IMPACT OF CORPORATE POLICY AND STRATEGIC PLANNING ONTHE PERFORMANCE OF NIGERIAN COMMERCIAL BANKS

ABSTRACT

The research is on ” Impact of Corporate Policy and Strategic Planning on the Performance of Nigerian Commercial Banks”.   The objectives of the study are,  to determine the impact of corporate policy and strategic planning on goal attainment,  find out if there are relationships  between bank failure and corporate policy and strategic planning,  find out if corporate  policy  and  strategic  planning  check waste  of resources,  see if information  technology  supports corporate policy and strategic planning,  determine if strategies  such as mergers,  acquisitions,  aggressive marketing, listing with the stock exchange and others  facilitated the recapitalization  of commercial banks between 2004/2005, determine  if information  technology  supports  corporate  policy and  strategic planning  and to find out if strategic planning in commercial banks could lead to economic growth and stability in the Nigerian  commercial banks.  This study employed  the descriptive  research  design.  Stratified random  sampling  method  was used in the study.  The commercial  banks  selected  for the  study included  the First Bank  of  Nigeria  Plc.,  Union  Bank  of Nigeria  Plc., Intercontinental  Bank Plc.,  now a subsidiary of Access Bank Plc., and Afribank recently nationalized  and renamed Mainstreet  Bank Plc.  From a population  of 25200,  a sample size of 392 was determined  using Yamene’s  formula, which  was  considered  adequate  for the  study.  The  principal  instrument  for collection  of primary  data  was  the questionnaire.  Secondary data were sourced from journals, books, newspapers and magazines.  The questionnaire was structured in five point Likert scale. A content validity approach was adopted.  The split half method was used for the reliability test. The result gave a reliability co-efficient of 0.91  which indicated a high degree of consistency.   Data collected  were  presented  in  tables  using  frequency  and  percentages.  Pearson’s  product  moment  correlation  co• efficient  and  Chi-Square  were  used  for hypotheses  testing.  Findings  indicate  that  corporate  policy  making  and strategic planning  made impact  on the achievement  of organizational  goals and objectives.  Corporate  policy and strategic planning had relationship  with bank failure  Corporate policy and strategic planning helped to check waste of resources.  Implemented  strategies by commercial  banks facilitated  the recapitalization  as revealed  in the result. Information  Technology  supported  corporate  policy making  and strategic  planning.  Corporate policy and strategic planning could lead to economic growth and stability within the Nigerian commercial Banks.  The research made the following recommendations; Top management of commercial banks should embark on corporate policy and strategic planning to ensure that goals and objectives are achieved.  Commercial banks should establish corporate policies and plan  strategically  to avoid  failure.  Field managers  should  avoid waste  of resources  to minimize  operational  cost. Nigerian Commercial banks should embark on different  types of strategies as need arises.  Commercial banks should

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take advantage  of information  technology  to improve  services.

CHAPTER  ONE

INTRODUCTION

1.1.      BACKGROUND  OF THE STUDY

The principal target of Corporate Policy and Strategic Planning  is setting clearly defined goals and objectives stretched out to cover the entire organization for over a period of years.  The need to plan cannot be over emphasized.   Corporate Policy and Strategic Planning have today become a sine-qua  non  for corporate  survival.   Ukeje  and Akanwa  (2000: 1)  believe  that business  of yesterday depended on trial and error.  Ifezue (1999:2) supports this when he suggests that many past decisions were made without the benefit of formal strategic thinking and planning.  This trial and error approach appears to have failed companies in moving them to the Promised Land in the face of scarce resources and competition.   Management  is recognizing that intuition alone is no longer enough for succeeding in today’s environment.   This does not suggest that all types of strategies are good at all times. Price war for instance sometimes  succeed in destroying  many competitors  especially  the  smaller  members  of the  group.    In  the  process,  profit  is  eroded therefore, the smaller firms would have to fold up (Porter 1980: 17) another effect of price war is that when the war is over and smaller members  of the group have been forced out, monopoly come up and with monopoly, there will be hike in prices to compliment for the losses encountered during price war.  In institutions like commercial banks, the equivalent ofprice war is low interest rate.   Sometime around  1990,  banks like Mammy Bank Nigeria Limited published that they do not charge commission on turnover, a major source of bank revenue.  Today, that bank is no more in existence.

