THE EFFECT OF INSURANCE INDUSTRY IN PROMOTING BANKING SERVICES IN NIGERIA (A CASE OF SKYE BANK ENUGU)
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THE EFFECT OF INSURANCE INDUSTRY IN PROMOTING BANKING SERVICES IN NIGERIA
(A CASE OF SKYE BANK ENUGU)
ABSTRACT
The aim of this research study is to identify the effect of insurance industry in promoting banking services in Nigeria. (A study of Skye Bank Enugu Metropolis). The objectives of this research work is to examine and analyze the success of banking business in Nigeria and the roles insurance sector play in promoting their services and also to identify the various problems and challenges facing Nigeria banks. The Related literature review of this work include; The historical background of skye bank Nigeria . For a successful completion of this research work, the researcher made use of both primary and secondary methods of data collection of information gathering. Primary data were collected through questionnaire, administration, oral interview, and personal observations. Secondary data were collected through journals, textbooks, lectures, notebooks and internet. The data collected were presented in table and analyzed with simple percentage while the hypothesis stated were tested with chi-square. The summary of findings made by the researcher include the following: it was discovered that insurance industry has positively influenced the services of Nigeria banking industry. In conclusion, the future and success of Nigeria banks lies mainly in the hands of insurance industry; therefore, Nigeria banks needs insurance industry to survive. The researcher recommends that Nigeria government should support the activities of insurance industry in order to boost the effectiveness of Nigeria banking services.
TABLE OF CONTENTS.
Title page - - - - - - - - - i
Approval page - - - - - - - - ii
Dedication - - - - - - - - iii
Acknowledgment- - - - - - - iv
Abstract - - - - - - - - - v
CHAPTER ONE
INTRODUCTION
1.1 Background Of The study - - - - 1
1.2 Statement of problem- - - - - 4
1.3 Objectives of the study - - - - - 5
1.4 Research Questions - - - - - 5
1.5 Research hypothesis - - - - - 6
1.6 Significance of the study - - - - 7
1.7 Scope and limitations of study - - - 8
1.8 Definition of operational terms - - - 9
Reference - - - - - - - - 16
CHAPTER TWO.
REVIEW OF RELATED LITERATURE.
2.1 An overview 17
2.2 Historical background of Skye Bank Nigeria. - 19
2.3 Immediate causes of bank failure in Nigeria - 21
2.4 Factors affecting Nigeria banking system - 24
2.5 Fraudulent attitude believe - - - - 25
2.6 Social influence - - - - - - - 26
2.7 High rate of illiteracy in the society - - - 26
2.8 Nigeria deposit insurance corporation
(NDIC) policies towards bank development - 27
2.9 Roles of insurance industry in promoting services 29
2.10 General effect on insurance activities in
Nigeria banking services - - - - - 33
Reference - - - - - - - -
CHAPTER THREE
RESEARCH METHODOLOGY AND DESIGN.
3.1 An overview - - - - - - - 37
3.2. Source of data - - - - - - - 37
3.2.1 Primary data - - - - - - - 38
3.2.2 Secondary data - - - - - - 38
3.3 Population of the study - - - - - 39
3.4 Sample size - - - - - - - 39
3.3 Instrument used in determining the sample size 40
3.6 Validity of the instrument used - - - 41
3.7 Method of data presentation and analysis - - 42
CHAPTER FOUR
DATA REPRESENTATION AND ANALYSIS
4.1 An overview - - - - - - - 44
4.2 Data representation and analysis - - - 44
4.3 Testing of hypothesis - - - - 59
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
5.1 Summary of findings - - - - - 65
5.2 Conclusions - - - - - - - 66
5.3 Recommendation- - - - - - 67
Bibliography - - - - - - - 69 Appendix - - - - - - - - 70
Questionnaires - - - -- - - - 71
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Nigeria as a developing country has been grappling with the realities of development process, not only politically and socially but also economically. Since economic development is perceived as a multi-dimensional process, it requires not only capital and technology but also attitude and the creation of the institutional structures. It also includes special protection of the financial institutions.
The banking system has thus been singled out for this special protection because of the vital roles banks play in an economy especially in the process of economic development. According to C. Arthur Williams jr (1992), the establishment of insurance protection and cover through Nigeria Deposit Insurance Corporation (NDIC) was informed by economic circumstances and by a number of other considerations. The economic circumstances involved the new economic policy of government, the bitter experience of prior bank failures in Nigeria and the lessons from other countries with bank deposit insurance scheme.
The distress in the banking system often precipitate other crises and this has necessitated regulatory and supervisory authorities to take a series of actions and intervention in response to these problems.
The emergency of Nigeria Deposit Insurance corporation into financial sector of the Nigeria economy was borne out of necessity and need to check the incessant rise and fall of indigenous banks, Thus, the objectives of the Nigeria Deposit Insurance corporation are to protect bank depositors, ensure stability in the industry, encourage healthy competition among banks at foster, informed risk taking by insured institution, grant financial assistance to banks experiencing difficulties among others.
Insurance industry also stand as a risk transfer mechanism that can also provide cover and protection to some certain uncertainties that can negatively affect Nigeria banking services. According to J.O Irukwu (1999), Insurance cover risks like:
Loss of building and contents to fire and special perils
Loss of cash-in-transit and cash-in-safe
Loss or break down of computers and other business machines
Loss due to infidelity of employees
Loss due to bad debts
Theft in the business premises
Loss of key employees
Loss due to professional negligence
The researcher in this research work was prompted by the curiosity to know the challenges facing Nigeria banking and how much insurance industry has contributed to tackle and solve those challenges.
