1.1 BACKGROUND OF THE STUDY
There have been different deductions about what globalization depicts. Some related it to the scientist perspective, economic and social political perspective while some view globalization from the information technology aspect, but globalization under this research work or study, is viewed from the banking perspective.
On this note there are so many definitions given to globalization by different authors or scholars. Globalization can be seen as a process of integrating economic decisions making such as: consumption, investment and savings all across the world. It is a process of creating a global market in which all nations are forced to participate.
In other words globalization is a process of expanding economic cooperation among states and this does not necessarily imply future breakdown of boarders.
Globalization can also be defined as the integration of national economies through trade and financial transactions. It is a process that has tended to reduce the ability of micro economic policy to achieve it’s objectives without the due consideration of countervailing effects of competing policies adopted by other nations. The effect of globalization on the Nigerian banking performance has been the outcome of several factors among which are the increase in the volume of international trade and capital flows, technological improvement in the communication and data processing, and the deregulation of domestic market for international financial transactions. The advance in information and technology, telecommunication technology tends towards the building of strong Nigerian banking system, in order to aid its efficient and effective performance, especially with the new reform of recapitalization of twenty-five, billion naira (#25,000,000,000)
All over the globe, foreign banks has entered into countries and added another dimension to a stiff domestic competition and in the process, significantly affecting the structure of domestic banking markets. This is particularly evident in the United States, central Europe, Latin America and Asia, where foreign old banks have captured growing share of key markets (Rose, 1999). The profiles of the foreign banks that have entered into joint ventures with Nigerian banks are intimidating. They have the capacity and potentials to restructure the banking system of any country. The strategic alliances between Nigerian banking system and foreign banks and the increasing resources of Nigerian banks to foreign markets to raise capital fund are signs of movement towards the globalization and the Nigerian banking industry. This has to a large extent aid a magnitude level of great performance in the industry and of course tending it to a greater height.
Further more, globalization has transformed the Nigerian banking performance in a profound way by altering the size and structure of the firms that comprise it. Major banks can now extend their branches network beyond national frontiers or built strategic base in foreign financial centers by acquiring either local banks or subsidiary banks. The network of financial connections, among bank and other financial institutions is now embracing the global world.
Globalization has not only transformed the Nigerian banking system and or aid it’s performance, but also has a positive impact on wholesale financial markets as evidence by blurring-off the traditional barrier between commercial banking and investment banking and asset management motivated by the boom in equity and bond market, in high yielding instruments and the wave of merger and acquisition, the Nigerian banks have expanded or introduced into the field of investment banking by engaging in security operations.
Also globalization is simply viewed as the gradual evolution of markets and institutions such that geographical boundaries do not restrict financial transactions. Globalization of banking in any economy mean that domestic banks have opportunities to engage in banking operations (accepting deposits, lending, borrowing or investing) in foreign markets. They can issue or transact in foreign financial instrument denominated in foreign currencies. Foreign banks can also perform similar functions in the domestic economy. The impetus for globalize financial market initially came from the de-regulation of the foreign exchange and capital markets by governments of the developed countries, especially the united states, United Kingdom and Japan. Perhaps the most celebrated of all these was the de-regulation of the London stock exchange in 1986, Which made London to be the most open and competitive capital market in the world (Eunamd Resnick, 2001). This was followed by wide spread Liberalization of financial markets in both developed and developing economies.
Advances in telecommunication contributed in no small measure to the emergence of global financial markets. These technological advancement, especially internet based information technologies, gives investors around the world immediate access to the most recent news and information affecting their investments, sharply reducing information costs. Another force that derives globalization is the increasing desire of institutional investors and portfolio managers to diversify their investment portfolio behind geographical boundaries. Finance theory holds that international diversified portfolios are more efficient than domestic portfolios.
Moreover the stabilization of finance and financial risk have been attributed to an increase in the financial capability for engaging precision finance, the integration of national financial institutions and the activities of the markets they engage in, and the emergence of the global banks and the international financial conglomerate, each providing a mix of financial products and services in a broad range of market and countries. Financial and bank globalization has resulted in two distinct development in global bank;
1.2 STATEMENT OF PROBLEMS
The problems which this project work is interested in finding answers to are centered on the following:
1.3 OBJECTIVES OF THE STUDY
The major objective of this research work examined the role of globalization on the performance of the Nigerian Banking industry.
It also strived at the following:
IV To compare and contrast the experiences of the advance countries financial performance under globalization with that of domestic financial performance, i.e. Nigeria.
1.4. RESEARCH QUESTION
For some of the objective of this study to be realized, certain hypothesis must be stated and tested and these must be prelude by some questions which are otherwise called research questions. The following questions will be addressed in the course of this research work:
1.5 RESEARCH HYPOTHESIS
The conjectural statement for this research work in respect of the research questions are as follows:
HA1: Globalization and the Nigerian Banking Performance will enhance economic growth.
II. Ho2: Globalization has no impact on the Nigerian Banking Performance.
HA2: Globalization has impact on the Nigerian Banking Performance.
III. Ho3: Globalization has not facilitated the management of the Country’s foreign reserve by the local banks.
HA3: Globalization has facilitated the management of the Country’s foreign reserve by the local banks.
1.6 SIGNIFICANT OF THE STUDY
At the successful completion of this work it is expected that the entire stated objective should be realized, failure to achieve these, this research becomes insignificance. There fore this significance is for the simple reasons, that it will be of help for the attainment of the objectives stated earlier.
This research work will also reveal the conformity of globalization in the banking sector to the prevailing economic policy of the country understudy i.e. (Nigeria). At the same time, it showcases the in-depth knowledge the students are expected to have concerning the research work. Furthermore, the end result of this research work would be germane and or imperative to academicians, investors, financial institutions as well as the government who may be interested in making use of the information’s available there in. However, it will as well widened the knowledge and or the understanding of the generality of the people on how globalization policies positively or negatively influence their day to day business operation and management.
Finally, it is as well important to note that, at the end of this study, reasons for the prevailing attitude of banks in Nigeria towards globalization through their performance appraisal would be known.
1.7 SCOPE AND LIMITATION OF THE STUDY
1.8 DEFINITION OF TERMS
GLOBALIZATION: In this content, it means the integration of national economics through trade and financial transactions, consumption, investment and savings, all across the world.
INTEGRATION: This implies to combine parts in to whole. In this study, integration means the combination of globalization and the Nigerian banking system to aid efficient performance.
LIBERALIZATION: This refers to the freeing of trade, investment and capital flows between countries.
BANK: A bank is being defined as any institution which is carrying on the business of banking like, taking deposit, making payment and lending.
FINANCIAL MARKET: This is a composition of institutional arrangement that facilitates the intermediation of funds.
ECONOMIC: In this study, it is defined as the study of the way in which national resources are used and how the wealth they produced are divided and the application of the principles to the need and prosperity of the society (LEZSON WEBSTER)
1.9 PLAN OF THE STUDY
The research study on the effect of globalization on the Nigerian banking performance will be divided in to five (5) different chapters on the following patterns
i. Chapter one: Introduction
ii. Chapter Two: Literature review
iii. Chapter Three: Research Methodology
iv. Chapter Four: Data analysis, results and discussions
v. Chapter Five: Summary, Recommendations and Conclusions
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