ABSTRACT
This is a work based on a topic which has been critically viewed by many people as an area which has been under serious treat in recent years.
The banking industry has for some times come under heavy supervision as to whether there should be any reliability on the industry or is it just collecting money from people today and then go in to distress, the next day. With the help of this reform program, the central Bank of Nigeria (CBN) has on July 2004 announced a major reform program aimed at transforming the banking landscape of the country. The main thrust of the 13 point reform agenda then was the prescription of minimum share holder’s funds of 25 billion not later than December 31 2005. Also the central bank of Nigeria (CBN) announced on the 1st of January 2006 that 13 out of 89 banks failed to meet its 25 billion capitalization target and therefore is to be liquidated. And then the number of banks that emerged at the consolidation exercise was 25 banking groups, and Afribank plc which is my case study is among those banks that were given fresh licenses to operate in Nigeria. This work is to bring to memories of people the role the banking industry plays and they generate its revenue. And expenditure further more, it went ahead to establish a firm prove on the relationship between profitability and Afribank Plc. The researcher went further to outline the functions of commercials banks. The core of its assets and liabilities how they most operate to remain liquid and the danger of excess liquidity.
The researcher analysed a financial report of the bank (Afribank Plc) and was able to show the growth trend of the bank and finally made recommendations on the liability of the bank and its prospect in the years to come.
1.1 INTRODUCTION
To put things right and ensure a sound banking system for Nigeria (Soludo) proposed a 13 point banking reform programme that anchored on the following.
– Capital base requirement of N25 Billion through consolidation of Bank via merger and acquisition by December 31st 2005 etc. To create a safe banking system, the apex bank must have been encouraged by the fact that global size has become an important ingredient for success. Furthermore an enhanced capital base given a bank a competitive edge enables it to acquire relevant technology to engage high quality personnel to absorb cost to provide better services and ultimately increase in its earning although the 25 billion minimum capitalization requirement and the bank consolidation exercise is meant to create a sound banking system that depositors can trust, it does not necessarily guarantee or address the observed weak corporate governance practices excessive risk taking poor credit policies and administration loans Nigeria banking system.
The reform of the banking system is the right panacea the country needs for the industrial take off. This is in view of the fact that banking system plays a critical role in the economic growth and development of a country.
According to Prof. G. O Nwankwo, (1991), since they are the providers of the means of payment a failure in banking system could have a devastating consequences on the economy especially as financial institutions and markets are key intermediaries through which government bring their macro economic activity.
In banking transactions, the commercial banks operate on a profit. Motivated basis that is their sole aim of being in operation is for profit maximization and they try to make their shareholders happy by recording huge profit in their financial report every year. Banks represent a significant and influential sector of the economy and play a major role in the monetary system. There is, therefore considerable and widespread interest in their management and performance.
The quality of their financial statement will help to foster public confidence in the banks as well as in evaluating their performance.
A little history of banking in Nigeria needs highlighting to enable us form a firm understanding of the business generally. Modern commercial banking in Nigeria dates back to early colonial period. The decline in barter system of trade and the rise in financial transactions of the colonial government required on institution in the form of a commercial bank for safety and transmission of funds it was for this purpose that African Banking corporation based in South African was invited in 1892 to open a branch office in lagos.
The African banking corporation was therefore the first modern commercial bank to open a branch office in Lagos but its existence was made precarious by the trade depression, which hit lagos in that year. In the years 1894 its operation were taken over by the bank of British for West Africa. Later, its name was changed to standard Bank for West African Ltd. In compliance with the company’s act of 1968, this pioneer expatriate bank has incorporated in Nigeria s the standard bank of Nigeria Ltd. The bank changed its name was changed his name in 1978 to first bank of Nigeria limited Liability company (PLC). We have also another one called Barclays Bank (Dominion Colonies overseas) which came into Nigeria banking scence in 1917. Through also the companies Act of 1968, the bank changed its name to Barclays Bank of Nigeria limited. And in 1978 it was re-named Union Bank of Nigeria which is now a public limited company.
There were few of these banks that were purely indigenous right from outset which represent the effort of Nigerian business men to establish their own banks since the expatriate banks have not been particularly interested in giving them assistance they normally require to manage their own business.
In order to break the monopoly of the colonial banks indigenous banks Mushroomed, in the absence of a banking ordinance to regulate banking business. The first attempt to establish an indigenous bank was in 1929. Indigenous West African businessmen resident in London required a bank in London and transferred its operations to Lagos.
Because of bad management the industrial and commercial bank folded up in 1930. The Nigeria Mercantile Bank founded in 1931 collapsed in 1936, but the relational bank of Nigeria founded as a public company in 1933, survived an early collapse apparently because of prudent financial management.
Between 1947 –1952, well over twenty banks sprang up in the country. Almost all the mushroom banks formed during that period, as most of them were little different from wayside football ditch filed away before December 1959 because of: