International Journal of Economics and Business Administration
Articles Information
International Journal of Economics and Business Administration, Vol.1, No.1, Jul. 2015, Pub. Date: Jun. 17, 2015
Environmental Perspectives of Bank Distress in Nigeria in the 1990s: Lessons for Contemporary Bank Management
Pages: 6-16 Views: 1516 Downloads: 662
Authors
[01] John N. N. Ugoani, College of Management and Social Sciences, Rhema University, Aba Abia State, Nigeria.
Abstract
The bank distress syndrome which first became noticeable in 1989 was a matter of serious concern in Nigeria in the 1990s. In the period the banks affected were particularly the state government and privately owned banks. By 1994 when the gross domestic product growth rate declined to about 1.3 percent from about 2.3 percent in 1993 the number of distressed banks had risen to over 120. The situation was exacerbated by both political and economic uncertainties that also affected borrowers’ ability to repay their loans. This situation compounded the poor risk asset quality of the distressed banks that were already carrying huge non performing loans. The banks were in a deep mess of distress because of aimless management, insider abuse, frauds and forgeries that had negative effects on the shareholder’s funds. Thus, the liquidity position of the banks became very precarious between 1995 and 1996. The average liquidity ratio in 1996 was minus 100 percent compared to minus 44 percent in 1995. The average loan to deposit ratio was 113 percent as against the prudential maximum of 70 percent, indicating that the banks had generally overtraded and the shareholders funds completely wiped away. The survey research design was used for the study. Data analyses were done through descriptive statistics and Pearson’s correlation technique using the statistical package for the social sciences. The findings were presented in tables capable of understanding. The study found a strong positive correlation between environmental perspectives and bank distresses in Nigeria in the 1990s.
Keywords
Prudential Guidelines, Liquidity Ratio, Economic Downturn, Non Performing Loans, Interim Management Boards, Weak Management, Huge Operational Losses, FRABM
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