Background of the Study
The Nigerian banking industry has witnessed tremendous changes and
expansion since the mid 1980s. Unfortunately the growth and expansion
in the sector are not the manifestation of a sound or vibrant banking
system known anywhere in the world. Most banks in Nigeria are
characterized by inadequate capital base, poor services, hug rate of
bankruptcy, lack of management expertise, bad debt syndrome and greater
exposure to fraud. In addition, many have poor database and lack of
reliable information on which sound policy decision can be take by
Board of Directors. This is a fragile banking system which is waiting
to explode from the contagion effect of the liquidation of over eleven
banks which are technically considered distressed. Currently there are
89 banks in operation in Nigeria, with 79 being considered marginal or
fringe players and with over 1,036 – fraud case in banks in 2003 while
N9.3 billion was lost through fraudulent activities.
A poor banking system of this nature creates unquantifiable
problems and crisis in the economy which could result in thousands of
people losing their jobs, lost of depositors’ money, lost of confidence
in the banking system and above all the banks can have little
contribution to the economic development of the country. Essentially,
the objectives of the new, banking sector reform though
recapitalization of N25 billion for each bank intends among other
things to take proactive steps to prevent an imminent systematic crisis
and collapse of the banking industry, create a sound banking system
that depositors can trust, create banks that investors can rely upon to
finance investment in the economy to drive down the cost structure of
banks and make them more competitive and development oriented and to
ensure Nigeria meets minimum requirements for regional financial system
integration, effectively, positioned to be a key. African regional and
global player.
Taking this steps is imperative for the survival of the fragile
banking system in Nigeria and to be at per with the global trend.
Generally speaking, the current average capitalization of banks in
Nigeria is less than $10 million or N1.3 billion and with the largest
bank in Nigeria having $298 million compared with the smallest
Malaysian bank with $526 million. This is an important indices for an
understanding of the unique, nature of the Nigeria banking system among
developing economies.
In the study an attempt has been made by examining the fragile
banking system of Nigeria, the need for recapitalization, the various
strategies by Commercial Banks to meet the recapitalization
requirements and how recapitalization can enhance repositioning of
Commercial Banks in competitive marketing environment of Nigeria.
Although the full policy implementation of recapitalization takes effect
from December 2005, this study provides an insight into the
anticipated challenges of post-recapitalization era. These challenges
as evident in the current mergers and acquisitions by smaller banks
provide input for academic research and analysis. However, it is also
the intention of this study to outline the various repositioning
strategies of United Bank for Africa towards meeting the challenges of
the Banking Sector reforms in maintaining a leading position among new
generation banks in meeting the CBN recapitalization requirement
deadline.
It is hope that the finding of this research study would provide a
pioneering blue-print for commercial banks in Nigeria to adequately
cope with post-recapitalization challenges of the marketing
scenario.
1.1 Statement of the Problem
The rising incidence of bankruptcy and distress syndrome in the
Nigerian baking system caused by poor capital base, lack of management
expertise, bad debt syndrome corrupt practices and fraud among other
have created serious concern to depositors, investors and the rational
economy. The need to address this issue has brought the need for
redefining the capital base of commercial banks in Nigeria to make the
banking sector strong. Dependable and viable with minimal distress and
meaningful contribution to the growth of the Nigerian economy. The
recapitalization of N25 billion makes it imperative for Commercial Banks
to seek for investors and to merge into meet the December 31st 2005
deadline.
The banks that meet up the recapitalization targets may be fewer
in number, stronger in capital base, well positioned to carry out full
the main challenges before the competing banks is to evolve effective
marketing strategies to attract customers to patronize their services
and to maintain a leading position in the industry.
United Bank for Africa as a successful emerging bank under the
new recapitalization policy has a well designed, modern financial
marketing network, better positioned for the post-recapitalization
competitive marketing of financial services in Nigeria.
This study makes a critical analysis and examination of the
marketing activities of United Bank for Africa Plc, Abuja designed to
achieve competitive advantage. It is hope that the finding of this
study would provide an important blue-print for effective modern
marketing of banking services in Nigeria.