This work is purposely written to look into The Effect of deregulation economy system of commercial banks performance. The research was carried out in Lagos. This project work is divided into five chapters: Chapter one (1) consist of the purpose of study, significance of the study and working hypothesis are discussed. Chapter two (2) dealt with the review of literature in which reasons for deregulation economy system of commercial banks performance in Nigeria. Chapter three (3) focused on research methodology. During this investigation the researcher used GT Bank. Chi square method was used to test the reliability of the data collected through instrument of data gathered. Chapter four dealt with the result and discussion on the analysis of the data obtained from GT Banks through the use of questionnaire and the research of the hypothesis to fortify the research study. Chapter five (5) consists of the findings, summary and conclusion to the study while recommendation and suggestion were made for further studies.





Title page                                                                                                    i

Certification                                                                                               ii

Dedication                                                                                                  iii

Acknowledgement                                                                                     iv

Abstract                                                                                                     v

Table of content                                                                                         vi

Chapter One

Introduction                                                                                     1

Background to the study                                                                1

Statement of the Problem                                                                4

Purpose of the Study                                                                       6

Research of the Study                                                            7

Research Question                                                                          7

Research Hypotheses                                                                      8

Signification of the study                                                                 8

Scope and Delimitation                                                                   9

Definition of Terms                                                                          10


Chapter Two

Review of Related Literature                                                            12

Historical Background                                                           12

Conceptual framework on deregulation in Nigeria

banking sector                                                                                 16

Functions of commercial Banks in the Development

of Nigeria                                                                                  21

The concept of Structural Adjustment Programme (SAP)             23

The Era of Banking Regulation                                             24

The Era of Deregulation                                                                  25

Emergencies of the Capital Market and its Regulation

Framework                                                                             29

Current Literature on the study                                                      33


Chapter Three                                                 

Research Methodology                                                         38

Research Design                                                                              38

Population of the Study                                                                   38

Sample and sample Technique                                                       38

Research Instrument                                                                       39

Validity of Instrument                                                                      39

Data Collection Instrument                                                             39

Method of Data Analysis                                                                 39

Chapter Four

Analysis of Data and Interpretation of Result                                         41

Definition of Findings                                                                                49


Chapter Five

Summary, Conclusion and Recommendation                                         50

Summary                                                                                          50

Conclusion                                                                                                 53

Recommendation                                                                             55

References                                                                                        56

Appendix                                                                                          58




Background of the Study

The rapid growth in the banking industry since 2000 has attributed greatly to the deregulation of the banking system and the financial liberalization including licensing of the banks and non banks according to (Cameron 2002) “Generally, banks are dominant mobilization of savings and promoters of investment

In terms of membership, there has been an increase in Commercial and Merchant Banks form twenty-one in 1976 to forty-one in 1986 before deregulation and jump to one hundred and twenty in 2002. Other types of banks like the people bank of Nigeria, Community Banks specialized banks, Mortgage Banks and finance houses were set up and allowed to flourish to fill some gaps in the financial system.

Thus, the numbers of Community banks which only started in 1990 and currently progressing. The number of branches of the people’s bank, which started operation in 1989 increased to two hundred and four at the end of 1992. For the mortgage banks, the number increased from twenty-three at the end of 1991 to one hundred and forty-five at the end of 1992, while the finance houses institutions which have been applied to the CBN licenses.

According to (Ekpeyong 1993 “By December 1991 a total of five hundred and fifty eight financial institutions had applied for CBN licensing. By 1993/1994 more than half of that number had gone out of business.

As Ojo (1994) distress, the prudential regulations have been very useful in steaming financial distress.

Other Institutional developments in the Banking Institutions like urban development bank, maritime development banks. Educational banks and the Nigerian export/import bank (NEXIM).

Deregulation is a response to regulatory failure, which occurs when the outcome of attempting to fight market failures and inferior to what the situation would have been without regulation are mainly to remove compiled, Administrative controls on economics activities encourages greater private sector participation, increase reliance on market for the allocation of resources. It should be noted that deregulation certainly does not suggest a situation of no regulators.

