MARKETING OF BANKING SERVICES UNDERTHE REGIME OF RECAPITALIZATION:

"A CASE STUDY OF THE NIGERIAN BANKING SYSTEM"

BY

Nwachukw.u Remlqlus I.CMD-UNN/PG/EMBA/2001/0947

"

BEING A RESEARCH PROJECT SUBMITTED TO THEDEPARTMENT OF MARKETING, FACULTY OF BUSINESS

ADMINISTRATIONUNIVERSITY OF NIGERIA,ENUGUCAMPUS ENUGU, IN PARTIAL FULFILMENT OF THE

REQUIREMENT FOR THE AWARD OF MASTER OF BUSINESSADMINISTRATION (MBA) DEGREE IN MARKETING

APRIL 2005

UNIVERSITY OF NIGERIA, NSUKKA

ABSTRACT

In performing their role as financial intermediaries, the banks provide theplatform for the transfer of funds from surplus economic units to deficitones thereby helping in facilitating business transactions and economicdevelopment. Since the funds being deployed by the banks are largely

. owned by third parties (usually the depositors), it becomes necessary forsuch funds to be prudently and efficiently managed so as to ensure thesustenance of the confidence of the depositors in the banking system,ensure that the financial system remain sound at all times and ensure thatthe risk of bank failures is minimized.

The proliferation of banks in the 1990s brought about a stiff competitionwhich eventually culminated in a wave of change sweeping through theentire banking system. This wave of change led to the death of 'arm-chairbanking' and impressed on every bank official the imperatives of constantmonitoring of developments in the environment; identifying and analyzingthreats with a view to converting them to opportunities as the surest wayto ensuring not just the survival but the growth of their banks as well.

Of recent, the Central Bank of Nigeria (CBN) has directed all operatorswithin the Nigeria - banking system to raise their capital base to N25billion within eighteen months with compliance deadline of 31st December2005.

This recapitalization requirement has thrown up a number of opportunitiesas well as challenges related to mobilization of deposit and theirdeployment; marketing of banking services; interest rates; diversification;mergers and acquisition; consolidation, and so on.

In view of the foregoing prevailing economic reforms in the financialsector, especially the banking industry, with particular regard to the newrecapitalization requirement, it has become necessary to examine thechallenges and prospects of marketing banking services; depositmobilization and deployment viz-a-viz the imperatives of ensuring thesafety and soundness of the banking system.

For example, it is necessary to examine the position of the Nigerianbanking system prior to this era of recapitalization, and also look into theworkings of the system post recapitalization.

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UNIVERSITY OF NIGERIA, NSUKKA

Specifically therefore, this study sets out to undertake an assessment ofthe challenges and prospects of marketing banking services under theregime of recapitalization in the Nigerian banking industry.

The study relied basically on both the primary and secondary data whichwere obtained through the administration of structured questionnaire andthe revision of existing relevant literature, respectively. The questionnairewas administered on a carefully selected group of respondents fromamong notable operators within the Nigerian banking system.

Data gathered during the course of this study were subjected to empiricaland statistical tests in order to find answers to the research questions andto prove the hypotheses.

Basically, descriptive statistical analysis were carried out. For claritypurposes, results of data analysis were presented using statistical tables,percentages and charts.

,Of the 120 questionnaire administered, 89 were retrieved duly completed.3 of the questionnaires were however rejected as unusable on the groundsof ambiguity, leaving a balance of 86 usable returned questionnaire whichgave a 71.6% retrieval rate. The report of the research findings is herebypresented in subsequent pages.

Specifically, the study identified that the recapitalization will engender shiftfrom speculative banking practice to a more focused approach leading tosustainable long term lending. This will then result in economies of scaleand more efficient resource allocation and hence overall national economicdevelopment.

However, the study also cautioned on the implementation of therecapitalization exercise to prevent a mis-interpretation by the public,which could lead to a run on the banks. This could be achieved through aphased implementation schedule as different from the 18 months periodpresently being implemented.

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UNIVERSITY OF NIGERIA, NSUKKA