The compliment to strategic planning is corporate policy.   Corporate policy is important because any large organization  with a corporate  headquarters  should have some established policies  to ensure  uniformity  of operations  especially  as  decision  making  is  concerned.    Such policies ensures that strategic plans  conform with the missions,  visions  and values of organization  on which strategic

The commercial banks are key players in the financial and money markets.   To achieve a stable economy  and  sustainable  growth,  our  comm ercial  banks  must  be  strategically  and prudentially managed to eliminate waste and to achieve maximum  benefits with the available  manpower  and other resources.    Only this can give the banks competitive advantage  when compared  with their counterparts  in the international  financial markets to make the realization  of our objective 2020 possible. Nigerian comm ercial banks have rather suffered severe set backs in the past. Anyanwaokoro   (1996:440)   specifies  that  banks  encountered  series  of  problems  which  forced many  of them  out  of  the  banking  scene  in  1952.    The  same  experience  was  suffered  by  the comm ercial banks in the  1990’s.   In 2004/2005  during the period  when commercial  banks were mandated to recapitalize  from N2b to N25b,  about five banks dropped out because they could not concede to merger agreements  with other banks.   2009/2010  was another difficult period  for the banks.      While   some  problems   were   attributed   to   stringent   legislative   regulations,   modern managers believe that sound corporate policy and strategic planning have the answer.  It therefore, suffices to say that corporate policy and strategic planning were not practiced by the commercial

banks  within  the  period  under  review.    This  resulted  to  their  inability  to  meet  with  their obligations  to  customers,  loss  of confidence  by the public  and also  inability to  comply  with government’s  mandates.   The  absence  of such intensive planning  led to the closure  of many commercial banks such as the Orient Bank Nigeria  Limited, New Nigerian  Bank Limited, Pan African Bank Nigeria Limited and Progress Bank Nigeria Limited.  These unfortunate  incidences must  have  led  to  the  reconstruction  and  recapitalization   of the  Nigerian  commercial  banks between 2004 and 2005.   The failure or distress of these banks often leaves some catastrophic consequences to stakeholders of the banks.   Investors lose their funds,  employees lose their jobs, directors are displaced, the government loses sources of revenue and the public also lose in terms of social benefits.

1.2. STATEMENT OF THE PROBLEM

Banks are key players in the financial and money markets in Nigeria.   The role of commercial banks  in the structural  formation of the national  economy therefore  cannot be under-stated.  In

1952,  there was bank failure in Nigeria.  At that time,  all the banks were expatriate banks.   The banks were  mainly concerned  with  financing  imports and exports to and from Nigeria  as the colonial masters desired.  The banks were not interested in building and consolidating the position of banks in Nigeria  and so some of the expatriate banks pulled out when the government  gave some directives that  were not in their  interest.  In  1990’s there  was another bank  failure.  These banks were indigenous  banks having complied to the Indigenization policy of 1972.  At this time, the  Central  Bank  licensed  many  comm ercial  banks  following  a report  that  Nigeria  was  under banked.  There was stiff competition among the banks to the extent that some were crowded out. That was again the time when the banks practiced what was referred to as the armchair banking. Bankers relaxed  in their offices while customers  came to them.   There was little or nothing  like serious thinking  and planning.   2009/2010  is yet another hectic  period  for the banks.  This time, the Central bank  was able to link up the problems  to managerial problems.    The cash collected during the recapitalization  was excess and so top managers resorted to squandering bank’s money rather  than  making judicious  use  of them  to  earn  more  profit  for the banks.    These  problems would  have  been  averted   if  banks  were  fully  comm itted  to  corporate  policy  and  strategic planning.

1.3. OBJECTIVES OF THE STUDY

The thrust of the study is the extent to which corporate policy making and strategic planning are used  as instruments  for achieving  corporate  goals and objectives  in the Nigerian  commercial banks. The following specific objectives shall be pursued:

1.   To find out whether corporate policy making and strategic planning help in achieving corporate goals and objectives of the Nigerian commercial banks.

2.   To find out whether there is relationship between corporate policymaking/strategic planning and bank failure in the Nigerian commercial banks.

3.   To confirm that corporate policy making and strategic planning check waste ofresources.

4.   To determine if mergers, acquisitions, diversifications, aggressive marketing and listing with the Nigerian stock exchange facilitated successful recapitalization/reconstruction of commercial banks.

5.   To find out iflnformation Technology supports corporate policy and strategic planning.

6.     To determine if corporate policy making and strategic planning could lead to growth and stability ofNigerian commercial banks.

1.4.   RESEARCH QUESTIONS

1.    Do corporate policy making and strategic planning help to achieve corporate goals and

objectives in the Nigerian commercial banks?

2.    Is there any relationship between corporate policy making and strategic planning and failure in the Nigerian commercial banks?

3.    Do corporate policy making and strategic planning check waste ofresources in the

Nigerian Commercial Banks?

4.    Did Mergers,  acquisitions,  diversifications,  aggressive marketing and listing with the

Nigerian Stock Exchange facilitate successful recapitalization  of  comm ercial banks?

5.    Does Information Technology support corporate policy/strategic planning?

6.   Can corporate policy making and strategic planning lead to growth and stability of comm ercial banks?

1.5. HYPOTHESES

1.   Ho.    Corporate policy making and Strategic planning do not help to achieve corporate goals and objectives in the Nigerian Commercial Banks.

Ha.    Corporate policy making and strategic planning help to achieve corporate goals and

Objectives of the Nigerian Commercial Banks.

