ASSESSMENT OF CORPORATE GOVERNANCE AND ETHICS IN NIGERIA BANKING INDUSTRY: CHALLENGES AND OPPORTUNITY (A CASE STUDY OF ECOBANK)

ABSTRACT

This research work is set out to investigate issues challenges and opportunities in the Niger a Banking industry. Also to see if a significant relationship exist between corporate governance, ethics and bank failure. Relevant data were collected using well structured questionnaire. The statistical technique for data analysis and test of hypothetical proposition is chi-square (X2) The result of the findings revealed that the new code of Corporate Governance and Ethics for Bank is adequate of the Curtail Bank distress and that improper risk management, corruption of Bank official and over expansion of Bank are the key Issue why Bank fails. It is concluded that corporate Governance and ethics is necessary to the proper functioning of banks and can only prevent banks distress only f it is well implemented.
Recommendation about corporate Governance and Ethics should be use as tool to help stem the tide of distress, as it entails conformity with prudential guidelines of the government. The Central Bank and NDIC should enforce the need for all banks to have approved policies in all their operation.

TABLE OF CONTENTS

Title Page                                                                                          i

Certification                                                                                                ii

Dedication                                                                                         iii
Acknowledgements                                                                           iv
Table of Contents                                                                             v

Abstracts                                                                                          vii

CHAPTER ONE: INTRODUCTION

1.1     Background to the Study                                                                  1

1.2     Statement of the Problem                                                        3

1.3     Objectives of the Study                                                           4

1.4     Research Questions                                                                 5

1.5     Statement of Hypothesis                                                                   5

1.6     Significance of the Study                                                                  6

1.7     Scope of the Study                                                                            7

1.8     Limitation of the Study                                                           7

1.9     Definition of’ Terms                                                                8

CHAPTER TWO: LITERATURE REVIEW

2.1     Introduction of Corporate Governance                                             9

2.2     Corporate Governance in the International Level                    13

2.3     Corporate Governance in Nigeria                                            14

2.4     Corporate Governance and Ethics in the Nigeria Banking

Industry                                                                                   16

2.5     Classification of Unethical and Unprofessional Conducts in

Nigeria Banking Industry Conflict of Interest                         19

2.6     Benefit of Corporate Governance in the Nigeria Banking

Industry                                                                                   21

2.7     Weakness in Corporate Governance for Bank in Nigeria                 23

2.8     Opportunities of Corporate Governance                                 24

2.9     CBN’s Examination of Banks in Nigeria                                26

2.10   Eco Bank and Corporate Governance                                              29

CHAPTER THREE: RESEARCH METHOD

3.1     Introduction                                                                                      31

3.2     Research Design                                                                      31

3.3     Population of the Study                                                          31

3.4     Sample Size                                                                                      31

3.5     Sampling Techniques                                                              32

3.6     Method of Data Collection                                                      32

3.7     Sources of Data                                                                       32

3.8     Method of Data Analysis                                                                  33

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND

INTEIRETATION

4.1     Introduction                                                                                      34

4.2     Presentation of Data                                                                34

4.3     Test of Hypothesis                                                                            41

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND

RECOMMENDATIONS

5.1     Summary of Findings                                                              44

5.2     Conclusion                                                                              45

5.3     Recommendations                                                                             45

          References                                                                               48

          Appendix I                                                                              49

Appendix II                                                                                      50
 

CHAPTER ONE

INTRODUCTION

1.1            Background to the Study

Financial scandals and misappropriation around the world and the recent collapse of large corporate organization in the USA and Europe have brought to the fore, again, the need for the practice of sound corporate governance, which is the system by which the affairs of companies are directed and controlled with the aim of increasing shareholders value and meeting the expectation of other stakeholders. The case of Enron in the U.S and many cases in U.K such as Polly Peck, Maxwell Communication and British Ceylon Corporate Ltd (BCL) are all becomes stressing the need for the adoption of good corporate governance in our various organizations.

In Nigeria, most especially the financial industry the retention of public confidence through the enthronement of good corporate governance and ethics remain an uncompromised duty given the role of the industry in the credit to the needy sector of the economy, the payment and settlement system and the implementation of monetary policy. It is a veritable tool for ensuring corporate survival since business confidence usually suffers each time a corporate entity collapses. Most of the business failures in the recent past are attributed to failure in corporate governance and ethical practices. For instance the collapse of bank in Nigeria in the early 1990s to date was as a result of inadequate corporate governance and ethics practices such as insider related to credit abuses and poor risk appreciation and internal control failures.

To stern the tide, this ugly trend scholars and practitioners have advocated consistently different approach and theories to corporate governance and industrial ethics. A critical tool in corporate governance be adequate disclosure on the risk profile of banks in the overall interest of the stakeholder (ICAN 2006, P. 345) defined “corporate governance as the system by which the affairs of companies are directed and controlled by those charged with the responsibility” Magdi and Nadereh (2007) view corporate governance as ensuring that the business is run well and investors receive a fair return. Oyejide and Siyibo (2001) defined corporate governance as the relationship of the enterprise to shareholders or in the wider sense as the relationship of the enterprise to society as a whole.

