THE EFFECT OF INFORMATION TECHNOLOGY ON THE OPERATION OF BANKING SYSTEM IN NIGERIA

Introduction

1.1 Background Of Study

Development in a country can be measured in relation to its overall social, economic and political development. But no matter how developed the country is, it cannot be self sufficient, there is always an urge to improve in the social relationship, economic development and in polities.

In Nigeria, during the pre-colonial era, there is always an interaction which begins mostly from trading activities which makes the country to exchange what it has for what it requires. Trading were carried out among the various tribes that made up the present Nigeria nation through the old methods of trade (barter) system which is the exchange of goods for goods[services] objects like shells, cowries, beads etc were recognized as a means of exchange.

However as society enlarges more complex, the crude means of exchange became imperative. Coins and paper notes were introduced, which made it easy for more goods and services to be acquired at the exchange of such coins and paper notes. Thus as the nature of businesses becomes more sophisticated and complex, it become necessary for all sectors to be connected with a modern means that would be simpler, faster and convenient.

For this reason, the birth of the modern day banking system using information technology [IT]. The banking industries are now been connected with the information technology facilities which make the operations, services and activities of banking to be more efficient and effective for both organization and individuals for business transactions.

The impacts of IT has become far reaching to the extent that organization jostling for relevance in a competitive environment cannot help but embraces the potentials of the E-revolutions.

Information technology is a manmade resource, embracing principally the electronic technologies of computers and telecommunications [voice, data and video] and comprising both electronic hardware and software. The significant of IT in today’s successful organization cannot be under estimated. It plays a major role in the success of the organization in a highly competitive world by providing easy and reliable means of collection, storing, and retrieving, processing, transmitting and distributing information. There can be various other factors that determine the success of a firm, and a firm may use various strategies to pursue the path of success.

However, fast and easy access of information through the use of IT is very important to the firm because it influences all the other success factors and the competitive strategies cannot be practically implemented without its support. Information technology (IT) is the automation of processes, controls and information production using computers, telecommunications, software and ancillary equipment such as automation teller machine and debit cards, it is a term that generally covers the harassing of electronic technology for the information needs of a business at all levels. Banking services that have been revolutionized through the use of ICT as including account opening, customer account mandate and transaction processing and recording.

Information and communication technology (ICT) has provided self service facilities (Automated Customer Service Machines) from where prospective customers can complete their accounting opening documents directly online it assists customers to validate their account numbers and receive instructions or when and how to receive their cheque books credit and debit cards. ICT products in use in the banking industry include ATM, smart cards, telephone banking, MICR, electronic funds transfer, Electronic data interchange, electronic home and office banking

1.2 Statement Of The Problem

The advent of information technology in the operations of the commercial banks in Nigeria amongst other sectors has brought about several noticeable developments but at the same time its attendant problems. The achievement of IT has been applauded by users of these techniques.

The most significant problem of IT is that banks capitalized on it as an instrument for an efficient and competitiveness.

1.3 Objective Of The Study

The objective of the study is to examine how the adoption information technology affects the operation of commercial banks in Nigeria such as :

1. How the introduction of information technology has influence banks performances as well as assessing logically whether the adoption of information system has influence the banking sector.
2. Also to find out the reason why banks have to left their old method of operation to modern banking such as E- banking and identify the problems arising from the operational style of the commercial banks in Nigeria.
3. To investigate into the extent of effectiveness and efficiency for banking sectors after the introduction of information technology.
4. To examine the modes by which commercial banks can improve on their service delivery in order to attract depositors funds.
5. To access how information technology was assisted in the enhancement of globalization of Nigeria commercial banks.
6. To also access how information technology has affected the customer base of the banks.
7. To access how I.T helps in the reduction of cost and benefit in increasing revenue base of the bank and finally, make recommendations based on findings.

1.4 Research Question

The question this research work tends to ask are as follows:

1. Why high incident of fraud in the banks is is attributed to the development of information technology?
2. How has the information technology aided the banking operations?
3. Why is it that the corporate mission/mission statement is not been adhered strictly by banks?
4. Does huge investment into information technology in banks have a proportionate profit returns?

1.5 Statement Of Hypothesis

1. H1: The use of information technology leads to improvement in banking services.
2. H2: The use of IT has contributed to the high profitability of Banks.

1.6 Significance Of Study

Banking system is required as a catalyst for rapid microeconomic development of other sectors of the economy. Hence its stability should be the priority of the government most especially during the democratic dispensation.
Going by the recent distress in banking industry in Nigeria, the level of public confidence in the sector was drastically reduces and thus led to the instability problem in the sector and as such the public assurance and confidence on efficiency in the private sector is decaying.

The major cause of this syndrome can be attributed to the problems inherited in the banks operational system. The quest for globalization and commercialization has brought about innovations in technology. The digital age and the potential threat posed by non-traditional competition which necessitated innovation has made it inevitable for Nigeria commercial banks to improve upon their operation as they face evolving revolution are being confronted with increasingly sophisticated customer base compelling them to offer today what their customers would be expecting tomorrow. Banks have to deviate from just being a profit making bank to a more conscious customer centered institution.

This research will enable banks to identify ways of remaining competitive in the global and domestic financial industry. It also helps prepare banks repositioning towards meeting the challenges imposed by global banking. Also it is expected that the work will contribute to the banks future projections on strategies to be used in attracting depositor’s funds, reduce queues in the banking hall, the bank’s management policies.

Finally, the research work will also contribute to knowledge to academic field and serve as a source of reference to researchers who would carry out research on similar study in the future,

1.7 Scope Of The Study

The research work covers the role of information technology on the operations of commercial banks in the country, Nigeria.

1.8 Limitations Of The Study

Specifically, the information in this research work is limited to the happening in the Fidelity Bank PLC and First Bank of Nigeria PLC. Emphases are laid on activities of both banks situated at bank road via government house Umuahia branch.

1.9 Definitions Of Terms

1. Barter System:

This can be define as a system of trade which involves the exchange of goods for services, using objects like shells, cowries, beads etc barter system does not recognized the used of money or currencies as a medium of exchange.

2. Information Technology:

This can be define as a man-made resource, embracing principally the electronic technology of computers and telecommunications.

3. Computer:

A computer is an electronic device that is capable of solving problems by accepting data, performing prescribed operational on the date accepted and supplying the results of those operations.

4. Telecommunications:

This is an electronic technology which uses the voice, data and video in disseminating information.

5. ATM Card:

Automated Teller Machine (ATM) is a machine which enables a customer of a bank to operate on its account, with a card which is encoded with a personal identification number (PIN).

6. Electronic Funds Transfer:

this is a process of transferring fund through an electronic device.

7. Micr Cheque:

This means magnetic ink character Recognition cheque used in processing volumes of cheque received by banks. It uses special ink and it’s limited to 14 characters only.