CHAPTER
ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The trend in the
Nation’s economy in this recent year particularly from the dawn of the
democratic salting, the would be revealed that, this has been innovation and
reforms to the various sectors of the economy most especially the banking
sub-sector of the economy. This development in the banking sector is what is
generally known s the bank recapitalization or bank reformation whereby the
former capital base of various banks existing in the country was raised from
two billion naira (N2 billion) to twenty five billion naira (N25 billion). This
is by far the most profound monetary policy measure, witnessed by the banking
industry in
since its interception in 1892.
The key driving force
behind this policy is to transform banks from the weak, marginal
players they have been, to mega banks that would ultimately perform effetivelly
in the strong global competitors. The second and equally important reason is to
better position these banks to cope with the vagaries of the
operating environment and endow them with the capacity to finance major project
and real sector activity like their counterparts in the advance economics. This
development has made the total number of bank in the country to be reduced to
just twenty five.
Estate surveyors and
valuers have over the recent years been able to discharged their professional
duties and services prominent among which is valuation which is a bid to
establishing the values of this bank so as to facilitate the merger
acquisition, consolidation, asset sharing, etc on relevant bases. In order to
present a comprehensive dissertation on this topic i.e the impact of the
recapitalization process on the real estate sector. There is a need to build
the impact from diverse and given necessary details as may be demanded.
Real estate sector
(market) is a place where bundles or clusters of right are being exchanged. It
could be a system of transaction between landowner, land user and estate
agents.
Real property investment is a capital
formation of new asset which involves creation of real estate products such as
commercial building, residential building. It can also be described in the sector
ranging from commercial sector, residential sector and industrial sector etc.
Since it has been said
earlier that banks from the weak. Marginal players they have been in to mega
banks that would ultimately transform into strong global competitors and to
better the position of these banks to cope with the vagaries of the Nigerian
operating environment and endow their
with the capacity of finance major industry project and real estate sector
activities.
In view of this, the
project work will focus on examine, identifying analyze and recommend all
necessary things as regard the impact of commercial banks recapitalization
process on real professions.
1.2 STATEMENT OF THE PROBLEM
In Nigerian today,
research has shown that real estate sector face some challenges, which has
posed problem or set back in the sector. Some of the challenges are lack: of
adequate funding, high cost of building, heavy reliance on imported items and
costly housing design, low returns from real estate. Since real estate is
characterized by relatively large economic size, investors have traditionally
relied on third party financial instruction for significant positions of fund
required for investment. Control of large parcel of real property is difficult
to achieve without access to borrowed fund, which have consequently become
ambiguities factors in real estate investment decisions.
Banking sector, which was the major source of
development finance, reneged on it role of financing sustainable economic
development by rather supporting the import dependence nature of the economy.
Most of the revenues generated by bank before consolidation to the highly
fragmented nature and the weak capital base of Nigerian commercial banks as at
that time.
In doing this, certain questions become
imperative; what is really meant by recapitalization? Why recapitalization?
What are the machineries put in place? What was the state of banks in the
pre-consolidation era? What was the state of banks in the post consolidation
era? What is the relationship between banking industry and real estates sector?
What are the impacts of the reform on real estate sector? What are likely
shortcomings or challenges of this reform on real estate and banking industry?
What are the probable solutions? So this project work is faced with challenges
of proffering solutions to some problems that arise in the process of
commercial bank recapitalization with emphasis is real estate sector.
1.3 AIM AND OBJECTIVES OF THE STUDY
The aim of this study
is to evaluate the impact of bank recapitalization in real estate sector of the
economy.
OBJECTIVES
– To
examine the real estate market prior to the process of recapitalization.
– To
assess the recapitalization of the affected banks in the study area
– To
examine the impact of recapitalization on the real estate sector
– To
identify the problems of the recapitalization on the real estate sector and to
suggest possible solutions.
