Abstract
The aim of this research study is to identify the effect of insurance industry in promoting banking services in Nigeria. (A study of Skye Bank Enugu Metropolis). The objectives of this research work is to examine and analyze the success of banking business in Nigeria and the roles insurance sector play in promoting their services and also to identify the various problems and challenges facing Nigeria banks. The Related literature review of this work include; The historical background of skye bank Nigeria . For a successful completion of this research work, the researcher made use of both primary and secondary methods of data collection of information gathering. Primary data were collected through questionnaire, administration, oral interview, and personal observations. Secondary data were collected through journals, textbooks, lectures, notebooks and internet. The data collected were presented in table and analyzed with simple percentage while the hypothesis stated were tested with chi-square. The summary of findings made by the researcher include the following: it was discovered that insurance industry has positively influenced the services of Nigeria banking industry.
TABLE OF CONTENT
Title page
Approval page
Dedication
Acknowledgment
Abstract
Table of content
CHAPETR ONE
1.0 INTRODUCTION
1.1 Background of the study
1.2 Statement of problem
1.3 Objective of the study
1.4 Research Hypotheses
1.5 Significance of the study
1.6 Scope and limitation of the study
1.7 Definition of terms
1.8 Organization of the study
CHAPETR TWO
2.0 LITERATURE REVIEW
CHAPETR THREE
3.0 Research methodology
3.1 sources of data collection
3.3 Population of the study
3.4 Sampling and sampling distribution
3.5 Validation of research instrument
3.6 Method of data analysis
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS AND INTERPRETATION
4.1 Introductions
4.2 Data analysis
CHAPTER FIVE
5.1 Introduction
5.2 Summary
5.3 Conclusion
5.4 Recommendation
Appendix
CHAPTER ONE
INTRODUCTION
- Background of the study
Nigeria as a developing country has been grappling with the realities of development process, not only politically and socially but also economically. Since economic development is perceived as a multi-dimensional process, it requires not only capital and technology but also attitude and the creation of the institutional structures. It also includes special protection of the financial institutions. The banking system has thus been singled out for this special protection because of the vital roles banks play in an economy especially in the process of economic development. According to C. Arthur Williams jr (1992), the establishment of insurance protection and cover through Nigeria Deposit Insurance Corporation (NDIC) was informed by economic circumstances and by a number of other considerations. The economic circumstances involved the new economic policy of government, the bitter experience of prior bank failures in Nigeria and the lessons from other countries with bank deposit insurance scheme. The distress in the banking system often precipitate other crises and this has necessitated regulatory and supervisory authorities to take a series of actions and intervention in response to these problems. The emergency of Nigeria Deposit Insurance corporation into financial sector of the Nigeria economy was borne out of necessity and need to check the incessant rise and fall of indigenous banks, Thus, the objectives of the Nigeria Deposit Insurance corporation are to protect bank depositors, ensure stability in the industry, encourage healthy competition among banks at foster, informed risk taking by insured institution, grant financial assistance to banks experiencing difficulties among others. The role of insurance sector in mitigating sudden and devastating occurrences thereby stimulating economic growth cannot be over emphasised. Both in developed and developing countries, insurance sector contributes to economic growth both sectorally and geographically. Since insurance sector has links to sectors such as industrial, transportation, agriculture, mining, petroleum and trade both locally and internationally, its relevance to general human activities has continued to grow for all ages as all categories of risks increase. Recently, several interesting lines of research have begun to map the specific contributions of insurance to the economic growth processes as well as to the wellbeing of the poor. In particular, several studies have focused on the relationship between insurance and economic growth. However, no consensus has emerged on the impact of insurance development and economic growth. For example, studies such as Arena (2006), Haiss and Sumegi (2008), Mojekwu et al. (2011), and Pen-Fen et al. (2011) found that insurance had positive impact on economic growth. However, study by Webb et al. (2005) showed that insurance had no significant positive effect on economic growth. The number of empirical studies is relatively small (for survey sees Levine, 1997; Thiel, 2001; Ang, 2008). No doubt that a good financial system with a well functional competitive market as well as a well supporting financial institution is an essential ingredient for sustainable economic growth, but in countries with undeveloped financial sector, opening the financial sector to foreign participation in the quest for a developed and market driven financial sector may not produce the desired effects (Jong, 2002). Though, the pattern of foreign penetration is country-specific and differs across region as a result of financial policies, the trend of opening up domestic financial market has been pronounced, especially in developing countries since 1980s and 1990s. However, Clarke et al (2001) observed that the progress of openness has been fastest in Latin America and the transition economies of Central Europe while that of Asia, Africa and the Middle-East has been much more modest. Arestis et al (2001) use both bank and stock market to assess the finance and growth relationship with a quarterly data for developing countries. Their result revealed a positive and significant correlation between finance and growth, with a larger impact from banking sector measures. A rise in real interest rate driven by financial development is likely to encourage saving and expand the supply of credit available to domestic investors (Reinhart and Tokatlidis, 2002). Also, when an economy has strong institutions, the impact of financial development on the fragility of banking system will be mitigated through changes in institutions supporting a better functioning of financial market (Demirguc-kunt and Detragiache 1998, Kamisky and Schmukler, 2002). Okudia et el (2002) employ a parametric approach to estimate Malaysia bank cost efficiency between 1991 and 1997 with intention of analyzing the effect of changes in the industrial structure and efficiency of commercial banks due to the financial liberalization programme of 1990s for a sample of 19 commercial banks. The mean cost efficiency was estimated to be 83% after controlling for asset quality. Rajan and Zingales (2003) hypothesize that opening up an economy to international trade and finance