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Problems Of Money Transmission In Nigerian Banks

Table of contents on Problems Of Money Transmission In Nigerian Banks

Cover page

Title page

Approval page



Table of content

List of tables




1.1 Statement of problem

1.2 Objective of study

1.3 Significant of study

1.4 Scope and delimitation

1.5 Definition of terms

1.6 Organization of work



2.1 Payment system in Nigeria

2.2 Channel of money transmission

2.3 Money transmission instrument

2.3.1 Cheque

2.3.2 Draft

2.3.3  Mail and telegraphic transfer

2.3.4 Money gram and western union

2.3.5 Money and postal orders

2.3.6 Standing orders

2.3.7 Credit transfer

2.3.8 Problems of money transmission in Nigeria banks



3.1 Sample size and sample method

3.2 Method of data collection

3.3 Interview format

3.4 Method of data analysis

3.5 Limitation of the study



4.1 Interpretation of data



5.1 Recommendation



Chapter one of Problems Of Money Transmission In Nigerian Banks


The banking decree of 1969 in defining the banking business incorporated all the functions of the institutions.  However, in terms of what services banks offer to the public, three stand out distinctly deposit and payment mechanism, finance and credit and money creation.

The role the banks play by facilitating payments for goods and services without the need to hold hand to hand currency cannot be overemphasized.  By the use of the deposit and payment by cheques the settlement of debts by means of coins and note have become unnecessary.  In the definition of money supply, demand deposits are distinguished from time deposit because cheques are in most societies, generally accepted means of payment.

Consequently, in a system where the payment mechanism does not allow for the force and full use of cheques, it becomes unnecessary and anomalous to distinguish between demand deposit, and hand to hand currency on the one hand and time deposit on the other hand.

The next role-played by banks and which is of tremendous interest to businessmen is that of providing finance and credits for business the bank serve as intermediaries between lender and borrower.

In the process of lending banks creates money by borrowing to investors who pay interest on these funds given to them.  How much a bank can create money depends on their reserve ratio.  Banks increase and decrease the quantity of money in circulation through their actions.

Having discussed these categories of services; I do intend to appraise how adequately the banks have provided these services to the Nigerian public.  Section 39 (11) of the central bank of Nigeria Act 1958 requires the central bank to “promote and maintain as three to four months to be cleared, in spite of the provision of a maximum period of 21 working days from the data of lodgment as stipulated by the Central Bank of Nigeria (CBN) in the “Bankers Tariff.

In some cases, customers are allowed to cash their open drafts over the counter because the draft over, did not arrive until months after the drafts have been presented for payment.  Statements of account are not sent to customers regularly.  In other cases, standing orders are delayed.

Some of the incidents have attracted public criticisms, this made the author to develop interested in carrying out a research into the problems of one of these services, rendered, money transmission.


Of the many services which the banks render in our economic system and which people criticize are being inadequate, money transmission appears to be the least resolved in terms of solutions for optimization.

A lot of writers on this issue, have blamed the poor state of this service on dearth of effective communication in Nigeria, the tendency for banks to be reasonability careful because of the high rate of fraudulent activities involving both the public and some bank staff, such as authorized printing of bank stationary like fake cheque books, bankers draft, tellers and robber stamps.  Others include manipulating of computer records, signature forgery and nonchalant attitude by staff as regard their duties.

Among these possible causes of inadequate money transmission in Nigeria, there have been possible solutions.  However, it is pertinent to mention that most of the literatures written on this topic lack the merits of an empirical study.  In spite of the numerous solutions offered in these works, the service of money transmission in Nigeria has remained inadequate.

This indicates that the central bank of Nigeria in turn requires the commercial banks to provide adequate services to the Nigerian public.  Indeed the Central Bank of Nigeria can be said to set the machinery for the promotion and maintenance of adequate and reasonable banking services to the public.  They take such steps by publishing the bankers tariff which set out the amount of charges to be paid by the public for certain services and those that are expected to be free, the length of time, certain transaction are to be completed, charges for consortium lending.  But the issue is how effectively are these specification followed and hence how adequate are our banking services.

Commenting on inadequate banking services Dr. Pius Okigbo, a banking consultant said: Banking services can be adequate only if the customer does not have to go through pains to obtain these services.  They can be obtained these services.  They can be adequate if the customer does not have to travel a long distance to find a banking faculty.  They cannot be adequate if the customer has to suffer humiliation and wait endlessly in long queens to deposit or withdraw his or her money.  They cannot be adequate if the commercial banks cannot rely on other institutions to provide ancillary services.

These excerpts or passage from Dr. Okigbo highlights some of the amply in the provision of adequate banking services by our commercial banks.  The following are district without commercial banks such as:

The problem of under banking in terms of the number of banks and banking offices per square kilometer as well as in the density of banking officers per unit of population.

Delay in our banking system.  A visit to any banking hall of any bank anywhere in the country spell long queues.  These often lead to ways of seeking preferential attention.

Lack of financial infrastructure to support commercial banking.  The delay in transferring money from one place to another, cheques take as long one to two weeks on the average.


In any research work, the setting out of clearly defined objectives is the bedrock of any project work.  In Nigeria, money transmission is very relevant because apart from any other fact, it is easier for the beneficiary to receive money.