1.4 JUSTIFICATION OF THE STUDY
Property (real estate
investment in any given country involves large sum of money or capital
commitment and also takes a long time to complete when compared to other forms
of investment. The general economic condition of country is one of the major
determinants of the level rate of real estate investment. The issue of
incurring base now becomes a necessity in the development of real estate. The
capital could be gotten from equity finance that is, from one’s saving, profit
drawn on other business that are capable of carrying out development, including
ways in which income would be earned without incurring debt. The other sources
of development finance is gotten from debt finance, which ensures a liability
on the developer to a second party that could be termed the financial on
investors. As compared with equity finance where the developer is the investor
to the land finance e.g from friends, banks, financial, institution, trust and
bonds, property companies, government, pension funds and insurance etc of al
sources of debt financing in Nigeria, bank and other financial institutions
seem to be the largest dominating factor on real estate financing.
The property and
development, gazette (1991) recognizes that without a well-organized and
efficient housing finance system. It is difficult to mobilize substantial
financial resources for channeling funds in to the real estate sector.
In the light of this, various
works have been concerned with the problem of banking industry in economy
from a broad view Oboh G.A.F (1991), carried out a research work on banking and
economy. Contemporary issues in the banking system. However,
during the time they were carrying out the research, the banking sector, which
was the major source of finance reneged on its role of financing sustainable
economic development by rather supporting the import dependence nature of the
economy.
Most of the revenues
generated by banks before the recapitalization program was import business
related. This was largely due to the highly fragmented nature and the weak
capital base of Nigerian commercial banks as at that time.
Therefore, this study
seeks to establish link between the reforms initiated by the central banks of
Nigeria (CBN) and the accessibility of real investor to finance in order to
ensure better performance and this, reduce the problem of real estate to the
barest minimum.
1.5 SCOPE OF THE STUDY
This project work
sought to establish the impact of recapitalization programe on real estate
sector in .
However, as a result of time constraint, the writer limited the scope of this
study to Osogbo.
Ideally, the study was
supposed to embrace all the banks that were recipients of the recapitalization
exercise and that are situated in Osogbo as well as the estate firms involves
in the real estate practices, but the writer decided to focus on a random selection
of the estate firms registered under estate surveyors and valuers registration
Board of Nigeria (ESVARBON) and some banks that survived the recapitalization
exercise.
1.6 LIMITATION OF THE STUDY
In the course of
carrying out the research work, the following were the challenges encountered
by the researcher.
There was the challenge of time
constraints in which case, there was limited time to carrying out this research
work, in the same vein, there was also the constraint of funds to carry out a
very thorugh research work. There was also the challenge of retrieving all the
questionnaires administered to these respondents and nonchalant attitude from
the respondents.
1.7 HISTORICAL BACKGROUND OF OSOGBO
In Yoruba mirth, Osogbo
as a historical town was founded by Osun a river of goddess and wife of
legendry king Sango of the ancient Oyo Empire Osogbo’s prominence as an
important tourist attraction stems from the
where the Osun grooves and shrine are both located. As early as 1929’s Gesman
Art connoisseurs stated flocking to Osogbo to afford themselves of the fertile
Osogbo art in Textile design and fertility frame evidence in sympathetic magic
in the Osun goddess. Little wonder, Osogbo is praised as Osogbo Ilu-aro, Oroki
asala, “Osogbo the town of dye, Oriki the one that embraces all”
Notable among these
Germans Swan Wenger who was the moving figure behinds the imbari art movement
was a training ground for performing literary and visual artistes who were
later bestrode the artistes framament like colluses.
The point being
chorused is the fact that Osogbo has always played lost to visitors and thus
have compelled the need for terminal expansion and accommodation beckoning. At
another level, with the contact of British colonial administration, Osogbo
became a prominent town as the capital of Osun division which was home to the
colonial representatives in the area.
To crown it all
commerce becomes centred in Osogbo with the coming of J. B Olivant, Peterson
Zochonis and Royal Niger company later UAC, Mr. Bigg’s, Species and enactment
of Banks like bank PHB, Spring, Intercontinental bank, Pacific, UBA, Zenith all
extended there merchandize tentacles in the city.
The coming of Railway
and sitting if terminus at Osogbo also share up into the compelling housing
need at the city. By the way, employees of various government and
non-government organizations settled down in Osogbo and necessitated an
accelerated, affordable medium size low income housing need.