characterized by massive direct government involvement, because of weak technological base, lack of linkages in infrastructure and policy investment, highly production cost and goods that were uncompetitive internationally. Overall, the micro Economic environment was highly unstable, witness capital flight, high interests or inflation rates, negative real growth rate and fiscal excesses with an external debt burden of about 27.4 billion as the end of 1997, the repayment burden put a constrain on growth.

Since 1995, however, the federal government has been able to store some measure of fiscal discipline through low budge deficits, which achieved stable interest and exchange rates regimes, while pushing down inflation to a simple digit of 8.5 percent in 1998.

Aggressive reform and sanitation of the financial institution source were pursued on the other hand little or no attention was paid to the vital area of privatization of government utilities liberalization of the company and improvement of infrastructure.

The above review of the economy has been undertaken and other financial institutional were suppose to operate and provide finances to the industrial sector from the above review the researcher, therefore went to use this study to explore those factors emanated from government interference in the management of financial institution that inhibited them from effectively discharging their responsibility to the economy generally using the generational rules and regulation of Union Bank Plc to determine the extent it has contributed both positively and negative part of such interference in the institution.

1.1        BACKGROUND OF THE STUDY

The Nigeria institution is very vibrant and highly competitive. It consist of 105 viable commercial and merchant bank which are privately owned with a total of 2,400 branches and 5 development bank such as N BC, NIDB PBN and FMBN owned by the by the government. There are also about 200 registered non bank finance house of various size. Part of the structural adjustment programme (SAP) introduced in 1986 was the expansion and diffusion of the banking and financial institution. By 1992, the banking sector had growth to 67 commercial bank 55 merchant bank, 45 primary mortgages institution, 228 branches of the people bank, 618 finance companies (48 fully incensed by the CBN) 401 community bank and specialized bank. By the mil 1990ís the was endemic distress in the financial system, which led eventually to collapse of many of the institution in the unstuffy many commercial and merchant bank were liquidated, with 26 banks (13 each of commercial and merchant) liquidate ad recently as January 16, 1998. In the case union Nigeria Plc survived it. Close at the operational policy o f union bank Nigeria plc, Enugu revealed that government interference in management of positive type even though that there are some risk in embodying such rules and regulations line in their banking system such as deposit-base product, lending lines in their banking system such as deposit based products, lending base product fee-base products and technology base products. Therefore the interference has help them to accept the risk job of greater mobilization of saving from the surplus units and channeling them to the deficit productive units of the economy, and to ensure that no unable project is frustrated due to lack of funds and greater facilitation of synergies and sartorial linkages within the economy there still problem resulting in such interference of which union bank are complaining of.

Government interference in the management of union bank Nigeria plc also covers limits of permissible business, risk concentration, capital and liquidity adequacy and statutory returns. The monetary aspect of regulatory includes, control, over loading generally, structure of leading interest rates, reserve requirement and foreign exchange.

There are also regulation covering adverting staffing loan, loans to director and inside dealing supervisor is employed to ensure effective management and control due to the level of our development. These control have been said to be unwisely and the system cover regulation with too little supervision and control. The criticism let to gradual deregulation in 1984 and was subsequently accelerated with the adoption of the structural adjustment programmes in July 86. The programme was designed to give more room for the operation of free market force given financial institutions more direction to their operations and stimulate competitions in the financial system as a whole.

Consequently in 1988, the† Nigeria deposit instance corporation was established with regulatory powers to protect depositors against bank failures and thereby strength the financial and impacted greatly on financial environment.

1.2        STATEMENT OF PROBLEM

Despite the interference of government in the management of financial institution, there is no doubt that a lot of ills are bestting financial institution existence in Nigeria, especially in the area of control regulation and operation. Regulation does not guarantee that they will reverse bank failure an serious banking crises. No matter how effective and through the regulationary mechanism, the problem may still occur as history has shown it. Even with high policy and regulation which usually accompany and serious bank crises or bank failure it is to prevent impact of such failures form threatening the systematic last resort function on the central bank exist in protect the aggregate deposit of the system and prevent the collapse of single institution from destabilizing the entire financial system.

Establishing of more financial institution by both government and individual was implement to solve the problem of poor service to customers and also dominance of foreign based bank by Nigeria indigenes to help in encouraging improved banking system in Nigeria but still their supremely investment, high production costs and goods that were uncompetitive internationally, high interest rate and rift among bank directors and unprecedented industrial unrest within the sector exist due to shallow acknowledgement policy and regulation in the sector of economy which helps in paralyzing the while system. Also problems exist due to hardcore of such regulation and deregulation of policy to the financial institution.

1.3        PURPOSE OF STUDY

The main purpose of the study are:

To find our how union bank of Nigeria plc is employing the government policy to ensure sound banking system towards the acceleration of economic development in Nigeria.

To study their growth and survival in the faces of various banking ordinance that was consolidated in central bank number 24 decree of 1991 and the present day decrees.

To highlight the enviable policies of union Bank of Nigeria Plc adopted to keep float against the recently established banking system.

To ascertain the effect of government interference in the management of financial institution and the type of environment it has created for the proper existence of financial institution whether it is on the right director.

1.4        SCOPE OF THE STUDY

This study is interned to cover:

The new policies and decrees introduced in financial institution since the inception of structure adjustment program in 1996.

The impact of these policies on the operations of union bank of Nigeria plc.

The challenges passed by these policies and decrees and the central bank effort to control the problem arises by the implementation of the polices and regulations.

This study will also cover the problem union emment control in he management of their affairs and also the position aspect of the policies to the management of union bank Nigeria plc.

1.5        SIGNIFICANCE OF THE STUDY

The finding and recommendation of this research work would be useful and serve as a guide to the financial institution and also to government in formulation policies and decrees relative to the effectiveness of the institution. This study is pursued with view to highlight growth of financial institution since government interference in their operations with particular analysis on the union bank of Nigeria plc a commercial bank which can sever as a guide to other bank. The study will be significant in examining the achievement of government the presence of increasing problem confronting this sector of the economy mostly on the part of monopoly of the rendering of services to entrepreneurs foreign connecting cover the indigenous ones poor customers services high rates of interest high rate of inflation constant bank crises and increasing competition among the institution.

†The study will provide a data-base for future researches in government interferences in the management of financial institution and add to the material out standing in the library. The study would be of importance to only reader and assist government and financial institution in reviving their various policies. Plans decrees regulation deregulation with respect of management of financial institution and the fundamental services they render.

1.6        ††††DEFINITION OF TERMS

Financial institution: Is the organization that responded to the financial system in the country. They provided both short term and long term fund

Effective operation: Being active progressive and consistent in financial institution operation on service.

Regulation: regulation is an act of being regulated or control by role government a group of people

Policy: A selection planned line of conduct in the light at which individual decision are made and co-ordinated achieved this can be chosen by government or business.

Immensely: Valued too much

Management: Managing or being managed by he body of those in position of administrative authority

Interference: Interferences is to taken on active but unwelcome part in some one port else activity

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