THE IMPACT AND ROLE OF INFORMATION TECHNOLOGY IN

BANKING DEVELOPMENT IN NIGERIA

(A STUDY OF SELECTED COMMERCIAL BANKS IN ANAMBRA STATE)

BY

OSUOCHA JOY CHIKAMNAYO

NAU/2000414150

PROJECT REPORT SUBMITTED IN PARTIAL FULFILMENT OF THE

REQUIREMENTS FOR THE AWARD OF BACHELOR OF SCIENCE
DEGREE (B.Sc) IN BANKING AND FINANCE DEPARTMENT OF
BANKING AND FINANCE FACULTY OF MANAGEMENT SCIENCES NNAMDI
AZIKIWE UNIVERSITY, AWKA

JANUARY, 2005
 APPROVAL PAGE

This is to certify that this work written by Osuocha Joy. C. is original and Ms satisfied the
standard in partial fulfillment for the award of Bachelor of Science Degree (B.Sc.) in
Banking and Finance in the Department of Banking and Finance, Faculty of
Management Sciences - Nnamdi Azikiwe University, Awka.

_________________________ __________________
Mr. Victor Ike Okonkwo Date
Project Supervisor

__________________________ __________________
Mr. Celestine Okaro Date
Head of Department

________________________ __________________
External Examiner Date

DEDICATION
This work is solely dedicated to the Almighty God who made it possible for me to start
and accomplish this work, and to my beloved parents, Chief and Lolo R.I. Osuocha for
their immense contributions towards the success of this project.
 ACKNOWLEDGEMENT

My profound gratitude goes to the Almighty father who has given me the knowledge to
carry out this piece of work.

My special gratitude goes to my project supervisor, Mr. Victor Ike Okonkwo whose kind
direction and guidance made this project work a reality. May the good Lord reward him
abundantly.

My tremendous gratitude goes to my lovely parents Chief and Lolo R.I Osuocha for their
tireless efforts, good advice and financial contributions, which encouraged me
throughout my stay in school. I also appreciate in a special way the contributions of
other members of my family especially my eldest sister and her husband, Mr. and Mrs.
Maxwell Achi, Miss Caroline Osuocha and my elder brothers, Emeka , Chigozie, and
Okechukwu Osuocha for their financial and moral support towards the success of this
programme.

I equally recognize and appreciate the good works of my lecturers - Mr. Celestine
Okaro, Mr. U. Uloabachie, Mr. E.S. Ekezie, Dr. Steve Ibenta, Dr. Alex Mbachu, Mr. C.
Nwakoby, Mr. P. Adigwe, Lady Oge Adirika and many others.

I am equally grateful to my uncles and my aunties especially Mrs. Juliana Ogbolu for
their financial support.

Lastly, I thank and appreciate my good and lovely friends especially my roommates and
entire course mates for their lovely co - operations and encouragements.

ABSTRACT

This project report examined how information technology is changing the banking
arena. It shows how financial institutions and their clients' benefit from advances in the
arena. Advances in information technology has for instance led to increase space and
speed of banking transactions resulting in lower queuing by reducing customers waiting
time and improved service quality. It has also resulted in increased volume and quality
of transactions and improved staff efficiency. Advances in information technology
however have its own challenges. These problems are electricity power failure,
telecommunication failure, computer-aided fraud, lack of experts and personnel, high
cost of maintenance and training of staff. The challenges are especially in the areas of
regulations and fraud control.

The researcher instruments used were questionnaires, oral interview and personal
observations. Secondary sources of data were gathered from journals, dailies and
related textbooks and the sample size were derived from three commercial banks
located in Awka, Anambra State. The banks were:

1. United Bank for Africa Plc. (UBA)

2. Union Bank of Nigeria Plc.

3. First Bank of Nigeria Plc.

Questionnaires were administered to both the bank staff and customers in each bank.
The data generated were presented in tables, and analyzed using percentage response
and Likert - Scale of ranking.

CHI - Square (X2) were used to test the hypothesis formulated. It was found that the
use of technological equipments has enhanced the internal operation of banks in areas
such as Account updating, management of finance, Security of data, storing and
transfer of information. The external operations of services provided by the banks to
their many customers were also improved by the information technology for customers
enjoy safe, quick and easy fund transfer.

It was also found that information technology in banks has reduced the cost bank
services, customer-waiting time and increased efficiency of staff.