1.2 STATEMENT OF PROBLEMS.
The under listed problems are what led to this research:
1. Liquidation of banks
2. Weakness of internal control
3. Inconsistency in monetary and banking policy
4. Fraudulent and unprofessional conduct of bank staff, depositors and customers
1.3 OBJECTIVES OF THE STUDY
1. To determine the effect of insurance industry on bank liquidation in Nigeria.
2. To evaluate the extent of weakness of internal control system in Nigerian banking industry.
3. To examine the impact of inconsistency in monetary and banking policy.
4. To examine the rate of fraudulent and unprofessional conduct of bank staff, depositors and customers.
1.4 RESEARCH QUESTIONS.
The researcher formulated the under listed questions to allow for thorough investigation on this research:
1. What are the effects of insurance industry on bank liquidation in Nigeria?
2. What is the level weakness of internal control system in Nigerian banking industry?
3. What are the impacts of inconsistency in monetary and banking policy?
4. What is the rate of fraudulent and unprofessional conduct of bank staff, depositors and customers?
1.5 RESEARCH HYPOTHESIS
From the mentioned objectives, the following hypothesis would be tested for verification.
1. H0: Insurance industry programme has not
positively influenced the Nigeria banking services.
H1: Insurance industry programme has positively influenced the services of Nigeria banking industry.
2. H0: Nigeria banking are not passing through any
challenges in rendering their services.
H1: Nigeria banking are passing through a lot of challenges and needs the support of insurance industry.
3. H0: Nigeria banking system does not need
insurance
industry to survive.
H1: Nigeria banking system needs insurance
industry to survive.
1.6 SIGNIFICANCE OF THE STUDY.
It is worthy that in the insurance industry today, there are very few literatures and academic research, undertaken on the effect of the insurance business in promoting Nigeria banking services with a view of measuring the performance of the insurance industry in the face of changing banking services.
This research will be very important both to the general public and also the banking firm and staff in the following ways;
1. This research work helps to reduce the rate of ignorance from the mind of the general public who do not know about insurance business.
2. Banks benefit from it because it will help to reduce fraudulent act in Nigeria banking sector.
3. The research work will also help to boost the image of insurance business.
4. It will be the basis of information to the research in carrying out further research.
1.7 SCOPE AND LIMITATION OF THE STUDY.
In this research “The effect of insurance industry in promoting Nigeria bank in Enugu state and mostly in Enugu metropolis.
It is pertinent to point out some of the constraints that limit this research work.
The uncooperative attitude of most personnel approached for data collection was a limitation to this research work. Also, time was a serious constraint and unavailability of adequate fund to travel round Enugu to collect data that are paramount to this research work.
1.8 DEFINITION OF OPERATIONAL TERMS.
For clarity and avoidance of possible misinterpretation, it is pertinent to express a contextual definition of explanation of some important concepts as used in the research work.
a. INSURANCE: This is the situation whereby the loss lightened rather upon many than heavily upon few is the essential feature; the insured person known as insured or assured transfer from his own shoulders the financial burden of some potential misfortune to the broader shoulder of the insurers who in turn for agreeing to assume a potential risk of loss , receive a payment known as premium, the insurers by collecting a sufficient number of premium, rely on the profitability that only some of the losses they insure against will occur within a given period of time.
b. RISK: This is the combination of hazards while Maxwell Harrison (1968) defined risk as the objective doubt concerning the outcome in a given situation.
c. POLICY: Contract of insurance are evidence in the form of policies. To the uninitiated, a policy is often a frightening document because it usually include a good deal of clause printing; often too, there are several printed slips known as endorsement, struck to the policy and these may seem at first sight to contradict the printed wordings whatever the type of insurance. However, policy forms have many common features.
d. INDEMNITY: The law makes insurance of property and liability subject to principle of indemnity whereby the insured is unable to recover more than the amount of his pecuniary loss arising from the event insured against.
An insurance may be for less than a complete indemnity, but it may not as a rule be for more. It is undesirable that an insured should stand to make profit out of an event such as fire or a car accident.
e. SUM-INSURED: Sum insured is the value of the property insured at the time of loss and at the place of loss.
Value means its intrinsic or real worth, there is no allowance for any sentimental value, loss of prospective profit or other consequential loss.
Sum insured is based on any of the four methods viz:
Replacement, agreed value, sum-insured less allowance for betterment and depreciation, book value/net realizable value.
f. ENDORSEMENT: Endorsement modify standard insurance contract. They can add coverage directly or they can add coverage by deleting an exclusion in standard policy. Sometimes, an endorsement can eliminate coverage (for a reduction of premium) or exclude an insured (for example, a teenage driver). Thus, endorsements can be used to achieve a variety of coverage of goals.
g. WARRANTY: This is an insurance terminology that refers to something g that has happened or exist (affirmative warranty) or something will happen (promissory warranty).
Another distinction sometimes arises between written (expressed) warranties and commonly understood (implied) warranties.
h. UNDERWRITING: This is a step taken by an insurance official known as the underwriter on a review applications for insurance and then either accepts them at an appropriate rate or reject them. Underwriting process is step of decisions which is based on criteria established by the companies top management on what kind of risk to be accepted and at what rate.
g. PROFESSIONAL LIABILTY: This is sometimes called malpractice liability or errors and omissions coverage, it is caused by errors of professionals. However designated, such insurance typically commits an insurer to pay all sums that the insured becomes legally obligated to pay as damages resulted from providing or failing to provide professional services.
h. WORKERS’ RETIREMENT BENEFIT: This terminology is similar to a pure annuity that is social security send out regular monthly checks during the recipient lifetime. A full retirement benefit is available to fully insured workers at the normal retirement age.
i. WORKER’S COMPENSATION INSURANCE: Worker’s compensation laws established the employer’s liability in cases of work-related injury. Employers exposed to this peril of liability losses purchase insurance to cover their exposures.
