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Wednesday, June 27, 2018

ACCOUNTING EDUCATION TOPICS: IMPACT OF FOREIGN EXCHANGE CONTROL ON BANK PERFORMANCE IN NIGERIA ( A CASE STUDY OF FIRST BANK OF NIGERIA) BY


IMPACT OF FOREIGN EXCHANGE CONTROL ON BANK PERFORMANCE IN NIGERIA
      ( A CASE STUDY OF FIRST BANK OF NIGERIA)

                                                                        BY






A RESEARCH PROJECT SUBMITTED TO THE DEPARTMENT OF ACCOUNTING FACULTY OF EDUCATION,  EKITI STATE UNIVERSITY, ADO EKITI. IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF BACHELOR OF SCIENCE (ED) IN ACCOUNTING
                                                                                                       DECEMBER, 2017
                                             CERTIFICATION
This is to certify that this study was carried out under my supervision by Mr. Akano and has been approved as meeting the requirements of the faculty of Education, Department of Accounting, University of Ado-Ekiti Nigeria.

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________________                                                                _______________
Mr. Akano K.                                                                                          Date
Supervisor

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Mr. Adebosin W.G                                                                          Date

________________                                                                _______________
Dr. O.A. Viatonu                                                                                       Date
Directorate of Degree Programmes

________________                                                                _______________
External Examiner                                                                          Date
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                                                DEDICATION
This research work is dedicated to God the Almighty for His grace, strength, the ability and most importantly the direction during my period of study.
          Also, in memory of my late father, Mr. Ekpe. May his soul rest in perfect peace (Amen).














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                                       ACKNOWLEDGEMENTS
I express enormous appreciation to Almighty God, the protector for spearing my life and making my degree programme a successful one. Am very grateful and appreciative of those who contributed in no small measure either directly or indirectly to the successful completion of the research project.
Firstly, I thank my supervisor, Mr. Akano for his support and good suggestion, fatherly advice, and kindness in reading this paper before final presentation. Kudos to you sir, Heaven is your reward.
I also appreciate my departmental lecturers Mr Adebosin W.G, Mr Ayanwole A.A, Mr Oyewole, Mr Oluwo, Mr Adeyemi A.P etc for their love, reasonable advice, sound academic, moral teaching and assistance.
Heartily, I appreciate my parent, Mrs Ekpe Rosemary Ginka for her full support in the success of my education, an enormous thanks to you (mum). I pray you will eat the fruit of your labour.
My sincere appreciation goes to my elder brother, Adebola Ogunlana, a great thanks to you sir for your moral advice and correction and unending support toward my educational career.
My special thanks goes to my closest friends; David Eucharia, Alelamole Precious, Tunde, Ebunu Blessing for their support and assistance toward my education.
I will not forget to appreciate my hostel mates; Akpan Nsikak, Oguntunwase Oluwabunmi, Adigun, Kemi, Wunmi, Dami, Lolade, Tilewa and Biggy,
I also appreciate the efforts of Omotoprecious Ventures in the typesetting of this research study.
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                                                ABSTRACT
The objective of this study was to establish the control and implication of foreign exchange transaction on bank performance in Nigeria using First Bank Plc as a case study. To achieve this, the study was analyzed in five chapters. It made use of both primary and secondary data obtained from articles, journals, magazines of First Bank Plc. To data was analyzed using both descriptive inferential statistics such as questionnaires. The study revealed that most of the banks in the Nigeria have related problem in control which has heavy implications on foreign exchange transaction. The study provided empirical evidence to support that foreign exchange transaction has impact on banks net earnings in Nigeria.