3.   Ho.  There is no relationship between corporate policy making and strategic planning and failure in the Nigerian Commercial Banks.

Ha.   There is relationship between corporate policy making  and strategic planning and failure in the Nigerian Commercial Banks.

4.    Ho.    Corporate policy making  and Strategic planning do not check waste ofresources in the

Nigerian Commercial Banks.

Ha.   Corporate policy making and Strategic planning check waste ofresources in the

Nigerian Commercial Banks.

4.  Ho.    Merger, acquisition, diversification, aggressive marketing and listing with the

Nigerian Stock Exchange did not facilitate successful recapitalization of commercial banks.

Ha.    Merger, acquisition, diversification, aggressive marketing and listing with the Nigerian Stock Exchange facilitated successful recapitalization/reconstruction of the commercial banks.

5.  Ho.    Information Technology does not support corporate policy and strategic planning.

Information Technology supports corporate policy and strategic planning.

Corporate policy making and Strategic planning do not lead to growth and stability of the Nigerian Comm ercial Banks.

Corporate policy making and Strategic planning lead to growth and stability in the

Nigerian Commercial Banks.

1.6.     SIGNIFICANCE OF THE STUDY

This research is significant because the concept of corporate policy making and strategic planning carry a lot of teaching to management  students.   It is also significant since succeeding students would   consult   it   as  reference   materials.      Policy   makers   and  operations   department   of organizations  and banks would see it as indispensable  guide in a bid to achieve organizational goals and objectives.  The best way through which banks and other organizations can overcome turbulent   environmental   and   economic   changes   due   to   technological   advancement   and competition is to embark on strategic planning.

1.7.   SCOPE OF THE STUDY

The study is on corporate policy making and strategic planning. The research will examine the impact of corporate policy making and strategic planning on achievement  of commercial bank’s goals  and  objectives.  It  will  also  study  corporate  policy  making  and  strategic  planning  in relationship  with  bank  failure,  waste  of resources,  information  technology  and  growth    and stability in the Nigerian commercial banking sector.  The research will also discuss the strategies that   facilitated   recapitalization   and   reconstruction   of  Nigerian   commercial   banks.   Four commercial banks in Nigeria were chosen for the study.  They are,  Union Bank of Nigeria Plc., First Bank ofNigeria Plc., Intercontinental Bank Plc., now a subsidiary of Access Bank Plc., and Afribank Plc., recently nationalized and renamed Mainstreet Bank Plc.

1.8.   LIMITATIONS OF THE STUDY

The three major limitations are:

(1) Limitation due to action ofrespondents.

A respondent  could decide to give misleading  information  and there is  no way the researcher could  detect  that.  In developing  countries  such  as ours where  the  literacy  level  is still  low,

respondents  find it difficult to co-operate with researchers. Researchers  are often mistaken to be either  law  enforcement  agents  gathering  information  for  the  police  or  tax  authorities.    Well established  organizations  and government  offices  compel their workers  to sign oath of secrecy and with this,  workers are afraid of giving out information to researchers.

(2)  Financial  Constraints;  Students  generally  have  financial  constraints.  There  are  only  few scholarship  schemes  in  this  country  and  few  bursary  awards  where  they  exist.    Most  student researchers are self-sponsored  and so they are compelled to cut their coats according to their sizes. (3) Time Constraints;   The student researcher  has limited time within which the research  report must be submitted.   The student must stick to the time set for the study.

1.9. DEFINITION  OF TERMS

It  is  not the intention  of the researcher  to use ambiguous  words because this document  is not intended to be used for political oration.  There are incidentally some technical words and phrases that appear in the text which require  some explanation  or clear definition.    Some of them are shown below:

Corporate  Body:    A corporation or corporate body is an association  of persons  or a group of persons  set up by law and authorized  to act as an individual person, which is vested with an independent  personality  and endowed with perpetual  succession of members.   It  is  an artificial person  or  a juristic   entity  whose  existence  is  maintained  by  constant  succession  of new individuals who replace those that die or are removed.   It can sue or be sued to court (Nkansah,

1996:3).

SWOT:     This is an acronym for; Strength, Weaknesses, Opportunities  and Threats.   They are important stages in strategy formulation especially during scanning.

Strategem/Strategy:   This is a Latin word meaning a plan for deceiving an enemy or gaining advantage over him. The word strategy has its origin from this Latin word strategem.  In modem business concept,  it has been given a variety of meanings.  It is most often used to denote a strong technique for achieving objectives and industrial growth.

Corporate Policy:   Policies are broad guidelines that assist in decision making. It ensures smooth operations and uniformity of practice.

Strategic Planning;   Strategic planning is the course of action designed to optimize future profit over a series of years by developing limited resources in a changing environment and in the face of increasing  competition  in  the  pursuit  of certain  management  goals  (Ukeje  and  Akanwa2000:40)

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