Marketing of Banking Services Under the Regime of Recapitalization: A Case Study of the Nigerian Banking System

Abstract

In performing their role as financial intermediaries, the banks provide the platform for the transfer of funds from surplus economic units to deficit ones thereby helping in facilitating business transactions and economic development. Since the funds being deployed by the banks are largely owned by third parties (usually the depositors), it becomes necessary for such funds to be prudently and efficiently managed so as to ensure the sustenance of the confidence of the depositors in the banking system, ensure that the financial system remain sound at all times and ensure that the risk of bank failures is minimized. The proliferation of banks in the 1990s brought about a stiff competition .,which eventually culminated in a wave of change sweeping through the entire banking system. This wave of change led to the death of 'arm-chair banking' and impressed on every bank official the imperatives of constant monitoring of developments in the environment; identifying and analyzing threats with a view to converting them to opportunities as the surest way to ensuring not just the survival but the growth of their banks as well. Of recent, the Central Bank of Nigeria (CBN) has directed all operators within the Nigeria - banking system to raise their capital base to N25 billion within eighteen months with compliance deadline of 3lSt December 2005. This recapitalization requirement has thrown up a number of opportunities as well as challenges related to mobilization of deposit and their deployment; marketing of banking services; interest rates; diversification; mergers and acquisition; consolidation, and so on. In view of the foregoing prevailing economic reforms in the financial sector, especially the banking industry, with particular regard to the new recapitalization requirement, it has become necessary to examine the challenges and prospects of marketing banking services; deposit mobilization and deployment viz-a-viz the imperatives of ensuring the safety and soundness of the banking system. For example, it is necessary to examine the position of the Nigerian banking system prior to this era of recapitalization, and also look into the workings of the system post recapitalization. iv Specifically therefore, this study sets out to undertake an assessment of the challenges and prospects of marketing banking services under the regime of recapitalization in the Nigerian banking industry. The study relied basically on both the primary and secondary data which were obtained through the administration of structured questionnaire and the revision of existing relevant literature, respectively. The questionnaire was administered on a carefully selected group of respondents from among notable operators within the Nigerian banking system. Data gathered during the course of this study were subjected to empirical and statistical tests in order to find answers to the research questions and to prove the hypotheses. Basically, descriptive statistical analysis were carried out. For clarity purposes, 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 grounds of ambiguity, leaving a balance of 86 usable returned questionnaire which gave a 71.6% retrieval rate. The report of the research findings is hereby presented in subsequent pages. Specifically, the study identified that the recapitalization will engender shift from speculative banking practice to a more focused approach leading to sustainable long term lending. This will then result in economies of scale and more efficient resource allocation and hence overall national economic development. However, the study also cautioned on the implementation of the recapitalization exercise to prevent a mis-interpretation by the public, which could lead to a run on the banks. This could be achieved through a phased implementation schedule as different from the 18 months period presently being implemented.