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                                                TABLE OF CONTENT
TITLE PAGE
CERTIFICATION
DEDICATION
ACKNOWLEDGEMENT
ABSTRACT
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
1.1  background to the study                                                              1
1.2  statement of the problem                                                             5
1.3  Scope and Limitation of the Study                                                       5
1.4  Research Questions                                                                     6
1.5  research Hypotheses                                                                             6
1.6  significance of the study                                                              7
1.7  Definition of Terms                                                                     7
CHAPTER TWO: LITERATURE REVIEW
2.1     Introduction                                                                                      9
2.2     Capital Market and Economic Growth                                   19
2.3     Conceptual Framework                                                           31
2.4     Empirical Framework                                                             35
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2.5     The measure and Types of Banking Risk                                41
2.6     Exchange Rates                                                                       44
2.7     empirical framework                                                               25
CHAPTER THREE: RESEARCH METHODOLOGY
3.1     Research design                                                                       48
3.2     Population of the Study                                                                   48
3.3     Sample and sampling techniques                                            49
3.4     Sources of Data Collected                                                       49
3.5     Research Instrument                                                                50
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1     Returns of Questionnaire                                                                  51
4.2     Data Presentation                                                                    51
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATION
5.1     summary of Findings                                                              65
5.2     conclusions                                                                              65
5.3     recommendations                                                                    66
REFERENCES                                                                                 68
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APPENDIX          I                                                                                    72
APPENDIX II                                                                                   74                                                                       

                                                           CHAPTER ONE

                                                          INTRODUCTION
1.1     BACKGROUND OF THE STUDY
          Foreign can be defined as the means of payment for international transaction. Foreign exchange is a monetary asset used on a daily basis to settle international transaction and to finance deficit in a country’s balance of payments. It is therefore a very important of a country’s stock of external reserves.
          Foreign exchange market is the medium of interaction between the sellers and the buyers of foreign exchange in a bid to negotiate a mutually acceptable \price for the settlement of international transactions. It is made up of obligation lawfully entered into. Since currencies include those of the group of seven industrialized countries comprising the United States (Dollars), British (Pounds Sterling), Deutsche (Mark), Japanese (Yen), French (Franc), Italian (Lira), and Canadian (Dollar). The role of banking industry towards the economic growth and development of a particular country cannot be overemphasized. This is obviously reflected in its functions as an asset of financial intermediation between savers and borrowers of investible fund. Banking in Nigeria is more than a century old now, with the earliest indigenous bank being the First Bank of Nigeria PLC established in 1984. One major function that has greatly contributed to the relative importance of the notable industry is its ability to make investible fund available to the customers. In Dr. Herber Hurt’s book, law of banking, he defined bank as a person or company carrying on the business of receiving monies and collecting draft from time to time by customers to the extent of the amount available in their current account. The Nigeria Banking Act of 1969 (herein after referred to in the Chapter as the Act) adopted the same approach when in its section 41, it defined a bank as any person who carries on banking business and include commercial bank, discount houses and merchant banks. The same section include the receiving of monies from outside sources as deposit irrespective of the payment of interest of thr granting of money loans securities for account and others of the incurring of the obligation to acquire claims in respects of loans on the assumption of guarantees and other warranties for others or the effecting of transfer and clearing and such other transactions a s commissioner may, on th recommendation of Central Bank by other published in the gazette, designated as banking business.
FIRST Bank of Nigeria Plc, is a full banking group, headquarter in Lagos, Nigeria with the vision to be the premier financial service group of Africa origin. From it early origin in investment banking a at securities limited in 1977, First Bank of Nigeria established in 1980, has emerged as one of the leading financial services institution in Nigeria and one of the top eight leaders in the country with subsidiaries that are market leaders in their respective limited liability company on 20th April 1983. On 15th July 2004, the bank changed its status from a private limited liability company to a public limited liability company and was listed on the Nigeria stock exchange. By introduction, on 21st December 2004, as at assets, 2000 employess over 270 branches in Nigeria had a licensed banking subsidiary in the United Kingdom First Bank of Nigeria UK and a representative office in the republic of South Africa. It was the first Bank to be established in Nigeria without government or foreign support. On 15th july 2004, First Bank of Nigeria changed its status from a private limited liability company was listed on the Nigeria stock exchange (NSE) by introduction on 21st December 2004. The bank started as a merchant bank lending among the top two until it converted to a universal bank in 2001. First Bank of Nigeria Plc shares were listed on the Nigeria stock exchange by 2004 and afterwards successfully raised additional capital in excess of 20 billion through private and public offers. First Bank of Nigeria also has subsidiary called First Bank of Nigeria capital markets which is an investment bank with a good history of serving the financial need of the government and other clients. The entity from which the bank was founded city securities limited, which was established in 1977 First Bank of Nigeria PLC was in corporation as a private limited liability company on 20 April 1982 and granted banking license on 11th of August 1983. It was the first bank to be established in Nigeria without government or foreign support on 15th July 2004, FBN changed its status from private limited liability company to public limited liability company and was listed on the Nigeria stock exchange (NSE) by introduction on 21st December 2004. In November 2010, both first bank and first city monument bank announced that First Bank of Nigeria has expressed interest in acquiring shareholding and became the strategic investor in first city monument bank; another Nigerian commercial bank that was undercapitalized in February 2012, following regulatory approval FBN acquired 100% shareholding and began integration of FCMB in its existing operation. FBN is a large financial services provider in Nigeria offering retail banking, corporate banking and investment banking services to large corporations, small and medium scale enterprises, as well as individual. First Bank of Nigeria has a number of active non-bank subsidiaries, which together with the bank, form the first Bank group member of the group. same section include the receiving of monies from outside sources as deposit irrespective of the payment of interest of the granting of money loans, securities for account and others of the incurring of the obligation to acquire claims in respects of loans prior to the assumption of guarantees and other warranties for others or the effecting of transfer and clearing and such other r\transactions as commissioner may, on the recommendation of Central Bank by other published in the Gazette as banking business.
1.2     STATEMENT OF THE PROBLEM
          Nigeria suffers from the preliminaries of foreign exchange shortage and a constantly depreciating naira and all sort of share practice by players in the foreign exchange market. Several time the federal government resorted to dipping into the foreign reserve to bridge the gap between demand and supply. Yet government has experimented with different foreign exchange system from the second tier foreign exchange market (SFEM) used during the Babaginda era to the current Dutch Auction system (DAS) being used now.
1.3     SCOPE AND LIMITATION OF THE STUDY
          This study is intended to determine the impact of foreign exchange as a strategy for banks survival in a depressed economy.
          The study covers foreign exchange transaction control on bank performance in Nigeria with a case study of First Bank of Nigeria. The major constraint of this research work is time and finances.
1.4     RESEARCH QUESTION
i.        What are the roles of the foreign exchange market operation in implementing foreign          exchange regulation?
ii.       To what extent has policies on foreign exchange control enhanced the stability of the          Nigerian economy?