Technological innovations and staff training technology changes everyday, banks have
to create rooms for such changes, so that they update the services rendered to the
public by the purchases of new information system. There should be continuous training
and development programmes that must be vigorously implemented by banks to update
the skill of their staff. With the implementation of all these by banks, the positive impact
of information technology in the development of banking industries will be realized.
 TABLE OF CONTENTS

Pages

Cover page ---------------------------------------------------------------------------i

Title page-------------------------------------------------------------------------------ii

Approval page-------------------------------------------------------------------------iii

Dedication------------------------------------------------------------------------------iv

Acknowledgement----------------------------------------------------------------------v

Abstract---------------------------------------------------------------------------------vii

List of tables-----------------------------------------------------------------------------xii

CHAPTER ONE: INTRODUCTION

1.1 Background of study------------------------------------------------------------------1

1.2 Statement------------------------------------------------------------------------------5

1.3 Objectives of the study---------------------------------------------------------------6

1.4 Significance of the study -------------------------------------------------------7

1.5 Statement of hypothesis -------------------------------------------------------8

1.6 Scope and limitation of study---------------------------------------------------------8

1.7 Definition of terms----------------------------------------------------------------------9

CHAPTER TWO: LITERATURE REVIEW

2.1 Overview of the banking scene --------------------------------------------------12

2.2 Concept of computer----------------------------------------------------------------------14

2.3 Types of computer system----------------------------------------------------------------18

2.4 Characteristics and qualities of a computer -------------------------------------------18

2.5 General comments on computer installation-------------------------------------------20

2.6 Commercial application-------------------------------------------------------------------20

2.7 Role of computer in bank management-------------------------------------------------23

2.8 Some technological driven product in banking----------------------------------------27

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Sources of data------------------------------------------------------------------------------43

3.2 Sampling size and technique---------------------------------------------------------------44

3.3 Method of data collection------------------------------------------------------------------44

3.4 Validation of research instrument---------------------------------------------------------45

3.5 Method of data presentation---------------------------------------------------------------45

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1 Bio- Data----------------------------------------------------------------------------------------48

4.2 The impact of information technology on banking industry in Nigeria---------------49

4.3 Recent trends in information technology------------------------------------------------51

4.4 Prospects of information technology in Nigeria banking industries-------------------54

4.5 Ways of improving the relevance of information technology in Nigeria banking

industry-------------------------------------------------------------------------------------------55

4.6 Test of Hypothesis--------------------------------------------------------------------------58

4.7 Discussion of findings-----------------------------------------------------------------------60

CHAPTER FIVE: SUMMARY OF FINDINGS, RECOMMENDATIONS AND

CONCLUSIONS
5.1 Findings----------------------------------------------------------------------------------------68

5.2 Recommendations----------------------------------------------------------------------------70

5.3 Conclusions-----------------------------------------------------------------------------------72

Bibliography---------------------------------------------------------------------------------------73

Appendix: Questionnaire for both bank staff and bank customers------------------------76

LIST OF TABLES

Table No: Table Title Pages

4.1: Responses on the extent information technology has

increased the number of depositors in banks

4.2 Response on the extent information technology has

made office work of bank staff less burdensome

4.3 Response on the extent information technology has

led to more efficient storage in banks

4.4 Response on the extent some areas in banking

needs to be developed

4.5 Response on the extent information technology has led to the

introduction of electronic fund transfer

4.6 Responses on the study of bank computerization

4.7 Responses on the extent information technology has reduced

time, wastage in banks.

4.8 Responses on the extent information technology has contributed

 to better planning and management of funds in banking business

4.9 Response on the extent information technology has reduced the banks
operational cost.

4.10 Contingency table on testing whether the use of information

technology has led to time reduction in banks.

4.11 Contingency table of distribution on testing whether information

technology has increased the number of depositors in banks.

4.12 Contingency table on testing whether information technology has

reduced the bank's operational cost including daily works.

4.13 Contingency table of distribution on testing whether the use of information

technology has contributed to better information storage in banks
 CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The industry in Nigeria was developed between 1894 - 1933 with the multinationals
commanding nearly all the equity base of the banks and close to 90% aggregate bank
deposits with the coining on stream of the indigenization enterprises promotion Decree
of 1972, Nigerians were allowed to command and control up to 60% equity in the
expatriate banks.

With the sanitization policy of the banking ordinance of 1951 which lasted to most of the
indigenous banks failed e.g. Industries and Commercial banks in 1929, Nigerian
Farmers and commercial banks in 1947 -1953, Nigeria Penny bank in 1946, thus,
mushroom banks were flushed out of the system The surviving ones were those that
had the regulatory provisions of the ordinance They are totally regarded as "old
generation banks". The industry didnt not experience any major changes in terms of
banking innovations and services delivery between 1952 to 1991 before the IMF
(International monetary Fund) compelled the Nigerian government to privatize and
deregulate banking services. This led to the springing up of different privately Pined
banks in Nigeria with full control and equity contribution by Nigerians. These banks are
expressly regarded as "The New generation Banks.

