CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND OF THE STUDY

Prior to the emergence of contemporary banking system, banking activities was manually executed which result to a slowdown in accomplishment of transactions. This manual system has to do with posting transactions from one ledger to another which is human handled. Figures or counting of money supposed be carried out through electronic machine or computer systems were computed and counted manually which were not 100% accurate thereby leading to human errors. Most bank then use only one computer in carrying out transactions which ameliorate the sluggish nature of banking transaction. Nigeria do not adopt electronic banking quite early compared to developed countries. Nigeria embraced electronic banking system in the early 2000s. As at the initiation of electronic banking system, the use of physical cash was said to have groomed corruption via the “cash and carry syndrome” commonly linked with the quick movement of Ghana-must go” bags by some politicians. Such bags as some analyst asserted, are a main source of corrupt activities as untrustworthy persons seeks to bribe their way to prevent been examined in some sensitive areas or places in a corrupt country. Ever since electronic banking emanated in all Nigeria banks, it has been a misery for civil servants; research show that some staff in organizations such as the national boundary commission for example, are yet to get their salaries for the previous months as efforts to electrically transfer salaries into their account have proved abortive according to Ibrahim, D. (2009). Olekah, J. (2009) while acknowledging the recent hiccups that befall the system, admonishes stakeholders against being weakened as such “early problems” are normal. James, A. (2009) a banker reported to vanguard annual reports that “we should not abolish electronic-banking by viewing at the negative angle, we must push towards perfecting it”. James, A. (2009) also asserted that the magnitude of data produced by the Government ministry Agencies is much making it a bit hard for financial institutions like banks to adjust, Mathew S. (2009) a staff affirms in his report to vanguard annual report on banks and cards that government should have carried out its homework “properly well” before introducing the system, “they fixed us into a system they were not harnessed for and the outcome is untold hardship visited on innocent people”. Online or electronic banking systems grant everybody the privilege for easy access to banking activities, thus promoting financial inclusion. These banking operations may include electronic money transfers, retrieving an account balance, and retrieving an account history electronically. Electronic banking (E-banking) has slowly become an essential part of modern day banking operations. All over the world, banking industry is one of the industries that have embraced technology which aid in providing better and quality services to customers. The quality of services is promoted using technological innovations. Technological innovations have continued to encourage speed of transactions and quick service delivery in commercial banks, thereby promoting customers’ convenience and satisfaction. Dawson (2011) firmly points out the advantages of E-banking to cut across speed operation, , timely management, better communication, improvement of product quality and gaining competitive advantage. According to Olusegun, Ishola and Hammed (2011), the transition from the traditional banking to electronic banking has been a ‘leap’ change, there is however a high level of job insecurity among employees in the modern-day banking institution. In other words, the modern-day banking operations place more importance on technological innovations to enhance service delivery and high level of customers’ satisfaction; and this however no doubt increases the rate of employees’ job security by making some skills outdated and demanding high level of skill in promoting electronic banking caused by information technology innovation or development. One of the major importances of electronic banking products and services is improved efficiency and effectiveness of the operations so that transactions can be processed faster and most conveniently. Thus, it is expected to enhance customers’ services, effective distribution, improved operations, faster access to information and improved internal processes. This implies that customers’ benefit ranges from reduced frequency of going to the banking halls to handling of cash. It is against this backdrop that an evaluation of e-banking on the development of financial system in Nigeria is examined.

1.2      STATEMENT OF PROBLEM

In Nigeria, there is a serious debate on whether the financial sector reforms have contributed to performance of the banking sector. This is because the Nigeria’s financial system is not effectively providing its development roles as such and is currently not in a position to fulfill its potential as a propeller of economic growth and development (Nkoro and Uko, 2013). And in spite of the banking sector reforms in the areas of bank recapitalization, electronic banking and effective corporate governance, the Nigeria’s major productive sectors have not really performed optimally, thus prompting the arguments as to the efficacy of the reforms. Thus, despite the rapid development in electronic banking innovations, it is not clear whether e-banking innovations have impacted positively and significantly on the development of financial system in Nigeria. It is against this, an evaluation of e-banking on the development of financial system in Nigeria is examined.

1.3      AIMS OF THE STUDY

The major aim of the study is to examine an evaluation of e-banking on the development of financial system in Nigeria. Other specific objectives of the study include;

1.  To examine the structure of the Nigerian financial system.

2.  To examine the types of electronic banking used in the development of financial system in Nigeria.

3.  To examine the impact of e-banking on the development of financial system in Nigeria.

4.  To examine the benefits of e-banking in the development of financial system in Nigeria.

5.  To examine the relationship between e-banking and development of financial system in Nigeria.

6.  To examine the challenges of e-banking in the development of financial system .

1.4 RESEARCH QUESTIONS

1.   What is the structure of the Nigerian financial system?

2.  What are the types of electronic banking used in the development of financial system in Nigeria?

3.  What is the impact of e-banking on the development of financial system in Nigeria?

4.  What are the benefits of e-banking in the development of financial system in Nigeria?

5.  What is the relationship between e-banking and development of financial system in Nigeria?

6.  What are the challenges of e-banking in the development of financial system ?

1.5 RESEARCH HYPOTHESES

Hypothesis 1

H0: There are is no significant impact of e-banking on the development of financial system in Nigeria.

H1: There is a significant impact of e-banking on the development of financial system in Nigeria.

Hypothesis 2

H0: There is no significant relationship between E-banking and development of financial system in Nigeria.

H1: There is a significant relationship between E-banking and development of financial system in Nigeria.

1.6 SIGNIFICANCE OF THE STUDY

The study will be of profound benefits to enlighten the general public on the benefit of e-banking and how it has impacted on the development of financial system in Nigeria. This study would also be of immense benefit to students and scholars who are interested in developing further studies on the subject matter.

1.7 SCOPE AND LIMITATION OF THE STUDY

The study is restricted to an evaluation of e-banking on the development of financial system in Nigeria.

LIMITATION OF THE STUDY

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview)

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8 OPERATIONAL DEFINITION OF TERMS

E- Banking: is defined as the use of infrastructure of the digital age to create opportunities both local and global. He noted that it enables the dramatic covering of transaction cost and the creation of new types of banking opportunities that address the barriers of time and distance.

A Financial System: is a web of organized and regulated financial interrelationship among financial institutions of various kinds and between and among the various economic units and persons and bodies, namely households(consumers /savers), businesses (producers/borrowers), governments (regulators, producers, lenders, borrowers), and external bodies and persons that make up an economy.