1.5     RESEARCH HYPOTHESIS
          Hypotheses are tentative statements that need to be tested for rejection or acceptance and it is divided into null hypothesis (H0) and alternative Hypothesis (H1).
H01: Foreign exchange transactions have no significant impact on the earning of Nigerian banks.
Ha1:   Foreign exchange transaction has significant impact on the earning of Nigerian banks.
Ho2: Foreign Exchange policy control has no significant effect on the stability of the Nigerian Economy
Ha2:   Foreign Exchange policy control has significant effect on the stability of the Nigerian Economy
1.6     SIGNIFICANCE OF THE STUDY
          The findings of this study will throw more light into some confusing issues about foreign exchange transaction in the banking industry. The aftermaths of this study will disclose the practicality and the adoptability of foreign exchange transaction and control in Nigeria.
1.7     DEFINITION OF TERMS
I.       Foreign exchange: It is the operation carried out in currency other than the country own base currency.
ii.       Research: It is the systematic investigation and study of material source etc in order to establish facts and reach conclusion.
iii.      Money: It is anything which is generally acceptable in exchange for goods and services or in settlement of debts.
iv.      Exchange Control: It includes Government measure which result in interference with the normal force of supply and demand for foreign exchange.
v.       currency: it is the note and coins issued by the central bank of a country or issued for the country as a legal tender.
vi.      Exchange rate: It is a rate at which a country “A” will thus have to exchange part of his product for part of country “B” services.
vii.     Foreign exchange market: It is a medium of interaction between the sellers and buyers of foreign exchange in a bid to negotiate a multiculinary acceptance price for the settlement of international transactions.
vii.     Black Market: The illegal business of buying and selling of currency in violation of restriction such as price controls or rationing.
viii.    Second tier foreign exchange market: it is the determination of the naira exchange rate and allocation of foreign exchange which is based on market forces.



                  


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