CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
The banking sector plays a very important role in the Nigerian economy as a supplier of credit to the many different sectors which require funds for growth. Soyibo & Adekanye (2013) assert that the role of an efficient banking system in economic growth and development lies in savings mobilization and inter-mediation. Thus, improved financial inter-mediation, especially through banking institutions, would not only help bridge the gap between domestic saving and investment in Nigeria, but more importantly facilitate trade and capital formation. The deposit money banks have traditionally been an extremely important channel of financial inter-mediation in both developed and emerging economies. It is common knowledge that the strength of any economy is strongly tied to the strength of her banking sector. On the other hand, the state of the economy is strongly impacted on by the operations and performance of her banking industry. The financial development of any economy is often viewed from among others, the perspective of the growth and vibrancy of its financial sector.
This is as a result of how important investible funds are to economic growth and development. The role of deposit money banks in financial development performance cannot be overemphasized. Lucas (2009) noted that the development of any economy is greatly enhanced through a vibrant banking industry. The banking industry serves the function of mobilizing savings from small and large savers in the economy and channels same to the fund users for investment purposes. Banking industry provides credit facilities to individuals, companies, as well as government for one kind of economic activity or the other. It could be for industrialization purpose, agricultural production, execution of contract etc. According to Onwumere and Suleman (2010), all national economies comprise the public and private sectors, though, the degree and size of each sector differ among countries. They asserted that the development of a country’s economy involves in part the development of the different sectors subsumed in these two main sectors. These sectors need funds to continue in operation and contribute to the nation’s overall performance. For them to effectively perform and survive there must be investment which is synonymous with funding, hence the banking industry becomes a very relevant agent.