Banking today is conducted in an6 age of economic crisis, distress, fraud, hood and
misrepresentation that is the opposite of what was obtainable in early centuries when
banking was manually operated with no complexity and sophistication. During this
period of development of banking, the customers the banks served were mostly
merchants who can be served immediately without any hitch; more so, transactions
were done with truth and transparent honesty. As centuries passed by, the complexity
and sophistication in the Liking sector increased the more, hence the signal on the need
for the production of technological activities into the banking services. A clearer
manifestation of this need was seen in the 2Ist century often known as the "Age
Computer Technology". For this ("act, information is the core upon which all Ilk activities
of any business enterprises revolve. It is therefore very true that effective and useful
information system should be available to any organization fee effective decision-
making. We are now living in the age of information technology were it is very important
and abundantly clear that it is required of managers, accountants or bankers to be vast
in the use of computers and process information system, otherwise he / she becomes
obsolete and the tool for fraud unknown to him or her. Banking industry is the most
beneficiary of the contribution of technology in the economic environment in that it is a
service-oriented institution where access information is the primary ingredient for its
operations. Organizations e banks are economic units established for attaining specific
objectives, Because batiks are constantly facing competitions in the financial market,
they have to be structured in such a way that they would be constantly informed on line
relevant changes in these markets, its effects on resources and objectives particularly,
the resultant reactions to these changes.

To properly analyze every bit of information, the organization needs to employ system
that constantly be used to process, update, store, retrace and retrieve puts stored into it.
For this to be achieved, it requires the use of computers. The computer can magnify any
information, which the workers abilities cannot nil since it can receive process and give
back information. Therefore, a person's skill in using computer will enhance his or her
working ability, which imply means that a bank manager who uses computer can attend
to hundreds / thousands of customers in a lesser time than a manager without
machines. More so, subordinates who are skilled in process information and computer
techniques cannot misguide such mangers.

The new information order will create a knowledge based society were the induction
and distribution of information goods and services will dominate line world economy.
Information technology is the fourth logical revolution known to man after the agrarians,
the industrial and technological (mass production) revolutions. Today, the information
economy has taken over from fie industrial economy with information goods and
services. However deep d powerful information, national differences still exist in the
areas of national information infrastructure, enterprises culture work among nations.
This information goods and services have provided more than 60% of the IPDSS
National Product (GNP) in developed countries.

Statistics evidence and growth rate in the economy shows that the global innovations
have enabled the economies in developed areas to achieve a high level of efficiency
and productivity. However, the anti-globalization protesters from all over the world at the
world trade organization in Seattle, USA in 1999 fear that the liberalization competition
would increase economic insecurity.

A core component of information technology development change is the semi-

conductor chip, which since the early 1980s began to decrease in size and cost, and
increased steadily in capacity and complexity. Information complexity conveys the
notion of the application of microprocessor based (digital) technologies for information
handling for effective and speedy decision- making.

The information age is reviewed as (lie age of electronically wired or enabled piety (e-
society) within the context of the aspiration for living and managing life activities in a
paperless environment. The competitive foundation of the information age is the
National Information Infrastructure ( NII). NII is the rapine room while the heart of this
engine is the software.

However, the impact of technology in the modern banking in the 21st century cannot be
over - emphasized. Technology has made notable contributions in banking industries
and has become historical in recent times and a potent factor in the development of (he
entire economic environment. The aspects that are post outstanding in these areas or
landmarks are in:

1. Cash Management

2. Transfer of money through Electronic Fund Transfer ( EFT)

3. Fraud Management

4. Automated Clearing House System (ACHS)

5. Telephone Banking System

 6. Automated Teller Machine (ATM)

1.2 STATEMENT OF THE PROBLEMS

The constraints of the Nigerian banking system are well known. Economic is still fragile
while supporting infrastructure is grossly inadequate. These constraints have been
largely responsible for the existing weak technological base. Consequently, technology
remains an imported commodity" which continues to depend on the availability of
foreign exchange for its consumption. The purchasing power of the Naira has also
limited the ability to import and therefore restricted access to modern technology.

Beside the incessant failures of power supply and irregular functioning of

telecommunication facilities have not provided the level of support required for
Sustained computerization and computer networking, there has also been low
information technology skill and lack of technological base needed for bring the growth
of indigenous banking technology.

Since computer is capable of performing in minutes and more efficiently tasks that takes
several man-hours, hence the first crucial problems of workers is that most
computerized systems are introduced to cut labor costs which causes redundant and
retrenchment of workers. By introducing extra coding into cheques and other
documents, they could start to offer some of integrated banking and accounting services
thereby throwing out the accountant from ilk se duties he should do.

