CHAPTER ONE

INTRODUCTION

1.1   Background of the Study

        After the implementation of the liberalization of the financial sector which was part of the Structural Adjustment Programme (SAP) introduced in 1986, the banking industry in Nigeria witnessed a tremendous growth. This was manifested in the number of banks and bank branches, their total deposits, total loans and advances, total assets and total capital and reserves during that period.

        The number of banks in Nigeria increased from 15 in 1970 to 115 as at the end of 1996. The 1996 figure was made up of 64 commercial banks and 51 merchant banks. The number of bank branches in Nigeria stood at 2,377 in 1995 and of this figure, 2,234 were commercial banks branches while 143 were merchant banks branches. The total deposit liabilities of insured banks rose from N43.9 billion in 1990 to N210.9 billion in 1995. Total loans and advances increased from N4.1 billion in 1987 to N191.2 billion in 1996. The total capital and reserves of commercial banks rose from N1.5 billion in 1987 to N10.1 billion in 1996, while total assets of banks rose from N49.8 billion in 1987toN591.2 billion in 1996.

        These monumental growth witnessed in the banking industry, brought, with them some sharp practices on the part of the operators. These sharp practices later metamorphosed into malpractices that led to the collapse of many banking institutions. By malpractice, we mean broadly an unpermissible practice or improper treatment of an issue. In other words it refers to that practice that is against the rules and regulations or is forbidden by law.