Worker Compensation Insurance policies promise to pay on behalf of the employer any sums for which the employer is legally liable because of injuries to employees arising out of the course of their employment.
j. PROFESSIONAL LIABILITY: This is sometimes called malpractice liability or errors and omissions coverage, it is caused by errors of professionals. However, designated, such insurance typically commits an insurer to pay all sums that the insured becomes legally obligated to pay as damages resulted from providing or failing to provide professional services.
k. WORKERS’ RETIREMENT BENEFIT: this terminology is similar to a pure annuity that is social security send out regular monthly checks during the recipient lifetime. A full retirement benefit is available to fully insured workers at the normal retirement age.
REFERENCE.
Arthur .C W. Jr.(1992). Basic Principle of Risk Management and Financial Institutions, 20th June; page 7
Irukwu J.O (1999) Insurance Management in Africa. Bina Publication . Bina Africa LTD; page 102.
Iyiogwe N.U (1999) Aviation Insurance and Management Bekky Production Lagos Pg. 41.
Maxwell H.O (1968) E-Banking System Approach, Hosten Publication. Page 321.
Nigeria Deposit Insurance Corporation (NDIC) year book 2011. Page 17
Nwite S.C (2004); Element Of Insurance Practice. Immaculate Publication LTD Enugu. Page 8.
Orjih J.O. (2007): Basic Element of Banking. Harvard Publication Enugu. Page 50.
Soludo C.C. (2010): Finance Strategy. Vanguard Newspaper. Page. 19
Uzoma P.A (1996); Risk Management In Nigeria Banking Industry. Page 2-4.
CHAPTER TWO.
REVIEW OF RELATED LITERATURE.
2.1 AN OVERVIEW
Banks are among the most important financial institution in the economy. They are the principal source of credit (Loanable Funds) for millions of households (Industries and Families) and for most local units of government (Schools, Districts, Cities and Countries e.t.c). Moreover, for small local businesses ranging from grocery stores to automobile dealers, banks are often the major source of credit to stock the shelves with merchandise or to fill a dealer’s showroom with new cars. When businesses and consumers must make payments for purchase of goods and services more often than, they use bank-provided checks, credit or debit cards or electronic account connected to a computer network and when they need financial information and financial planning, it is banker to whom they turn most frequently for advice and counsel.
According to Markrell.W Jennison (1993); he recommended banks as one of the major principle that grant more installment loans to customers than any other financial institution. In most years, they are among the leading buyers of bonds and notes issued by governments to finance public facilities, ranging from auditoriums and football stadiums to airports, the highway.
Prof. Charles Soludo in his interview with the Nation Newspaper (2010) made it known that banks are among the most important source of short-term working capital for businesses and have become increasingly active in recent years in making long-term business loans for new plants and equipments.
Moreover, banks reserves are the principal channel for Government economic policy to stabilize the economy for all these reasons and more, banks are one of the most important of society institutions.
Other services rendered by banks include;
Carrying out currency exchange, offering savings deposits, safekeeping of valuables, supporting and assisting Government Activities, Offering trust services e.t.c; all these services are essential to both individuals, firms, governments in their day to day activities.
2.2 HISTORICAL BACKGROUND OF SKYE BANK NIGERIA.
The Nigeria banking industry which is regulated by the central bank of Nigeria is made up of Deposit money banks referred to as commercial banks, development finance institutions and other financial institutions which include; Micro finance banks, Finance companies, Bureau de changes, Discount houses and Primary Mortgage Institutions.
Essentially, the industry consists of 24 commercial banks, 5 Discount houses, 5 Development Institutions, 50 class of A Bureau de change, 598 bureau de change, 98 primary mortgage institutions, 84 Finance companies and 914 Micro Finance Institutions.
The researcher traces the history of banking from 1892 to 2010 presenting 118 years of complete banking history.
The origin of Skye bank date back to 1989 when Prudent Bank incorporated as a limited company in 1990, the bank was issued a license as Merchant bank. The same year, it rebranded as Prudent Merchant Bank Limited; In 2006, Prudent Merchant Bank Limited merged with four (4) other banks to Skye Bank PLC, namely; EIB International Bank PLC, Bond Bank Limited, Reliance Bank Limited and Co-operative Bank PLC.
Skye bank Plc maintains an inter-linked branch network of over Two hundred and sixty (260) in all parts of Nigeria. The bank maintains her head quarter at No 3 Akin Adesola Street Victoria Island
Skye bank evolved into one of the top financial institutions in Nigeria, after its seamless consolidation exercise in 2006. It operates as a group that provides facets of financial products and services powered by a purpose built technological framework that supports the service delivery process to customers.
2.3 IMMEDIATE CAUSES OF BANK FAILURE IN NIGERIA
A clear understanding of what is meant by failure and its management appear necessary so as to give meaning and effect to the discussion here.
According to J.O Orjih, Banking failure occurs when a bank or some banks in the system experience illiquidity or insolvency resulting in a situation where depositors fear the loss of their deposits and a consequent breakdown of contractual obligations. While a bank is said to be illiquid when it could no longer meet its liabilities as they mature for payment – Prof. Emeka Ojeh. It is said to be insolvent when the value of its realizable asset is less than the total value of its liabilities. These could lead to bank runs as depositors lose confidence in the system and seek to avoid capital loss.
