Role Of Commercial Banks In The Face Of A Depressed Economy

INTRODUCTION
Banks have as many definitions its definer as its definers: Oxford Advanced Learner’s Dictionary, simply defined the bank as “establishment for keeping money and valuables safely, the money being paid out on customer’s order”. However, a bank could be generally described as a company carrying out the business of receiving money and collection of drafts or cheques for customers subject to obligation of honouring cheques drawn upon them from time to time by the customers to the extent of the amount available on their account or agreed facility.
The above definitions and others by known experts were reinforced by the decision in UNITED DOMINIONS TRUST LIMITED vs. KIRKWOOD (1966) ALL E.R.P. 968. In This case, it was decided that banking is characterized by:
(a) The acceptance of money from and collecting of cheques for customer and placing of them to the customer’s credit.
(b) The honoring of cheques r orders drawn on the bank by their customers when presented for payment.
(c) The keeping of some forms of current account in their book in which the debit and credit are entered.
From the above, it can be seen that unless the principal or substantial part of the business consisted of receiving money for the credit of the customer which the depositor must withdraw on demand by cheque or otherwise, an establishment would not come within the definition.
Nevertheless, the banks role in the present day financial intermediation is far beyond that given by our past definers.
For the purpose of this work, references in the bank’s functions could be drawing mainly on financial role and few other non-financial roles. The ability of the banking system to perform its task efficiently and in harmony with the needs of the public and economic goals set by the monetary authorities determines to a large extent the future of a depressed economy in a country.
OVERVIEW OF THE NIGERIA BANKING INDUSTRY
The banking industry within the last decade recorded an appreciable growth. The number of banks increased drastically from 81 in 1990 to about 152 in 2000.
These brought about several inconsequence ranging from
(a) Severe and narrow competition as there was no distinct product lines among banks. This resulted largely from regulation in the industry where products such as future contracts were prohibited.
(b) Appreciable technological advancement and significant investment on infrastructure. This involves the huge capital investment and has led to distress I the industry to under capitalized banks.
(c) Keen competition for subsidized foreign exchange. This caused a fundamental fault in the structure of many banks as they were structured only to deal in foreign exchange. As a result, the moment foreign exchange subsidy was removed, many of them because distressed.
(d) A dearth of trained professionals in the banking industry resulting in poor quality staff.
On the general growth rate of the banking industry; the Nigeria Insurance corporation (NDIC) report showed that total deposit liabilities if insured banks grow by about 14.8% since 1994. A trading period that saw increased frauds and a rise in the number of distressed banks. As at 1990, the amount involved in forgeries rose to N804m, while the number of distressed banks grows from 39 in 1994 to about 52 in 1997.
However, some of the commercial banks are still holding their heads high in spite of all the oppositions facing them.

1.1 BACKGROUND TO THE STUDY
HISTORY OF FIRST BANK OF NIGERIA PLC.
The establishment of First Bank of Nigeria PLC., predicts the birth of the Nigerian nation as sovereign entity. The bank, which was registered as bank of British West Africa in 1984 has its founders as Alfred Jones and George William Neville.
When it was decided that a banking office was needed in Lagos in 1890, by a private British shipping magnate and his agent, the territories along the West Cost of Africa had already turned into a commercial area of intense competition among several European traders. The decision was made in the office of elder Dempster shipping company.
Mr. George Nevvile who is an agent Elder Dempster whose responsibility is to manage cash payments noticed his weakness in this duty and desired to have a bank established in Lagos so that this duty can be vested in the hands of the bankers whom he believe will do justice to it profitably.
He presented a request to his employers for the establishment of a bank in Lagos. His request was granted and implemented in 1894, May 4th as British Bank of West Africa with Mr. George Neville being the manager.
On June 13, 1957 British Bank of West Africa was changed to Bank of West Africa by special resolution of the West African Currency Board.
On March 24, 1966 The British Bank of West Africa was merged with Standard Bank London by special resolution of the Board. The name was changed to Standard Bank of West Africa/SBWA)
On July 24, 1979 the West Africa currency Board resolved to change the corporate name of the Bank to First Bank of Nigeria PLC but was formalized. In October 1, 1990. The bank was fully privatized as the Federal Government sold to the Nigeria public its equity share of 44.8%. Chief S. O. Sanusi was made the managing Director and Executive Chairman throughout Nigeria as at 1996.
First Bank Annual Report (1996).
In spite of the downtime on the economic cycle and the diversity of challenges, the banks performance during the 1990s was quite remarkable.
Areas of growth include; (within 1995 – 1996)
Area Rate of Growth 1995 1996
Profitability(PAT) 20% N830m N996.866m
Asset 17.84% N59.82m N72.816m
Deposits 33.2% N41.64b N55.49b
Shareholders Fund 11.44% N5.77b N6.43b

1.2 STATEMENT OF THE PROBLEM
(i) Contributions of commercial banks to Agricultural sector leads to revival of an economy.
(ii) Profitability and efficiency in commercial banks creates good conditions for big and small-scale business enterprises.
(iii) Social responsibilities, does it concern commercial banks?
(iv) High standard of education has a positive contribution from commercial banking firms.

1.3 PURPOSE OF STUDY
(i) The purpose of this study is to critically analyze the meaning of commercial banks
(ii) Detail their roles to the agriculture sector, Industrial sector, education and the genera public and to
(iii) Verify or ascertain to what extent commercial bank in Nigeria has performed those roles for the development and growth of our economy; the consequences of depressed economy include unemployment, anti-social activities, poor agricultural yield as a result of no finance to sponsor farm works, low standard of living, poor health and a lot more; the major purpose of this research work is to find solutions to the above dangerous conditions.

1.4 LIMITATION OF THE STUDY
The role of commercial banks in the face of a depressed economy will be covered by this study, as they are obtainable in Nigeria commercial banks.
Some period will be selected and considered to determined a steady growth rate of the banks position future.

1.5 RESEARCH QUESTION
(i) Can contribution of commercial banks to agriculture sector lead to economic revival?
(ii) Profitability of banks, does it have any advantage to industrial enterprises?
(iii) Social responsibility, does it concern banks?
(iv) Does the high standard of education in our country have a contribution from commercial banking firms?

1.6 HYPOTHESIS
(i) Commercial Banks contribution has a positive impact on agriculture sector of the economy
(ii) Big and small-scale business organization financial strength comes from commercial bank.
(iii) Commercial banks discharge its social responsibility duty judiciously.
(iv) Standard of education are made higher through commercial banking servicing.

1.7 SIGNIFICANT OF THE STUDY
The importance of this research work cannot be overemphasized. The ability of their banking organization’s (especially commercial banks) to perform its roles efficiently and effectively in a depressed economy, determines to a large extent the hope for such an economy.
These roles are discussed with reference to the various sectors in an economy such as agriculture, education, industrial and the public. Therefore, the research work is useful to:
(i) Management of the commercial banks for decision making since the banks roles are spelled out in this work, they will be asked to know when they are performing and when they are not.
(ii) Investors in Agricultural sector will also benefit firm this work, having seen the duties of banks towards, then, according to government regulations
(iii) Big and small-scale business organization can also utilize my work in deciding how to raise funds or capital.
(iv) Students and others in academic field will also find this material useful.
(v) The government bodies such as Central Bank of Nigeria can use the roles enumerated here in assessing the banks performances.
(vi) The general public can as well make use of my research work as it helps those who has idle cash to know the right place to keep it, and investors in viable project who need short or long-term capital, can now understand that banks can be of good assistance to them.