CHAPTER I
INTRODUCTION
This chapter deals with the background of the study, statement of the problem, purpose of the study, significance of the study, research questions, scope of the study, limitation of the study and definition of terms.
1.1 Background of the Study
Banking can be classified as both a profession and trade. As a trade, banking business involves the buying and selling of services.
On the other hand, banking could be referred as a profession because could be referred as a profession because of its distinct body of knowledge, which distinguished it from other aspect of human endeavours.
Scholars and practitioners generally referred to a bank as a licensed institution chartered to provide deposit facilities for general public, accept money and collection of cheques from customers, permitting money to be withdrawn and transferred from one account to another and lending the surplus of deposited money to customers at agreed rate. All over the world, the banking industry is deemed as a sensitive interface between the production and service sectors. For any government to achieve the national objectives of stable price and sound economic growth, the banking system should be one that was well developed with the depth, breath that would make financial intermediation efficient, effective and productive.
The Nigeria banking industry started in 1982 when the Africa Banking Corporation based in South Africa was invited to open a branch in Lagos. It was therefore the modern commercial bank to have a branch in Nigeria and from there, other banks evolved. The banking industry had gone through many years of development. At present, numerous banks had sprang up from first generation banks to community banks. The functions of the bank ranges from traditional role to more sophisticated functions such as electronic transfer.
Treasury operation can be defined as transactions relating to fixed deposit, call deposit and banker’s acceptances. Thus, fixed deposit has to do with customers depositing cash for an agreed period of time at ten percentage (10%) per annum. Fixed deposits attract withholding tax. Call deposit is related to fixed deposit but the difference is that the customers can breach the contract by coming to the bank to collect the money deposited before the agreed period with the bank. Call deposit also attract withholding tax. The current rate for fixed deposit in the United Bank for Africa as at May 10th 2006 is 22.5%.
Treasury operation started in Nigeria in April 1960 with the Central Bank of Nigeria, which was its market place. It initiated the market with the first batch of treasury bills.
The combination of earning and liquidity were especially relevant for treasury managers all over the world. This was because, the ultimate objective of commercial banks were to make profit for its shareholders. To earn profit for all, the banker must maintain confidence and to maintain confidence, the bank must maintain an adequate degree of liquidity in his assets. The amount of liquidity to hold and the form in which to hold it were the constant concern of treasury managers.
United Bank for Africa (UBA) Plc is one of the leading and oldest financial service group in Nigeria and also one of the Nigeria top three (3) commercial banks. It was established in 1961 by a consortium of five international banks to take over the banking business carried on in Nigeria since 1949, by British and French Bank Ltd with a total asset of N18803 billion and 138 outlets across Nigeria and Two (2) foreign branches in New York and Grandcayman Island. United Bank for Africa (UBA) Plc is the first international bank to be registered under Nigeria law, first to be listed on the Nigeria stock Exchange, first Nigerian bank to open a branch in USA, first and only Nigeria bank to issue Global Depository Receipts (GDR), and first Nigeria bank to establish a branch in a university campus.
1.2 Statement of Problem
The miscellaneous overheads and operating cost of most banks have had to be on the increase over the past decades due to high rate of lending and depositing in fixed deposits. The depression brought about a number of survival strategies to banks to enable them manage or monitor their fund collection and utilization. Several measure have, however, been introduced to reverse the receding economy.
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