As could be recalled, when modern banking business commenced in Nigeria by Adrew Sheng in 1892, it was solely a business for foreigners. The skewness in the ownership structure in favor of foreigners largely contributed to the lack of access to banks credit by Indigenous Nigeria entrepreneurs during that period. Nigeria entrepreneurs who came into banking from the late 1920s to early 1950s did so with the principal aim of redressing the situation and problems such as inadequate capital, management lack of regulation and unfair competition from the foreign owned banks, 21 of the 25 indigenous banks that were established up to 1954 failed.
According to P.N. Umoh, it was stated that there had not been any bank failure in the country in term of inability to pay depositors on demand, neither was there any significant threat of a run on any bank in over the three decades until mid – 1989.
However, of recent, the number of banks officially classified as failure as increased. The situation is the visible manifestation of a complex set of interrelated problems as the failure in the Nigeria banking system emanates from a numbers of factors; including the inhibitive policy environment (over regulation) capital adequacy, management problems, economic down turn, aftermath of deregulation/competition and ownership structure as well as political interference. Some of these factors are endogenous to the system while some could be regarded as exogenous. These factors are examined and attempt to trace other remaining factors affecting banking source in Nigeria.
2.4 FACTORS AFFECTING NIGERIA BANKING SYSTEM
The forgoing survey of banking services suggests that banks are currently undergoing sweeping changes in functions and form. In fact, the factors affecting the banking business today are as follows;
2.4.1 FRAUDULENT ATTITUDE
Bankers have the belief that any money that goes out by mistakes does not come back and there are a lot of people who are prepared to rob the bank through fraud. So banks adopt slow and steady checking system to deter the potential crocks since cases of fraud are never prosecuted in good time.
According to John Orjih (1998), it is discovered that there are several fraudulent attitude encountered in Nigeria banking system, the fraudulent attitude the following;
· Manipulation of dormant account.
· Substitution of names in credit vouchers.
· Unauthorized printing of bank stationary.
· Under-stating and over stating interest charges.
· Manipulation of computer records.
2.4.2 SOCIAL INFLUENCE
Certain social factors can influence the quality of bank services. A good example of such factor is the extended family system. Instances abound when a customer who is related to a bank manager can use his influence to secure loan on softer terms the credit worthiness notwithstanding.
A branch manager may reject a loan application only to return home to see his mother or his father-in-law, his parents or another influential figure already waiting to pressurize him into granting the loan.
2.4.3 HIGH RATE OF ILLITERACY IN THE SOCIETY
Most bank customer are illiterates and semi-illiterates but have a lot of money in their accounts, it takes time therefore to ensure that the right and money of such customers are protected by cross-checking signatures and even making sure that they sign their cheques. In such cases, according to them, the interest of the customers and banks are protected; so it is better to delay than to regret.
Again, some accounts are not properly operated, so those customers have to be thought on how to do that.
2.5 NIGERIA DEPOSIT INSURANCE CORPORATION (NDIC) POLICIES TOWARDS BANK DEVELOPMENT
It must out set be acknowledged that the sanitation of the banking system has been collaboratively carried out by a lost of regulatory authorities namely; CBN, NDIC and the Federal Ministry of Finance among others. However, distress resolution, which is the core of the revamping exercise i.e. legally a primary responsibility of the NDIC going by the amendment to its distress.
The corporation has therefore taken a number of initiatives in this regards leading to the evolution of a coordinated approach for distressed resolution. In this research work to the role of the NDIC in the vamping efforts, it is noteworthy to distinguish between some nominal or ordinary supervisory actions of the corporations that however impact of the sensitization effort and those more or less one of the action refers to the normal on site examination and off-set supervisory activities of the corporation.
These actions provide the diagnosis for updating the next possible trend in distress as well indicating the next possible line of actions in the sanitation drive. However, the normal supervisory activities will be elaborated upon here to minimize digression from the focus of the presentation. The second set of action conceptualized and implemented to sanities banking system are expectedly corrective as well as preventive of further deterioration in the financial condition of the distressed banks.
2.6 ROLES OF INSURANCE INDUSTRY IN PROMOTING SERVICES
Before the regulations under the financial services Act 1986 came into effect, those offering advice in the financial services sector especially banks were subject to general laws of fraud, insolvency and of course theft. A number of statutes were in force which gave a limited measure of regulation and consumer protection, but the whole area of advice regarding intangible investment products was viewed by the government as one that requires tightening up. There was the same degree of protection available as for people buying things that could be actually touch or see.
This financial service Act of 1986 made provision for insurance cover in different sector of banking services which include the following;
1. EMPLOYEE CRIME COVERAGE – FIDELITY BONDS.
Fidelity bonds protects against loss resulting from employee’s dishonesty and cover loss of money securities or other properties resulting from acts (fraud, forgery, embezzlement and theft) by the person bounded up to the face amount of the bond which is called the penalty. The penalty under a bond is never accumulative and a series of theft by one person is considered as single loss.
2. NON EMPLOYEE CRIME COVERAGES
This is a policy designed to cover against loss of money or other properties
through dishonest act of persons other than employees are classified according to peril.
There are policies to protect against burglary, robbery, theft, forgery and so on, only the specified type of criminal activity indicated is covered and coverage exists only when the loss meets the definition of the particular type of criminal covered, for example; burglary consist of stealing property when the premises are not open for business and required visible of forcible entry into the premises.
All non-employee crime forms exclude employee fidelity losses. The portfolio program provides non employee fidelity losses.
3. COMMERCIAL LIABILITY INSURANCE
One of the major exposures facing every business is the possibility of legal liability. The chance that the bank or its owners may be sued for bodily injury, property damage, errors and omission of services.
Liability coverage can be conveniently be divided into two classes viz;
a. Employer’s liability and workers compensation
b. General liability and automobile liability
General liability encompasses those exposures that do not involve injury to employees and that do not arises out of automobiles.