The specific objectives of the study can be summarized as follows:

i. To find out whether ineffective communication, both postal and telecommunication services, inhibit effective money transmission in Nigeria.

ii. To find out whether efforts to guard against fraud by banks, effect negatively, their ability to render adequate money transmission services.

iii. To find out whether there are anomalies in our banking system that inhibit effective money transmission in Nigeria.  This will also include attitude of bank staffs.

iv. To also recommend ways of improving money transmission Nigeria based on the findings.


One major significance of this study is to bring out the problems facing money transmission in Nigeria banks.  This study therefore, will enable other financial institutions to tackle their problems.

Also, this study will be very useful in developing Nigeria banks in the economy which may positively affect the growth of the economy.

This study will be useful to individuals trying to lodge or transfer money on their own thereby knowing the importance and usefulness of money transmission.

Nigeria, undoubtedly, at present, operates a cash economy.  Cheques are not readily acceptable to transaction business or make purchase in view of people’s mistrust for cheques.  Added to this, there are undesirable delays by banks in the checking system.

Again, the “Dishonoured Cheques (Offences) Act 1977” which makes it an offence punishable by two years imprisonment for a corporation or company if their cheques are dishonoured to insufficiency of funds, did not and was not able to check the abuse of the use of cheques.  Drafts were not honoured until weeks when the cover arrived.  Standing orders were minored, but when the beneficiary resides somewhere else, there is delay of several weeks before amounted is received.  Postal and money orders were constantly being refused as means of settlements.  The result of these were disenchantment about our money transmission instruments.  People preferred to carry large sums of money about especially now that we have higher denominations.

However, carrying large sums of money about have money serious draws backs.  Apart from being bulky, it exposes one to the risk of failing prey to armed bandits and night murders.  There have been numerous cases of money businessmen rendered useless by armed bandit while carrying about large sums of money.  Many company have been raided by armed robbers while carrying huge sums of money intended to be used as staff salaries.  This research is necessitated therefore by the need to identify the causes of inadequate money transmission service in Nigeria, recommended solutions for their improvement and effective utilization and save Nigerians from the quagmire of a cash economy.


The scope of this study is determined on the basis of what could be achieved with the available limited time and resources.

The research work covers the commercial banking sector as a major catalyst to economic growth in Nigeria.

Due to the numerous commercial banks, and for easy assessment of banks the project has been narrowed down to United Bank for Africa Plc with an attempt to point out the problems of transmission in Nigeria Banks.

This study is not free from some sort of limitations.  It limitation are finance, time, secretive nature of staffs and academic work.  Nevertheless, the writer found it very difficult to visit some of the areas because of high cost of transportation fare.


This research work intends to define some terms, and burg our full meaning of some observations, which will help the reader in understanding the contents in the study work.

i. Bill of Exchange:- Section 1 of the Bill of Exchange Act 19882 defines a bill of exchange as an unconditioned at order in writing addressed by one person to another signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time, a sum certain in money to a specified person.

ii. Cheque:- A cheque may be defined as a bill of exchange drawn on a banker payable on demand

iii. Draft:- It is known as bankers draft.  It is a bill of exchange drawn by a bank on another bank office of the same bank.

iv. Fraud:- This is described as obtaining a material advantage by unfair means.

v. Fraudulent practices:- There shall for the purpose of this study include the following forged cheques, signatures and cashiering fraud.

vi. Forgery:- This may be defined as fraudulent making or alteration of a writing to the prejudice of another men’s right.

vii. Money order:- This is an official order bought from a postal office for money to be paid by another post office to a named person.

ix. Money transmission:- This is defined as a process of transferring cash from one person to another through the means of cheques, drafts, mail money or postal orders and standing orders.

x. Negotiable instruments:- A negotiable instrument has the following attributions.

a. Title passes by delivery only or by endorsement and delivery.

b. A transferred taking such an instrument in good faith and for value, can acquire a better title than that possessed by his transfer to pay affected by prior equities or branch to pay a specified sum of money to a named beneficiary.

c. The holder can see in his own name parties to establish his title.

xi. Promissory notes:- A promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at a fixed money to the bearer.

xii. Poster order:- This is an official order brought from post office for payment to be made to a named beneficiary to another post office.

xiii. Standing order:- This is an instruction given by a customer to his bank, requiring a certain payment to be made to a person.

xiv. Telegraphic transfer:- It is an instruction from one bank to another or from one branch of a bank to another or from one branch of a bank to another requiring the bank or branch to pay a specified sum of money to a named beneficiary.


This research work consists of five (5) chapters.  Chapter one is introduction, statement of problem, objective of study, significant of study, scope and delimitation, definition of terms and organization of work.

Chapter two bring out the theoretical framework (literature review) on preamble channels of monetary transmission, money transmission instrument, cheque, draft, money and poster orders, money gram and western union, mail and telephone standing orders and problems of money transmission in Nigerian Banks.

Chapter three elucidates the research method used, sampling size and method, methods used in collecting data, the interview format and limitation of the study.

Chapter four discusses data presentation, analysis and interpretation.

Finally, chapter five presents the conclusion and recommendation of the study.


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