A Critical Analysis of the Impacts of Corparate Governance in The Banking Sector in Nigeria.

International Journal of Research and Innovation in Social Science (IJRISS) | Volume V, Issue VII, July 2021 | ISSN 2454–6186

A Critical Analysis of the Impacts of Corparate Governance in The Banking Sector in Nigeria

Chief Ajugwe, Chukwu Alphonsus Phd.
Ajugwe Chukwu and Associates

Abstract: It is absolutely necessary that each bank in Nigeria not only should put a code of corporate governance in place but must make sure it is observed by all the staff in the banks, inclusive of the board members whose duties is to ensure that the staff observe the code and to enforce sanctions should any staff goes contrary to the code of corporate governance. Therefore, it is germane to note that efficient corporate governance is necessary in the banking sector to survive and to be sanitized as it confers on the banks certain indisputable advantages such as increase in profitability, robust and sound cash flow, solid capital base, and ensuring that the interest of the staff is aligned with that of bank for greater productivity. Such banks engender the interest of the stake holders and confidentiality of the public which will in turn lead to the increase in depositors’ fund. A sound banking sector is absolutely necessary for development of financial market that will trigger economic growth and development. On the contrary, poor or lack of corporate governance on the banking sector may lead to the distress of many banks and impacting negatively on the economy.
The thrust of the paper is to examine the impacts of corporate governance on the banking sector, the negative consequences of poor or lack of corporate governance on the banking sector will be subjected to deeper analysis and the paper will go a long way to proffer recommendations to improve corporate governance on the banking sector in Nigeria.

I.INTRODUCTION

It is imperative to stress the fact that one of the tools that defines a profit making Deposit Money Banks (DMBs) are effective, strong and working Corporate Governance. A weak Corporate Governance will spell a doom to any banking organisation by eroding the capital base and causing severe liquidity challenges in the bank. Corporate Governance is a means of interfacing the interest of those who have a stack in the company such as customers, shareholders, workers, management executives, financiers, the government suppliers, creditors etc. The importance of corporate governance cannot be emphasized, a weak one can shake the foundation of the banking system as it will erode the transparency, reliability and trust the public have on the system, this may lead to the failure/distress of the banks.
Wikipedia (2021) defines Corporate Governance as ‘the collection of mechanism, process and relation used by various parties to control and to operate a corporation” it is a means of distribution of rights and responsibilities among the stakeholders such as directors, managers, shareholders, creditors, auditors and regulators etc. “it includes rules and procedures for making decisions in corporate affairs. It is necessary because of the conflicts of interests between stakeholders, primarily between shareholders and upper management or among the shareholders’.” Wikipedia (2021)

Read More