4. DIRECTORS AND OFFICER’S ERRORS AND OMISSION INSURANCE
A special form of coverage known as Director’s and officer’s errors and
Omission insurance is available to protect corporate officers and directors from suits alleging mismanagement, such suit may be brought by stockholders or by persons outside the firm. The coverage is subject to a deductible and the insured as usually required to 5% (percent) of any loss excess of the deductible. The coverage excludes losses based on alleged personal gain by the insured and losses resulting from failure to purchase proper insurance coverage
2.7 GENERAL IMPACT ON INSURANCE ACTIVITIES IN NIGERIA BANKING SERVICES
Prior to the regulation under the financial service Act 1986. Financial services sector especially banks were subject to general laws of fraud, insolvency and of course theft.
This financial service Act of 1986 made provision for insurance cover which provides security and cover loss of money, fraud, forgery, embezzlement and theft. It also provides cover against Employer’s Liabilities and Worker’s Compensation and also makes provision for directors and bank officer’s omission and errors.
All these aforementioned provision for bank’s securities and protection gave rise to safe and sound system of banking in the following ways;
i. Customers make a good decision in selecting the bank of their choice.
ii. Customers are not afraid or worried about their money in the bank.
iii. Shareholders obtain more shares in banks due to the confidence that the bank will not liquidate.
iv. Bank Directors are comfortable while investing in banks.
v. High rate of fraud and corruption are reduced.
Ever since the establishment of the Nigeria Deposit Insurance Corporation
(NDIC) has consistent with it’s mandate as provided in NDIC degree, continued to ensure the sound banking system, the sanitization of the banking sector has remained the primary focus of the corporation’s activities through the adoption of appropriate failure resolute options and effective implement action of various laws promulgate by the government to stem the interrelated problems that ad for long afflicted banking system in the areas of poor management, capital inadequacy, poor lending e.t.c.
Finally, the impacts of insurance industry in promoting Nigeria banking system would not have been complete without mentioning it’s effects and contribution in the development of the economy.
According to Prof Charles Soludo in his interview with the Nation Newspaper, he emphasizes that banks are the most important source of short – term working capital for business, moreover, bank reserves are the principal channel for government economic policy to stabilize the economy, and this would not have been achieved effectively without the support and assistance of insurance been rendered to Nigeria banks.
CHAPTER THREE
RESEARCH METHODOLOGY AND DESIGN.
3.1 AN OVERVIEW
In evaluating the impact of insurance industry in promoting banking services in Nigeria, this chapter focuses on the method and procedure used to gather information for the study. This study covers the impact of insurance industry in Nigeria banking system using Skye Bank in Enugu Metropolis as the study.
3.2. SOURCE OF DATA
In planning this research, the researcher considered what data are relevant, where they can be sourced and the method to be used for sourcing them. It becomes very relevant to obtain data from both primary and secondary data.
3.2.1 PRIMARY DATA
The primary method involves the use of interview schedule to conduct interview whilst collecting information from the staffs of Skye Bank Enugu. Therefore, all relevant information are easily obtained by the distribution and filling of the questionnaire by the staff in Skye Bank Enugu branches, it contains 55 questions in number on the spot response were collected in respect to the oral questions.
3.2.2 SECONDARY DATA
The secondary data entail the use of the bank’s statistical records, journals, annual reports and other relevant data to obtain information that are relevant to this research work.
3.3 POPULATION OF THE STUDY
Skye bank branches in Enugu state metropolis which in actual sense amount to seven (7). A random selection of the staff in the seven banks are as follows:
Okpara Avenue Branch - 10
Agbani Road Branch - 13
Abakpa Road branch - 9
Ogui Road branch - 15
Emene branch - 11
Coal Camp branch - 8
New – Haven branch - 6
Total 72
Therefore, 72 staff of Skye bank Enugu
3.4 SAMPLE SIZE
The sample size is obtained from the above mentioned population size. They obtained the sample from the population
Where N = Total Population = 72
n = Sample Size
e = Error Marge = 5% = 0.05
= 
= 
= 61.2 = 61
3.3 INSTRUMENT USED IN DETERMINING THE SAMPLE SIZE
In other to determine the sample size of the research population the research used the Yaro Yamene formula. This is simple mathematical method for determining sample size of a large population
The formula is expressed as follows
Where n = Sample Size
N = Total Population
e = Error Marge
3.6 VALIDITY OF THE INSTRUMENT USED
The yaro yamane statistical formula is used for a finite population. This is if the number of a population is known for computing the sample size. Statistically is more valid than determining the size by mere approximation. However, it’s validity is more guaranteed if the data are evenly spread or distributed. Since the researcher needs to have an in-depth study of the data chosen at random on the basis of the stratified sampling technique used.
Therefore, in a relatively small population using the sample size is as good as studying the entire population. The chosen margin of error is another thing that affects confidence margin.
3.7 METHOD OF DATA PRESENTATION AND ANALYSIS
According to Iyiogwe (2005:138), the analysis of data is the breaking down of recorded researched information into meaningful parts for critical examination and making of interferences about the relationships existing among the parts.
The presentation of data table are going to be used to reflect the percentage of respondents to a given related to the hypothesis the data collected for this study was tested analysis with the use of sample percentage and presented in a tabular form.
The research analysis is tested using Chi – square (x2) method whose formula is
Where x 2 = Chi – square
∑ = Summation Sign
fo = Observed Frequency
fe = Expected Frequency
df = Degree of freedom
Level of significance = 5%
CHAPTER FOUR
DATA REPRESENTATION AND ANALYSIS
4.1. AN OVERVIEW
This chapter is going to represent the interpretation and analysis of the questionnaire stated, structured, shape and return from the respondents. As already stated, the interpretation and analysis are done using simple percentages and tables to represents the response of the respondents.
