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CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Over the last couple of decades the Nigeria financial system has grown remarkable.  From the almost crude form it was characterized with in pre-colonial and colonial days.  It has become so sophisticated that economic experts today can proudly thump their chests.  With due regard to ownership structure of the institution, the regulatory framework, the instrument employed and number of established institutions, Nigeria can be said to posses the most sophisticated financial system in African. Within the Nigerian financial system itself, the banking institutions have been 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 system which supplies the money and credit needs of the economy.

The world bank nor banker is nether used nor defined in the central of Nigeria (CBN) Decree No 24 of 1991 nor bank and other financial institutions Decree (BOFIO)No 25 of 1991 but section 2 of Bills of Exchange Act 1881 provides that “bankers include a body of persons whether incorporated or not who carry out the business of banking section 2 (1) of the Evidence Act defines banks banker to means “any person or persons, partnership or company carrying on the business of bankers.  Finally, the Banking Act of 1969, provides that bank means any persons who carries out the business of banking and include a 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 funds from the surplus spending and for of the economy.  In this way the increase the quantum of National savings and investment.  Secondly though an appropriate investment multiplier, the volume of good and service produced increase a result of investment projects financed by bank funds.  All of which lead to a successful promotion of an efficient system of payment, creating banking habits, development the society and providing employment opportunities. In view of these highlights, it becomes easily comprehensible why the failure of a bank of a bank has far reaching consequences.

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