may weaken the political influence of incumbents but promote financial development. They corroborate this hypothesis by showing in a global sample that financial development and trade openness are positively correlated when crossborder flows are high. Their work also emphasizes the influence of institutions on the impact of interest group activity and reiterates the importance of institutions on financial development. Matarr (2006) examine the impact financial liberalization has on bank spread in 14 Malaysia commercial banks between 1999 and 2004. The result shows that under Malaysian gradualist approach to financial liberalization, despite the level of government intervention, financial liberalization continues to have efficiencyenhancing effects on banks in Malaysia. Demetriades and Law (2006) examined the importance of institutions to the functioning of the finance-growth nexus. Using a panel data set from 72 countries, they found that the magnitude of effect of financial development on economic growth in an economy is directly tied to the quality of the institutional framework in that economy, with a weak relationship in poor institutional settings. Chinn and Ito (2006) showed that financial openness (capital account liberalization) positively influences financial development, albeit only after a certain level of institutional and legal development has been attained. Girma and Shortland (2007) examine the effects of democracy characteristics and regime change on the financial development of countries in a panel data analysis. Their result shows that regime stability and sound democracy promote financial development. Baltagi et al (2009) further examine the Rajan-Zingales hypothesis using data from developing and developed countries, as well as dynamic panel estimation techniques, and find that both financial and trade openness are significant determinants of banking sector development. Beck et al (2012) analyze micro and macro data from 32 developed economies and found that increase in the rate of financial innovation between 1996 and 2006 were associated with both increased levels of economic growth, and increased levels of economic volatility and an unusual bank fragility. Arcand et al (2012) analysis on “too much finance” held that beyond a certain limit, development of the financial sector starts having a significant negative effect on growth, even after controlling for volatility, crisis, and other institutional factors. Indeed, most existing studies on insurance-growth nexus are focused on the developed and few industrializing countries. In the developing countries, not many studies have focused on the insurance sector probably due to the small size of the sector before the reforms in the early 80s. Indeed, few studies to our knowledge have been published on the insurance-growth nexus in Nigeria. These are, no, doubt big gaps in the literature that needed to be filled. It is expedient to inquire not only into the growth of the insurance sector in Nigeria but also how the sector has impacted economic growth. This is why the main objective of this article is to examine both the short and long run relationship between insurance and economic growth in Nigeria
Insurance industry also stand as a risk transfer mechanism that can also provide cover and protection to some certain uncertainties that can negatively affect Nigeria banking services. According to J.O Irukwu (1999), Insurance cover risks like:
Loss of building and contents to fire and special perils
Loss of cash-in-transit and cash-in-safe
Loss or break down of computers and other business machines
Loss due to infidelity of employees
Loss due to bad debts
Theft in the business premises
Loss of key employees
Loss due to professional negligence
The researcher in this research work was prompted by the curiosity to know the challenges facing Nigeria banking and how much insurance industry has contributed to tackle and solve those challenges.
1.2 STATEMENT OF PROBLEMS.
The under listed problems are what led to this research:
- Liquidation of banks
- Weakness of internal control
- Inconsistency in monetary and banking policy
- Fraudulent and unprofessional conduct of bank staff, depositors and customers
1.3 OBJECTIVES OF THE STUDY
- To determine the effect of insurance industry on bank liquidation in Nigeria.
- To evaluate the extent of weakness of internal control system in Nigerian banking industry.
- To examine the impact of inconsistency in monetary and banking policy.
1.4 RESEARCH HYPOTHESES
To aid the successful completion of the study, the following research hypotheses were formulated by the researcher;
H0: insurance industry on does not have any significant effect on bank liquidation in Nigeria.
H1: insurance industry on does have a significant effect on bank liquidation in Nigeria.
H0: inconsistency in monetary and banking policy does not have any impact on the performance of the banking system
H2: inconsistency in monetary and banking policy does have an impact on the performance of the banking system
1.5 SIGNIFICANCE OF THE STUDY
It is believed that at the completion of the study, the findings will be of importance to the management of insurance companies and the Nigerian deposit insurance corporation as the study seeks to explore the effect of insurance industry in promoting banking services in Nigeria. The study will also be of great importance to the management of deposit money banks and other developmental banks in the country as the study seek to enumerate the benefit of collaboration between the insurance sector and the banking sector in Nigeria. The study will also be useful to researchers who intend to embark on a study in a similar topic as the study will serve as a reference point to further research, finally the study will be of importance to the general public as the study will add to the pool of existing literature on the subject matter and contribute to knowledge.
1.6 SCOPE AND LIMITATION OF THE STUDY
The scope of the study covers the effect of insurance industry in promoting banking services in Nigeria. But in the cause of the study, there were some factors the limited the scope of the study;
Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
Availability of research material: The research material available to the researcher is insufficient, thereby limiting the study.
1.7 OPERATIONAL DEFINITION OF TERMS
Insurance
Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.
Banking services
Is an end-to-end process ensuring the overall execution of a financial service provided over the Web. Such a digital banking service is available on demand and is carried out within a set time-frame
Bank
A bank is a financial institution that accepts deposits from the public and creates credit. Lending activities can be performed either directly or indirectly through capital markets
- ORGANIZATION OF THE STUDY
This research work is organized in five chapters for easy understanding as follows Chapter one is concern with the introduction which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study it’s based thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion and recommendations made of the study.