Furthermore, deregulation also aimed at protecting the bank against risks, in the exercise of their functions, Banks take several risk for example credit risk arising from default or delay in making or receiving payment, liquidity risk arising from maturity mismatches, faulty balance sheet structures changes in interest rates, asset prices and foreign exchange rate fluctuations, operating errors and inefficiencies, risk arising from frauds and defalcation etc

Nwankwo,2004, Reuail 2005; & Gardener, 2006, described that period (1986-1999/2008) was described as the period of deregulation. It ended up with so many regulations around at correcting the distortions caused by regulating controls. This is understandable because in order to change the old rules of the game new one h as to be put in place and this requires new regulations. This period generally referred to as the structural adjustment period (SAP) was designed to alter the structure and operational mechanism of the financial system among other objectives. The policy packages oneself imposed structural adjustment programme (SAP) which was launched on the27th June 1986. The structural adjustment programme (DA) aimed at deregulating the economy, especially the objective of structural adjustment programme were to:

  • Lay the basis for sustainable non-inflationary or minimum inflationary growth
  • Restructure and diversify the productive base of economy in order to reduce dependence on the oil sector and imports.
  • Improve the efficiency of the public sector
  • Achieve fiscal and balance of payment availability over the period
  • Stimulate domestic financial and efficient resources allocation.
  • Reduce the dominance of unproductive investment in the public sector
  • Intensify the growth potentials of the private sector

Again, this background, the researcher was therefore motivated to examine the topic “The effects of deregulated economic on commercial banks performance” a case study of UBA Plc.

Statement of the Problems

From the introduction of deregulation many noticeable changes have occurred in the economy particularly in the financial system in Nigeria which has brought many changes to the banking industry and GTB Plc is not an exception some of these changes including the following.

  • Adoption of inappropriate and irrelevant strategies for a given change is a major problem in the banking industry.
  • The size and structure of the industry as well as the mode of operations in the system are affected significantly.
  • There is the problem of coping with constant change of the policy measures
  • inability of the deregulatory authorities (CBN and NDIC) to effectively monitor the expansion in size of the banking industry brought about by deregulation
  • Economy standard growth has fallen of target between 1998 and till date resulting in foreign exchange appreciation rate as compared to our Naira standard depreciation.
  • Federal government deficit kept rising interest rates inflation kept increasing and there was excess liquidity build up caused by increased federal government deficit.
  • Inter banks rates claimed to an alarming rate, which eventually influenced other rates
  • Another main deficiency that also stems from the adopted system in the banking system that functions predominantly on short term deposit and lending on short term bases that is hardly useful for productive investment
  • Increasing incidence of non professionalism in banking practices
  • Rising incidence of fund, insiders abuses and un ethical practices
  • Banking system distress with rising waves of financially weak liquidity deficient banks and bank defaults resulting in erosion of confidence in the banking system.
  • Non co-operative attitudes and negative/sabotaging reactions of bankers that often ineffective monetary policy and foreign exchange management measures.
  • Faulty policy measures and deficient performances of the supervisory/regulatory functions of the apex institutions consequent upon the failure of monetary stability to materialize government resorted to issuing stabilization security in 1990 and transferred government accounts from the banks, to the (CBN) which action revealed the first signs of distress in many banks and other financial institutions.

Hence, some banks became distressed and technically unhealthy while some have their license revoked. Therefore, to make adequate recommendation, it has to be ascertained to what extent has the deregulation of the financial system affect the banking institution in Nigeria especially GTB Plc. An answer to these questions necessitated the need for this study.

Purpose of the Study

The reasons for writing this project work among others are enumerated as follows:

To examine the deregulation of the banking sector especially GTB so as to encourage competition, new initiatives and innovations which cannot occur without risk.

To examine other ways of improving the competitive readiness of the bank

To ensure that competition and regulation are not substitutes and are not mutually exclusive. To offer suggestion for the survival of the banking deregulated industry. To examines the effects of various banking policy measures on the bank. To assess the strategies adopted by the bank in a deregulated industry

To investigate the duties, rules and responsibilities of bank employers in a deregulated banking industry. To investigate the strategies, weakness, opportunities and threats of the bank management. To find out the effects of deregulated economy, examine the future of the bank and to identify the survival strategies of the bank in a deregulated banking environment.

