Impact Of Universal Banking Concept In Financial Service Delivery

1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
From 1891, when the first banking institution was established in Nigeria to 1986 when the structural adjustment programme (SAP) was introduced, banking practice was essentially regulated with clearly defined functions both commercial and merchant banks. With SAP, improved policy environment triggered off an unusual increase in the number of banks registered in the country.
The genesis of universal banking in Nigeria can be linked to the distress syndrome that has characterized the banking industry due largely to deregulation which led to the expansion and stiff competition among the existing banks and new entrants. The ensuring struggle by individual banks for survivals and growth, also contributed in no small measure. Like a drowsing person catching any straw many banks had agitated for widening of their scope, the belief that the wider the scope, the larger the room to maneuver ability to generate activity and opportunity to maximize profit or minimize loses.
Successive policy aimed at relaxing the regulatory framework further, saw to the removal of hither to rigidly entrenched dichotomy between the operations of commercial and merchant banks. Apparently, in a bid to fine – tune the financial environment the playing field became more roughed or event more unrealistic when merchant banks were required to maintain a minimum of 20% of their total credit in medium to long term category in an environment characterized by short term deposits. These categories of the banks were also not allowed access to the clearing house because of their lack of checking facilities. Merchant banks also lacked access to CBN over draft facilities due to their non participation on the clearing house activities. They were also not allowed to mobilize small savings.
In making a case for merchant banks, it has been alleged and loudly orcheritrated by some that the better performance of commercial banks derive from their direct access to cheque clearing facilities and large idle funds of customers who maintain their interest free or low earning balances with commercial banks. On the other hand, commercial banks, acting in reprisal, challenged the exclusiveness of the right of merchant banks to capital market of activities, which visibly provide risk-free fee income. Valid as these argument are proper consideration should be given to the pre-requisition for effective take off of universal banking, that is, an analysis of the existing and additional resources that are requisite for effective delivery of omnibus services, especially if practice of universal banking should become a reality in Nigeria. These resources include financial, infrastructural and human capability, suitability and adequacy.
Essentially, the failure of macro economic management policies that have heated up the financial system. Lent credence to calls for over haul of the financial system through total liberation of institutions and functions. The totality of the hostile operational environment and the growing trend towards globalization and financial liberation led to calls for the introduction of universal banking in the country.
Universal banking, traditionally believed to have started in Germany in the 1850’s had spread to most of continental Europe where banks now pose as supermarkets for financial service in leading financial centers of the world.
A BRIEF HISTROY OF FIRST BANK OF NIGERIA PLC
First bank of Nigeria Plc for over a century has distinguished itself as a leading financial institution and a major contributor to the economic advancement and development of Nigeria.
The bank was incorporated as a limited liability company on March 31, 1894, with head office in Liverpool by Sir Alfred Jones, shipping magnate, it started business in the office of elder Dempster & company in Lagos under the corporate name of the bank for British west Africa (BBWA) with a paid up capital of 12,000 pounds sterling, after absorbing its predecessor, the African banking corporation, which was established earlier in 1892. in its early years of operations the bank recorded an impressive growth and worked closely with the colonial government in performing the traditional functions of a central bank, such as issue of specie in the west Africa sub-region.
To justify its west African coverage, a branch was opened in Accra, Ghana in 1896 and another in Freetown, Sierra Leone in 1898. These marked the genesis of the banks international banking operations. The second branch of the bank of Nigeria was in the old Calabar in 1900 and two years later, service was extended to Northern Nigeria.
To reposition and take advantage of opportunities in the changing environment, the bank had at various times embarked on restructuring initiatives. In 1957, it changed its and from bank of British West Africa. In 1969, the bank was incorporated locally as the standard bank of Nigeria limited in the with the companies decree of 1968. Changes in the name of the bank also occurred in 1979 and 1991, to first bank of Nigeria limited and first bank of Nigeria Plc, respectively. In 1985, the bank introduced a decentralized structure with five regional administrations.

1.2 STATEMENT OF PROBLEM
The agitation for universal banking began when some merchant banks sought permission from the central bank of Nigeria to convert to commercial banks in response to what they perceived as skewed structure of the banking industry, which in most cases favoured commercial banks. This and other factors led to the demand for a level playing field and a clamour for universal banking in Nigeria.
Merchant banks formed a lobby group for years to press for this system so that they can compete favourably with the commercial banks that they see as having undue advantage over them. The CBN for so claiming that some requirement like sustained macro – economic stability, effective regulation of the distress in the banking system and beefing up the capital base of banks have to be met and fully put in place for the concept of succeed.
However, the CBN in its 2000 monetary credit, foreign trade and exchange guidelines stated that it has reviewed the operational environment for universal banking and has therefore approved the system in principle.
Since then, a lot of activities have take place in the financial system in Nigeria that an indepth study is required to bring to the fore, the impact of universal banking in the financial service delivery in Nigeria. This is the statement of the problem.

1.3 OBJECTIVE OF THE STUDY
The study has the following objective among other achieve: to highlight the
(i) Relevance of universal banking system in Nigeria
(ii) Impact of universal banking on the financial service delivery in Nigeria
(iii) Regulatory challenges of the adoption of universal banking on monetary authorities.
(iv) Emerging trends on universal banking system in Nigeria.

1.4 SCOPE AND DELIMITATION OF STUDY
The study will focus on the implication of universal banking in the financial service delivery in Nigeria with special focus on first bank of Nigeria Plc.
The scope of the study there, will be limited to first bank of Nigeria Plc. The scope could have been wider, perhaps to include more banks but the researcher was constrained by lack of time and resources to embark on such an extensive coverage. This limitation will not however invalidate the result of the research study.

1.5 RESEARCH QUESTIONS
The following research question will be administered for the purpose of the study.
(i) What are the benefits underlying principles of universal banking
(ii) What are the benefits derivable from the adoption of universal banking system
(iii) What are the operational modalities of the UB system
(iv) What are the likely regulatory challenges imposed by the adoption of UB system.
(v) What are the likely impact of UB system in the financial service delivery in Nigeria.

1.6 SIGNIFICANCE OF THE STUDY
The study will be relevant to
(i) Monetary authorities in repositioning themselves strategically for the challenges of universal banking system
(ii) Operators in the Nigerian financial system to avail themselves of the full and symmetric benefit of the universal banking system
(iii) Academic community as a good base for further study on the universal banking system.

1.7 DEFINITION OF TERMS
The following terms are defined in context of the research study.
(i) Universal banking: This is a system or an arrangement where financial institution can offer, either directly or through a subsidiary the entire range of financial services.
(ii) Universal banks: These are financial institution that can act as a supermarket for the delivery of the whole range of financial services.
(iii) Deregulation: This implies the removal or dismantling of regulation or minimization of control and the enlargement of free enterprise.