1.2     Statement of the Problem

Corporate failures in the world, in recent time have kindled interest in corporate governance and ethics. Nigeria as a nation has suffered a lot of decadeness both in the public and private sector. The political and business climates had become so worse off that by 1999 when the nation returned to democratic rule, under the leadership of Obasanjo, it was rated as one of the most corrupt nations in the world.

Most public corporation, such as PHCN, NITEL, NNSL, water board etc were either dead or simply drain pipe of public resources, while the few factories that were merely available were working below capacity. The banks with their numbers leaving a trail of woes. For investor, shareholder, suppliers, depositors employees, and other stakeholders. The falsification of financial statement of Cadbury Nigeria PLC in 2006, the liquidation of bank in 1980’s and 26 Bank in 1997 and the recent sack of CEO’s of nine banks in Nigeria after CBN’s audit and investigation are all evidence showing the sorry state of the country.

What measures should be put in place to prevent the occurrence of corporate failure in the banking industry? How can organization best practice corporate governance? How can banking industry? How can we guarantee public confident?

The need to proffer solution to the questions greatly informed this research work.

1.3     Objectives of the Study

This study seeks to examine how corporate governance and ethic have been embraced in the Nigeria banking industry. To attain this, we intend to:

1.       Find out how corporate governance is being practiced in the Nigeria
banking industry.

2.       Ascertain the extent of professional ethic adoption in our banking industry.

3.       Examine the role of shareholder and board of director, who manage the affairs of the companies.

4.       Examine the corporate governance demand and requirement in the banking industry in ensuring accountability and transparency.

5.       Ascertaining what were responsible for the poor performance of banks in the CBN’s audit of 2009/2010.

1.4     Research Questions

*        Why is corporate governance and ethics so important to the Nigeria banking industry?

*        How does corporate governance and ethics effect membership to
change in an organization?

*        What is the relationship between corporate governance and ethic to
members in the banking industry?

*        To what extent may the codes of corporate governance and ethics applied to the Nigeria banking industry?

*        What area can corporate governance and ethics be address in the Nigeria banking industry?

1.5     Statement of Hypothesis

          Hypothesis One  

Ho:    Corporate governance and ethics have no significant relationship with banks performance.

Hi:     Corporate governance and ethics have significant relationship with banks performance.

Hypothesis Two

Ho:    Effective Corporate Governance and ethics in the Nigeria Banking Industry does not raise a high standard of accountability and transparency.

Hi:     Effective corporate governance and ethics in the Nigeria banking industry raise a high standard of accountability and transparency.

Hypothesis Three

Ho:    Corporate governance and ethics does not help to avoid corporate failures and scandals.

Hi:     Corporate governance and ethics help to avoid corporate failures and scandals.

1.6            Significance of the Study

The importance of corporate governance cannot be over emphasized. It is ii important tool in regulating corporations. Corporate governance and ethics help to avoid corporate failures and scandals. Corporate governance is seen as the structure of relationship within an entity for making decision and its implementation. It is particularly important because it ensure accountability and transparency in the manner an organization is run. Stakeholder interest is best protected, there would be public confident financial scandals and fraud would eliminate if sound corporate governance and ethics are practiced.

1.7            Scope of the Study

This research work seeks to study the emerging concept of corporate governance. Its role in financial accountability and transparency, financial statements could represent a true and fair view position of them.

It also intends to study the place of ethics in our financial industry and the roles in governing corporate decision.
However, work is limited in scope to corporate governance and ethics in our banking industry.

1.8            Limitation of the Study

The ideal cannot be attained in this research work because of some obstacles that have been encountered. Amongst these are:

•        The time duration for this research is not enough to carry out the research. The scope has been limited in respect to population as well as the findings thereof.

•        Financial difficulties have made it not possible for the researchers to meet all designated population. Therefore, various sampling techniques will be employed.

•        Difficulty in getting information from the company’s staff under study. This is so because most of the documents the researchers asked for where not made available. Also most interviews were not granted and some of the questionnaires sent out were either destroyed, returned or not answered.

1.9            Definition of Terms

Corporate Governance: This is defined as the system by which companies are directed and controlled.

Ethics: This is defines as the philosophical analysis of human morality and conduct.

Financial Statement: This are the means of communicating to interested parties information on the resources, obligations and performances of the reporting entity or enterprise.

Fraud: Can be defined as a deliberate or intentional act by a privilege individual or group of individual s within or outside the organization, which results in a misrepresentation of financial statement.

Central Bank of Nigeria: Is defined as a banking system in which a single bank has a complete monopoly in the note issue.

Corporation: This is defined as an organization or a group of organization that is recognized by law as a single unit.

Morality: Are principle concerning right and wrong or good and bad behavior.