Besides, it is in this section that the hypothesis the Chi–Square statistical model. In this, using respondents view about the question will be reviewed to know if it will follow a general decision rate to know if it follows a general decision.
a. DATA REPRESENTATION AND ANALYSIS
Table 4.1
Distribution showing the return of the questionnaire from the respondents
|
Questionnaire |
No of Respondents |
Percentage |
|
Returned |
55 |
89 |
|
Unreturned |
7 |
11 |
|
Total |
62 |
100 |
Source: field survey (2013)
From the data above 55 (89%) of the respondents returned their questionnaire and 7(11%) of the respondents did not return their questionnaire from this, one could understood that the response rate is very large because a reasonable percentage of the targeted audience returned.
Table 4.2
QUESTION 1
Distribution showing the response of the respondents in their age
|
Age (in years) |
No of Respondents |
Percentage |
|
Below 20 |
NIL |
Nil |
|
25 – 40 |
15 |
27 |
|
41 – 55 |
30 |
55 |
|
56 and above |
10 |
18 |
|
Total |
55 |
100 |
Source: field survey (2013)
From the above table, none of the respondents was below 20years. 25 – 40 years of age that was used for this research is 15 (27%), while 30 (55%) of the respondents are 41 – 55 years of age. 10(18%) of the population are 56 and above
Table 4.3
QUESTION 2
Distribution showing the response of the respondents by their gender
|
Gender |
Number of respondents |
Percentage |
|
Male |
20 |
36 |
|
Female |
35 |
64 |
|
Total |
55 |
100 |
Source: field survey (2013)
The above table shows that 36% of the respondents are male while the remaining 64% are female
Table 4.4
QUESTION 3
Distribution show the academic qualification of the respondents
|
Qualification |
No of Respondents |
Percentage |
|
OND |
5 |
9 |
|
HND |
10 |
18 |
|
BSC |
25 |
45 |
|
MSC and above |
15 |
28 |
|
Total |
55 |
100 |
Source: Field survey (2013)
From the above 5(9%) of the respondent are with OND, 10(18%) of the respondents are with HND, 25(45%) of the respondents are with Bsc while the remaining 15(27%) of the respondents are with either MSC, MBA or PHD
Table 4.5
QUESTION 4
Distribution showing response of the respondents that have heard about insurance before
|
Response |
No of Respondents |
Percentage |
|
Yes |
40 |
73 |
|
No |
5 |
9 |
|
Partially |
10 |
18 |
|
Total |
55 |
100 |
Source: own computation (2013)
From the table above, 40(73%) of the respondents said Yes, 5(9%) of the respondents said NO while 10(18%) of the respondents said partially.
From this table, above average supported that they have heard about insurance.
Table 4.6
QUESTION 6
Distribution showing the response of the respondents on the reasons for establishing (NDIC)
|
Response |
Number of respondents |
Percentage |
|
Generating revenue for government |
20 |
36 |
|
Assisting banks in making profit |
5 |
9 |
|
To manage and to regulate Nigeria banking system |
30 |
55 |
|
Total |
55 |
100 |
Source: field survey (2013)
20 (36%) answered that NDIC was established to generate revenue for Nigerian government, 5 (9%) said that NDIC was established to assist banks in making profit. while 30 supported that NDIC was established to manage and regulate Nigeria banking system.
Table 4.7
QUESTION 7
Distribution showing the response of the respondents on whether (NDIC) is achieving its objectives in Nigeria banking system
|
Response |
No of Respondents |
Percentage |
|
Yes |
45 |
82 |
|
No |
5 |
9 |
|
No Idea |
5 |
9 |
|
Total |
55 |
100 |
Source: field survey (2013)
From the above table, 45(82%) of the respondents answered yes, 5(9%)of the respondents answered No and 5(9%) of the respondents said that they don’t have any idea.
From this, one could understand that (NDIC) is achieving its objectives in Nigeria banking system
Table 4.8
QUESTION 8
Distribution showing the response of the respondents on if insurance programme is absolutely different from that of NDIC
|
Response |
No of respondents |
Percentage |
|
Yes |
50 |
91 |
|
No |
Nil |
Nil |
|
Partially |
5 |
9 |
|
Total |
55 |
100 |
Source: field survey (2013)
From the above table, more than the average of the respondents said its absolutely different, and 5(9%) of the respondents stood undecided. None of the respondents said No
Table 4.9
QUESTION 9
|
Response |
No of respondents |
Percentage |
|
Fraud & corruption |
28 |
51 |
|
Lack of customers |
10 |
18 |
|
Inadequate finance |
17 |
31 |
|
Total |
55 |
100 |
Source: field survey (2013)
Out of 55 respondents,28 (51%) respondents supported that fraud and corruption is the major challenge of Nigeria banks, 10 (18%) of the respondents said it is lack of customers while the remaining 17 (31%) suggested that inadequate financing is the major challenge of Nigeria banks
Table 4.10
QUESTION 10
Distribution showing the response of the respondents on whether insurance industry are doing anything to tackle and resolve the challenges facing Nigeria banking system
|
Response |
No of Respondent |
Percentage |
|
Yes |
45 |
82 |
|
No |
3 |
5 |
|
No Idea |
7 |
13 |
|
Total |
55 |
100 |
Source: field survey (2013)
From the table above 45 (82%) of the respondents said that Insurance Industry are doing something to tackle the challenges facing Nigeria banking system
2 (5%) of the respondents answered NO while 17(13%) of the respondents remained undecided.
Table 4.11
QUESTION 12
Distribution showing the response of the respondents on whether Nigeria banks can survive without support from insurance industry.
|
Response |
No of response |
Percentage |
|
yes |
10 |
18 |
|
No |
38 |
69 |
|
Partially |
7 |
13 |
|
Total |
55 |
100 |
Source: own computation (2013)
From the above table 10 (18%) of the respondents said that banks can survive, 38 (69%) said they cannot while the remaining 7 (13%) stood undecided
Table 4.12
QUESTION 13
Distribution showing the response of the respondents on the roles of insurance in promoting Nigeria banking system
|
Response |
No of respondents |
Percentage |
|
Granting loans to banks |
10 |
18 |
|
Making provisions for banks and customers protection |
40 |
73 |
|
Penalizing fraudulent staff and employees |
5 |
9 |
|
Total |
55 |
100 |
Source: own computation
From the above table,10 (18%) of the respondents answered granting of loans as the major roles of insurance industry, 40 (73%) supported that insurance industry provide protection for both the bank and its customers, while the remaining 5(9%)said that penalizing fraudulent staff is the role of insurance industry in promoting Nigeria banks.
Table 4.13
QUESTION 15
Distribution showing the response of the respondents on whether insurance industry have made any significant impact in promoting Nigeria banking system.
|
Response |
No of respondents |
Percentage |
|
Yes |
48 |
87 |
|
No |
5 |
9 |
|
Partially |
2 |
4 |
|
Total |
55 |
100 |
Source: field survey (2013)
From the table above 48 (87%) of the respondents supported that insurance industry have made a significant impact, 5 (9%) said No, while the remaining 2 (4%) said partially
4.3 TESTING OF HYPOTHESIS
This is the process of testing the statistical model as studied in chapter 1 using the Chi – Square principle, which is stated thus;
X2 = Critical Value
O = Observed Frequency
E = Expected Frequency
df = Degree of freedom
HYPOTHESIS 1
H0: Insurance Industry Programme has not positively influence the Nigeria banking services.
H1: Insurance Industry Programme has positively influence Nigeria banking services.
TABLE OF OBSERVED FREQUENCY
|
Response |
No of Respondents |
|
Yes |
35 |
|
No |
20 |
|
Total |
55 |
TABLE OF EXPECTED FREQUENCY
|
0 |
E |
0 – E |
(0 – E)2 |
(0 – E)2/E |
|
35 |
27.5 |
7.5 |
56.25 |
2.0 |
|
20 |
27.5 |
-7.5 |
56.25 |
2.0 |
|
55 |
|
|
|
4.0 |
X2C = 4.0
X2 = (R – 1) (C – 1) = (2 – 1) = 1 x 1 = 1
1 at df (a) 5% = 3.842
DECISION RULE;
Accept H0 if X2 = XC and reject H1 if X2 < X2
DECISION
X2 = 3.842 < X2C = 4.0
Therefore H0 is rejected and H1 accepted when says that insurance industry programme has positively influence Nigeria banking services.
HYPOTHESIS 2
H0: Nigeria banking are not passing through any challenges in rendering their services.
H1: Nigeria are passing through a lot of challenges and needs supports of insurance industry to survive.
TABLE OF OBSERVED FREQUENCY
|
Response |
No of Respondents |
|
Yes |
38 |
|
No |
17 |
|
Total |
55 |
TABLE OF EXPECTED FREQUENCY
|
0 |
E |
0 – E |
(0 – E)2 |
(0 – E)2/E |
|
38 |
27.5 |
9.5 |
90.25 |
3.28 |
|
17 |
27.5 |
-9.5 |
90.25 |
3.28 |
|
55 |
|
|
|
6.56 |
X2C = 6.56
X2 = 3.842 = (2 – 1) (2 – 1) = 1 X 1 = 59
DECISION RULE
Accept H0 if X2 > X2C and reject H1 or reject H0 if X2 < X2C
x2 = 3.842
X2 = 6.56
X2 < X2C;
Therefore H0 is rejected and H1 accepted which says that Nigeria banks are passing through a lot of challenges.
HYPOTHESIS 3
H0: Nigeria banking system does not need insurance industry to survive.
H1: Nigeria banking system needs insurance industry to survive.
TABLE OF OBSERVED FREQUENCY
|
Response |
No of Respondents |
|
Yes |
35 |
|
No |
20 |
|
Total |
55 |
TABLE OF EXPECTED FREQUENCY
|
0 |
E |
(0 – E) |
(0 – E)2 |
(0 – E)2/E |
|
35 |
27.5 |
7.5 |
56.25 |
2.0 |
|
20 |
27.5 |
7.5 |
56.25 |
2.0 |
|
55 |
|
|
|
4.0 |
X2 C = 4.0
X2 = (R – 1) (C – 1) = (2 – 1) = 1 x 1 = 1
1 at df (a) 5% = 3.845
Decision rule:
Accept H0 if X2 = XC and reject H1, if X2 < X2 and accept H0
Decision:
X2 = 3.842, < X2 C = 4.0. therefore H0 is rejected and H1 accepted which says that Nigeria banking system needs insurance industry to survive.
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
5.1 SUMMARY OF FINDINGS
After a critical evaluation of the impact of Insurance Industry in promoting banking services in Nigeria. The researcher came out with the following
1. That Insurance Industry has positively influenced the services of Nigeria banking industry.
2. That Nigeria banking are passing through a lot of challenges and needs Insurance Industry support.
3. Nigeria banking system will find it much more difficult to survive without Insurance Industry.
4. Insurance Industries are making every necessary provision to ensure smooth and safety system of banking.
5. Insurance has made a significant effect and impact in Nigeria banking system.
5.2 CONCLUSIONS
1. NDIC is an Insurance body established by Nigeria government to foresee the affairs of Nigeria banking system.
2. The future and success of Nigeria banks lies mainly in the hands of Insurance Industry; therefore, Nigeria banks needs insurance industry to survive.
