1.1 BACKGROUND OF THE STUDY
In the Nigerian Banking system considering the last decade the Commercial Banking to be precise had under gone a rapid expansion both in terms of the number of Institution and the scope of Financial services rendered. As bank licensing was liberalized so was the seed of instability sown in these banking system at the same time.
As these expansion trend continuous, a sign of lacked vision among the investors and the directors motive of quick returns to satisfy the liquidity operation. The word distress has been in existence but increased promptly as these institution increased due to acute shortage of resources and the massive with drawal of deposit by government agencies and other public sectors from these bank.
The development threatened the Financial structure, expose and undermine the economic system which impede development of the economy.
Therefore, distress places a great burden on regulatory authority, depress the economy, undermine the payment system and discourage savings.
1.2 STATEMENT OF THE PROBLEM
Some Commercial Banks have been diverted to assist in loans and advances to various sectors of the economy. And the Commercial Banking is known as refall banking which accept deposit and make payment to his customers. But the Financial condition of some of these Commercial Banking due to the political instability/electoral campaign that is on. Political analyst describes this on coming election to be one of the brutal crisis that is to come. Therefore, there is panic with drawal of fund by these bank customers. This institution is now bogged down by distress, insolvency, poor liquidity due to decline in deposit, and loss of confidence in the system. The crisis has to be averted and the urgency prompted the study. This research work is designed to describe the financial distress in some Commercial Banks system in Nigeria.
1.3 OBJECTIVE OF THE STUDY
The objectives of the study are:
1.4 RESEARCH QUESTIONS
For the purposes of this study, the following question is addressed.
1.5 SCOPE OF THE STUDY
The study examines distress and causative factors as it affects some Commercial Banks.
However, it was not possible to carryout the research in the country as a whole, but with the available range covered it made possible for the project to be unbiased.
1.6 LIMITATION OF THE STUDY
The study is limited within Enugu State due to insufficient time to carryout the work.
Apart from time factor the inability of accessing all distressed Commercial Banks, and Financial constraints among others also caused the limitation etc.
Other possible limitation to the study could be lack of transparency among the distressed bank staff to the researcher to avoid exposing their weakness to the public.
1.7 SIGNIFICANCE OF THE STUDY
The importance of a healthy banking system cannot be over emphasized, for so many reasons, ranging from the vital economic importance of the huge deposits at stake to public confidence, jobs and career of people who are staff of these banks and the key role these banks plays in the economic development. Also the benefit of finding a solution to the crisis will be found useful to investors or customers of these banks, the regulatory and supervisory authorities and even the government. The solution will also be useful to the managers in general of these banks.
1.8 RATIONALE/JUSTIFICATION FOR THE STUDY
The fundamental reason of this study is to be in compliance with the requirement of the school of management and the department for obtaining the Ordinary National Diploma (OND). Apart from this, it is also to enlighten students on how to carryout research independently.
DISTRESS: As been defined by Hornby it is the state of being in difficulty and needing help. Smith and Wall 1992, Ologun, 1994 defines distress as “unhealthy situation” or a state of inability or weakness which prevents the achievement of set goals and objectives.
FINANCIAL DISTRESS: This is when Financial Institution can no longer cope with their financial structure and requires help. This can take various forms like, insolvency, poor management, illiquidity, lack of deposits etc.
COMMERCIAL BANKS: These are financial institutions referred to as retail banks. They accept deposits are make payments on demand to their customers.
1.10 ASSUMPTIONS OF THE STUDY
This piece of research work was based on the following assumptions: