CHAPTER ONE

INTRODUCTION

1.1      PREAMBLE

Every Business oriented organization is aimed among other at making profits so high as possible.  All efforts, therefore are diversified at effective planning process with a maximum cost involvement in its decision making drive towards achieving the desired objectives, management often provides basic guideline which are quantified in financial terms and it mineral values.

Budgeting and budgetary control will continue to play a significant role in banking industry, its contributions today’s in competitive Banking environment and budgetary techniques by banking industry spared by intense revealer from other financial institution.

Due to the nature of banking industry, budgeting cannot be treated in exactly the same way in manufacturing firms.  Although the practice is different.  The difference lies in the fact that manufacturing firms are product oriented while banks are service oriented organization.

Budgeting is required to achieve many deferent aims within an organization, if not only aid in planning, co-ordinations and communicating the activities of the banks, but also as a control and motivating devices in the management of the management of the organization.

Budgeting call for effective monitoring and controlled by the head of the organization since budget animates from different sections departments and all the branches of a company which no company is an exception so as to guarantee its reliability and also minimize deviation from plans.

Budgeting starts with the setting out of the objectives of the organization by the management for the budget year according to government’s fiscal and monetary guideline and policies. The top management staffs must communicate the policy affect the long term plan to those who are responsible for preparing the current year budget.  The manager prepare the minimal budgets for those area for which they are responsible and submit it to their supervisory officer while the budget is examined and summarized into master budget which consists of budgeted profits and loss accounts, balance sheet and the cash statement.

The approval of the master budget constitute authorities of the manager countered in carrying out the plants while are contained in each budget.

For management to provide adequate control over the over the budget of an organization, It should co-ordinate all the various phrases of the firms activities and the collaboration of the responsible parties in achieving the actual results with budget to establish the variance.  It should trace the variances to where it arose so as to control the various effectively.

1.2   STATEMENT OF PROBLEM

There is nothing as bad as not planning for an event in the business circle.  While business operations will not want to go out of business, the mistakes will tills occur that will make them go out of the business, the mistakes will remain that some of them do not take pains to work according to their own budget.

This study, will investigate the extent to which bank have incorporated budgeting and budgeting control process in their banking operation.  Young business would see budgeting as more formality while the estimation which is supposed to be a guide in their banking operation, going business would see budgeting as a more formality while the actual performance will be far away from the estimation which is supposed to be a guide in their drive towards revenue generation and expenditure, before the modern way of budgeting.  There has been an informal way which does not follow the normal protocol ad in modern budgeting and budgetary control in banks.  There are some questions which are of great importance to budgetary control process that come to mind.

-       Why is there still banks failure despite the use of budgeting and budgetary process?

-       How can budgeting and budgetary control are improved in banking industry

-       Does budgetary control process help bank to achieve their goals and objectives?  It is based on this that I see it necessary to research on this using union Bank of Nigeria Plc as a case study.

1.3   OBJECTIVE OF THE STUDY                                    

There has presently been as increasing spate of banking industry dissatisfaction with budgeting and budgetary control process.

This study will aim at looking at the following:

i       Highlighting the impact of the budgeting and budgetary control process on bank operations.

ii      Appraise the efficiency of the system in banking co-ordination.

iii Examining the budgeting and budgetary control system in actualization of the Bank plans and objectives.

iv      Conclusively, to recommend ways and condition to enhancing efficiency.

1.4   HYPOTHESIS

The going a long way to achieving some of the goals and ascertain the significance role of budgeting and budgetary control in banking industry, the following hypothesis are formulated.

-Hi:   Budgeting and budgetary control do helps bans to achieve their goals and objectives.

Ho: Budgeting and budgetary control does not helps bans to achieve their goals and objectives.

Hi:    Budgeting and Budgetary do help to control process can be improved in banking industry.

Ho: Budgeting and Budgetary does not to control process can be improved in banking industry.

1.5 SCOPE OF STUDY

The study is restricted to evaluating of Budgeting and Budgetary control of Union Bank Plc specifically, a case study approach is adopted and various department, branches and sections are assembled by the budget department of Head Office and consolidated into a budget income and expenditure account and balance sheet of the bank as a whole.

1.6   SIGNIFICANCE OF STUDY

The importance attached to this area of study has necessitated this research topic and the objectives and goals of the bank will be achieved would be of great importance in the following ways.

i       Budget and Budgetary control can give “early warning” of impending problems.For instance, shortages of cash or business opportunities.

ii      It assists in decision making e.g. identifying the budgeted costs and budgeted revenue of a capital expenditure proposal.

iii      It assists co-ordination of functions and business areas e.g. purchasing and stock, production and sales, finance and uses of home.

iv      It will enhance good result of the objective of the bank.

v       It’s budget gives the banks a convenient time in making decision on budgeted revenue and expenditure.

vi      It will encourage the banks and other firms that are not in banking industry to look ahead and plan ahead.

vii     It helps the bank to identify the resource of the efficient utilization.

viii    Budgeting and budgetary control gives early warning of impending problems so as to enable the managers of the banks to strive to achieve the organizational goals and try to advert the problems

1.7   LIMITATION OF THE STUDY

        The framework of this study is centered only as organization. The project was limited on the data and the questionnaires that were collected from the particular bank of study and the textbooks and journals; I was to gain access to during the course of the study.

1.8   METHODOLOGY

In carrying out this research works questionnaires   

        will be used to collect information from the bank in   

         study.

-       Interview techniques will also be used.

-       Annual report of this bank and other related materials that information can be gotten from would be glanced through from the necessary departments.

1.9   HISTORICAL DEVELOPMENT OF BANKING INDUSTRY IN NIGERIA

The business of banking activities which was initiated in Nigeria in 1891 by the bank of British West Africa to which the standard bank of Nigeria Limited now first bank of Nigeria is a success or bank.

        There was not banking legislation of any kind then, neither a central bank nor a ministry of finance emerged until 1955. Prior to 1952 there were all kinds of special investor who started mushroom banks in Nigeria.  These banks usually operated for a while and after collecting deposits from their customers would suddenly disappear with their money, results in large sections of the banking community being swindled.

        However, this period also intense the existence reputable banks like the banks of British West Africa which, secured, monopolized such banking business as was prevalent than until about 1925 when Barclays’ Bank acquired the colonial Banks and opened a branch in Lagos.  The National Bank of Nigeria Limited was established in 1933. While the African Continental Bank Limited was established 1947.

        In 1971, the shares of the stock were listed on the Nigeria; Stock Exchange.  In the same year 8.33% of the Banks shares were offered to Nigeria.  The following year, the federal government of Nigeria acquired 51.67% ownership of the bank, hearing Barclay’s Bank Plc of London with 40% ownership, in 1979 that 40% was sold to Nigeria individuals and business to comply with the recently enacted banking and investment laws.  The bank changed its name to Union Bank of Nigeria Plc. To reflect its ownership structure in 1993, the federal government of completely divested it’s ownership in the Bank.

        Subsequently, Union Bank of Nigeria Plc. Acquire the Universal trust Bank Plc and Bread Bank Ltd.  It also absorbed its formal subsidiary Union Merchant Bank Ltd.

OWNERSHIP

        As of October 2011, the owners of the shares of Union Bank of Nigeria Plc. Includes the following corporate entities and individuals.

UNION BANK OF NIGERIA STOCK OWNERSHIP

BANK               NAME OF OWNER             %OWENRSHIP

1.                     African Capital alliance               60.00

2.                     Other investors                          21.00

3.                     Asset management company of

                        Nigeria                                      19.00

                        Total                                         100.00

African capital Alliance       is a consortiums of financial institution that include the following:

(a)          ACA Holdings Ltd.

(b)         ACA Managed fund

(c)          Netherlands development financial company

(d)         Standard Chartered private equity

(e)          Actor capital

(f)           Carlye capital of Washington DC

(g)          Highvister

(h)         The Keffi group Vii LCC (Keffi group JC Flowers BGD

(i)           ABC Holdings Ltd of Botswana

(j)           Discovery group of Connecticut Unit State of America

Assets Management Company of Nigeria is an arm of the federal government of Nigeria.

BRANCH NETWORK

        The bank maintains a vest network interconnected branches in all Nigerian states.  It has two wholly owned bank subsidiaries, one in Colonou, Benin and another in London in the United Kingdom.  It also maintains a representative office in Johannesburg South Africa.

BOARD OF DIRECTORS

        The Bank activities are supervised by a 14 (fourteen)members board of directors chaired by professor Mushells Yakubu,  one of the non executive director a former director of the Central Bank of Nigeria.

MANAGEMENT BOARD

The management board is chaired by Mrs. Olufunke Iyabor Osibodu, who serves as the managing director and chief executive officer of the Bank.  She has being at the helm of the Bank since August, 2009.

1.10  DEFINITION OF TERMS USED BUDGET.

The Budget is financial or quantitative statement, prepared and approved prior to a defined period of time, of the period to be pursued during that period for the purpose of at any giving objective.  It may include income, expenditure and employment of capital” (ICMA).

BUDGETARY CONTROL

“Is the establishment terminology of budgets relating the responsibilities of executive of the requirement of a policy and the continuous comparison of actual budget results, either to secure by individuals action, the objective of that policy or to provide a firm basis for its revision (ibid).

BUDGET MANNUAL

        This usually consists in large organization.  It is a written set of instruction and relevant information that serves as a reference for the implementation of the budgeting proves, it should contain among other things engaged in the preparation of budget.

        The basis on which of this should prepare the departmental and functional budget and the form and records to be used in reporting the actual result.

BUDGET CENTRE

        A budget centre is section of the business on which individual is responsible for the preparation of a separate budget.

BUDGET PERIOD

        A budget period is the period of time for which a budget is prepared and used.

        Summarized in master budget which is an estimate of final account (profit and loss account and balance sheet) at the end of the budget period.

PROFITABILITY

The primary aim of goal of a firm should be profit making in a banking industry, performance in the long run should establish well defined and measurable goal for evaluating success of the bank.  From the budget profit, statement can be prepared and the budget profit computed.

MASTER BUDGET:  The budget activities for the period can be summarized in master budget which is an estimate of final account (profit and loss account balance sheet). At the end of the budget period.

PROFITABILITY:  The primary aim or goal of a firm should be profit making in a banking industry, performance in the long run should establish well defined success of the bank from the budget profit, statement can be prepared and the budget profit computed.

PREPARATION OF BUDGET

The preparation of budget is a management as well as accounting book.

The line manager will have the ultimate responsibility for the preparation of individual budget.

BUDGET COMMITTEE

A large organization will consist of several number of top manager from the functional division the budget committees is to oversee the work of preparing the budget, it will set geared guideline to be followed by a line manger in building up their budget, resolve difference amongst them, submit final budget to chief executive for approval.

BUDGET DIRECTOR

        The budget director sometimes called budget controller may be the chief accountant or one of his subordinate, he will be appointed to organize various budget activities.