The main focus of this write up is to bring out the effect of deregulation economy on commercial banks performance

Research Question

Here are the guiding questions of this project work as it affects GTB plc.

  1. Are the inter-bank transactions and rate licensing as a result of deregulation?
  2. Has deregulation of financial system enable the bank to increase its earnings and profitability?
  3. Is the exchange rate of Naira declining as a result of fluctuation of currency?
  4. Can the deregulatory measures be simultaneously implemented?
  5. If not, have they been designed in such a way that a proper sequencing is set and followed
  6. Does deregulation of financial system lead to an increased level of deposit?
  7. Was the determination of the interest role by market forces led to an increase and volatile rate of interest?

Research Hypotheses

The research hypothesis include

Hi: The deregulation of the banking sector will not necessarily increase the incidence of non-professionalism in banking practice.

Hii:  The deregulation of the banking sector will not necessarily increase the incidence of non-professionalism in banking practices.

Hiii: Deregulation is likely to generate risking incidence of fraud, insider abuses and unethical practices.

Hiv: Deregulation of the banking system will not lead to distress with risking waves of financially weak liquidity deficient

Significant of the Study

The theme of this write up is that deregulated economy of the banking is sub sector can have positive effects on the operations of the banks provided the deregulators and the operators are determined in their intension to make them work.

The research work will be of great use to the bank managers and staffers, students of banking and finance, banking policy formulators; and the general public, This research work will help the bank executives to examine their strategies.

The research workers will provide useful information to management of banks on the effectiveness survival strategies

The research work will provide useful information to management of banks on the effectiveness survival strategies that are available in a deregulated financial system.

It will be reference value to educational researcher. The students of banking and finance, accounting and business administration students in higher institution of learning.

The research work will contribute to the growth of knowledge and advancement of intellectual endeavours. It will also guide the bank management to identify various official banking policies

In conclusion, it will help the general public to be exposed to various banking policies adopted by the regulatory authorities.

Scope of Study

The scope covers the era of deregulation (1986-1993/1995). The study also discusses the various official policy measures as well as their impact of the operation of UBA Plc

The study has made use of the figures of UBA Plc due to limitation adequate statistical data, time factor, materials and human resources, the research could not be extended to all the banks in the economy.

The work has not include the discussion of the banking sector before the introduction of structural adjustment programe. It should be noted that it only mention various financial system in existence as at period without discussing them.

Definition of Terms

Regulatory/Monetary Authorities

The regulatory/supervisory activities of the finance sector are strained by:

  1. The central bank of Nigeria (CBN) which is at the apex sectors
  2. The federal ministry of finances (FMF)
  • The securities and exchange commission (SEC) and
  1. The federal mortgage bank of Nigeria (FMBN) which oversees the mortgage institutions

Regulation in its intent seeks to ensure the safety of a country’s financial system.

Bank Liquidity

Bank liquidity is the ability of a bank to meet its cash obligation to depositors on demand and satisfy additional credit demand of its qualified customers and immediate business community.

A second definition is the ability of a bank to acquire funds at the right time and within the expected cost (that is, with minimal loss).


Bank Prudential Guidelines

Bank prudential guidelines constitute the official tool of the regulatory authorities for measuring the business health of banks and other financial institutions prudential guidelines provide the official boundaries for bank operators beyond which they may not go without attracting penalty of the deregulatory authorities. They also ensure uniformly of approach among banks in the given economy, for measuring and reporting performance in specified area of operation. The word prudential means the act of being discrete or cautions in managing ones activities practical or careful in providing for the future.

Bank Distress

Bank distress means to be technically unhealthy, great suffering caused by want of money or other necessary things.


Risk is the probability thus some unfavourable events will occur such that the financial position or cash flow of the bank is adversely affected (Umoh 1994).


The Nigeria export and import bank (NEXIM) was established in 1991 it has to promote the export of non oil products by providing credit and risk bearing facilities.


The national economic reconstruction fund (NERFUND) decree No 2 1989 and the bureau do change (1989) were establish to provide less medium enterprises.

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