3. The influence of Insurance Industry in Nigeria banking system has bring economic development in the country.
4. Insurance industry does not only provide protection to the banks alone, but also to the employees and customers of the banks.
5. Insurance Industry is the pillar that holds Nigeria banking system.
5.3 RECOMMENDATION
- That Nigeria Government should support Insurance Industry in order to boost the effectiveness of Nigeria banking system.
- If the relationship between Nigeria banks and Insurance Industry is properly managed, it will also boost the overall economy of the nation as there will be enough money in the capital market which will be borrowed by the deficit economy of economy development
- Nigerian banks should obtain adequate and comprehensive insurance cover/protection which will help to reduce the high rate of loss and liabilities which may equally lead to bank insolvent or liquidation.
- Special provisions should be created by Insurance industry to help tackle and eliminate the high rate of fraud and corruption invading the Nigeria banking system.
- That the Nigerian banking administrators and management should be regulated and statement of account and balance sheet to produce every year in order to eliminate mismanagement and corruption.
- The Nigerian Insurance sector is still over regulated, though the sector is supposed to have been deregulated. The roles and powers of NDIC need to be redefined. NDIC should be restructured to make it more independent so it can play the role of an umpire in Nigerian banks.
BIBLIOGRAPHY
Andrew S. C. (2001): Modern Banking Business in America. Powell Publication. Page 76.
Emeka U.J. (2003) Bank Failures in Nigeria. Ultimate Publication Ltd Enugu. Pg. 72.
Irukwu J.O (1999): Insurance Management in Africa. Bina Publication. Bina Africa Ltd; Page 102.
Iyiogwe N.U (1999) Aviation Insurance and Management Bekky Production Lagos Pg. 41.
Nigeria Deposit Insurance Corporation (NDIC) 2011 year book. Page 17 – 41.
Nwite S. C. (2004): Element of Insurance Practice. Immaculate Publication Ltd Enugu. Page 8 – 11.
Orjih J.O. (2007): Basic Element of Banking. Harvard Publication Enugu. Page 50.
Skye Bank PLC (2012) Year Book. Page 50
Umoh P.N. (2002): Fundamental Principle of Finance Harvard Publication Obiagu Enugu. Page 62.
Uzoma P. A (1996): Risk Management in Nigerian Banking Industry. Page 2 – 4.
APPENDIX
Department of Insurance,
Institute of Management and Technology,
Enugu,
Enugu State,
Nigeria.
Dear Respondents,
I am a final year students of the above department and institution. As part of the fulfillment of the requirement for the award of Higher National Diploma (HND) in the aforementioned department, I am carrying out this research.
Please, your maximum co operation in this is of much importance. Therefore, I crave your indulgence that information be supplied in good faith for it would be used solely for the purpose of this research and shall be in confidence.
Thanks for your co-operation.
Yours faithfully,
MOGBO KENECHUKWU .I
INS/H2011/011
QUESTIONNAIRE
1. SEX a. 25 – 40 ( ) b. 41 – 55 ( ) c. 56 and above ( )
2. AGE a. Male( ) b. Female ( )
3. EDUCATIONAL QUALIFICATION:OND ( ) HND ( ) BSC and above ( )
4. Have you heard about insurance before?
a. Yes ( )b. No( ) c. Partially( )
5. What are actually the major functions of insurance in Nigerian banks?
i. Foreign Investors
ii. Loss Accumulators
iii. Bank Shareholders
iv. Risk handlers
a. i and ii
b. ii and iv
c. All of the above
d. None of the above
6. Why do you think Nigeria Deposit Insurance Corporation (NDIC) was established?
i. To generate revenue for the government.
ii. To assist banks in making profit
iii. To manage and regulate Nigeria banking system
iv. Other; please specify:________________________________________
7. Do you think (NDIC) is achieving its objectives in Nigeria banking system? a. Yes ( ) b. No( )
c. Partially( )
8. Is Insurance Programme absolutely different from that of NDIC? a. Yes( ) b. No( )c. Partially( )
9. What are the major challenges facing Nigeria banking system?
i.Fraud and corruption.
ii.Lack of customers.
iii.Inadequate capital.
iv.Other; please specify: ___________________________________________
10. Do you think Insurance Industry are doing anything to tackle and resolve those challenges?
a. Yes ( )b. No( ) c. Partially ( )
11. Has Insurance Industry influenced Nigeria banking system positively?
a. Yes ( )b. No( ) c. Partially( )
12. Do you think Nigeria banking system can survive without Insurance Industry?
a. Yes ( ) b. No( ) c. Partially( )
13. What are the roles of Insurance in promoting Nigeria banking system?
i. Granting of loans to banks
ii. Making provision for bank and customer’s protection.
iii. Penalizing of corrupt staff and employees
iv. Others; please specify: _______________________________________
14. Do you think Nigeria government are encouraging insurance industry in exercising their duty/functions?
a. Yes ( ) b. No( ) c. Partially ( )
15. Has Insurance Industry create any significant impact in promoting Nigeria banking system?
a. Yes ( )b. No( ) c. Partially( )
16. If yes, what are the impacts of Insurance Industry to Nigeria banks?
i.Elimination of fraud and corruption.
ii.Encouraging safe system of banking.
iii.Increasing the rate of income and profit.
Other; please specify:
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