1.3 OBJECTIVES OF THE STUDY

The purpose of this study were:

1. To identify the impact that computer has actually exerted on the banking industries

2. To discover the areas in banking services that still needs to be developed with this
recent trend of information technology.,
3. To discover and study the constraints of information technology in computerization of
study banks.

4. To evaluate the prospects of information technology in the Nigerian banking business

5. To make recommendations based on the findings in improving the relevance of

information technology in Nigerian banking industry for economic development of the
nation.

1.4 SIGNIFICANCE OF THE STUDY:

This research work will be beneficial to various interests groups on its successful
completion. Such groups are the banking industry as an integral part of a sample of
financial system; Students and other researchers in the field, which may serve as a
reference as a copy of the work will be kept in the school library for public consumption.
This study will also be of immense importance to the government, customers and even
business enterprises.

This study will be beneficial in banks as it influences the way bank services are
delivered and distributed all with the aim of making banking more convenient for the
customers. For instance, many banks in Nigeria now lave most of their branches linked
online and real-time. The implication of this is that it is now possible for people to
conveniently carry out banking operations from any of their bank, which is linked online.
This clearly reduces the needs and dangers of carrying cash and help provide variety of
services to the numerous banking public. Banks by so doing will be performing the vital
functions of resource allocation in the economy (i.e. providing a medium of mobilizing
saving and channeling saving to investment outlets).

Finally, students are going to find this study useful in their academics. This is because
this study has extensively discussed the rationale for the introduction of information
technology in banking, the various uses they are put into, and the prospects of banks
making use of this technology in their operations.

1 5: STATEMENT OF HYPOTHESIS
Ho: Computerization of banks has not reduced time wastage in the banks. Hi: The
computerization of banks has reduced time wastage in the banks. Ho: Information
technology in banking system has not increased the number of depositors in banks.

Hi: Information technology in banking system has increased the number of depositors in
banks.

Ho: Computerization has not reduced the bank operational cost including ally workloads

Hi: Computerization has reduces the bank operational cost including pbily workloads.

Ho: Information Technology has not contributed to better information rage in banks.

Hi: Information Technology has contributed to better information storage in banking

system.

1.6 SCOPE OF THE STUDY:

This work aims at finding out various usage and impact of computer technology or
information technology in banking services. A survey study was earned out using
samples from selected commercial banks in Anambra State.

1.7 LIMITATIONS OF THE STUDY:

In carrying out this study, the researcher was laced with some constraints.

Though it was difficult at the initial stage to gather materials relevant for this research
work and to comprehend the details and requirements of the topic, the researcher was
still able to make due of what she had and a tangible write up or tangible write up was
made.

More so, with the very high cost of living, due to the present economic hazards coupled
with the high rate of transportation, engaging in serious exercise of this nature definitely
posed a lot of financial problems considering that the fact that the researcher is a
student, her lean pocket was further stretched in order to get the job well done. Despite
the constraints inherent to this work, the researcher was able to gather substantial
materials to the best of nr ability and knowledge, which made the work unhindered.

1.7 DEFINITION OF TERMS

ACHC-- Automated Clearing House System: This is a system used by banks for
clearing or exchanging cheques drawn on each other.

ATM - Automated Teller Machine: This is a self- service transaction concept that
provides ready access to cash 24 hours in day.

COMPUTER - It is an electronic device for storing and processing of data, making

calculations or controlling machinery

COMPUTERIZATION-This is the process or procedure of processing information using

computers.

E-Banking (Electronic Banking) - This means banking that exists solely on the
internet and has no physical presence for consumers / customers to interact with the
institution.

Economic Fund Transfer (EFT) - It is another product of the internet that has allowed
money to be sent by one party in a destination to another party located differently
through money transfer agent.

Hardware - A physical device that makes up the computer such a s printer, monitor,
diskette, mouse, etc

Information - This can be simply be defined as a knowledge acquired through

experience or study.

Experience or study on the other hand is procedures for data gathering.

Information Technology - This is regarded as a systemized body of tool, techniques

and infrastructure for generating, collecting, storing, processing and transmitting of data.
Point- Sale -System (P.O.S) - This is an online system that allows customers to
transfer funds instantaneously from their bank accounts when making purchases.

Software - this includes everything in the computer that is not hardware e.g language,
written programmes, documentation, manuals etc.

Technology - This is the knowledge or use of mechanical art and applied science.

Telephone Banking/Video Tex - This is a generic term used to describe home

information retrieval systems.

To get full detail of this project

Contact: 234-80-3224-7897

Email: jaybloxy@gmail.com