CHAPTER ONE

1.1 INTRODUCTION:

Over the last couple of decades, the Nigeria financial system has grown remarkably. From the almost crude of it was characterized with in pre –colonial and colonial days. It has become so sophisticated toady that economic experts can proudly thumb their chests. With due regards to the ownership structure of the institution, the regulatory flame work, the instruments employed, and the number of established institution, Nigeria can be said to posses the most sophisticated financial system in Africa.

Within the Nigeria financial system itself, the banking system itself, the banking institution has been the most remarkable in growth. This is just as well in any case considering the critical position, which they occupy. In a complex financial position, which they occupy, in a complex financial position, which supplies the money and the credit, need of the economy.

The work bank and banker is neither used or define. In the central of Nigeria (CBN) degree NO 24 of the 1991 nor bank or other financial institutions decree (Bofio) No 25 of the 1991 2 of P5.115 of exchange act 1881 provides that bankers include a body of persons whether incorporated or not who carry out the business of banking. Section (1) of the evidence act define banks or bankers as any person or persons, partnership or company carrying on the business of banking.

Financially, the banking act of 1969 produces that bank means any person who carries out the business of banking and include commercial bank and an acceptance house. The role of banks is thus an important one in the process of economic development in the sense that they mobilize fund form the surplus spending and for the economy. In this way they increase the quantum of national saving and investments. Secondary though an appropriate investment multiplier. The volume of goods produced increase as a result of projects financed by bank funds, all of which lead to a successful promotion of an efficient system of payment. Creating banking habits development in the society and providing employment opportunities.

In view of this highlights, it become easily comprehensible why the failure of the bank has a far – reaching consequence.

The ability of a bank to operate successfully rest on how well they are able to obtained the confidence of the public. If that confidence is missing, the gap will be too great for the bank to fill. The effect of bank failure on the economic development of Nigeria can be express in a nut –shell to be the following;

Lack of effective and efficient financial intimidation:

Loss of public confidence in the system, further depression of the economic additional burdens on the regulatory authorities – education of the social vice for the sake of the citizenry and in the interest of economic development, there is an expedient need to device a host of remedying situations.

The fact that a bank fails today is not to say those incidences are not systematic. There must be a number of ways out of any predicament. The only crack is how effectively employed. Such remedy includes;