There have been
different deductions about what globalization depicts. Some related it to the
scientist's perspective, economic and social-political perspective while
some view globalization from the information technology aspect, but
globalization under this research work or study, is viewed from the banking
perspective.
On this
note, there are so many definitions given to globalization by different authors
or scholars. Globalization can be seen as a process of
integrating economic decisions making such as consumption, investment, and
savings all across the world. It is a process of creating a global market in
which all nations are forced to participate.
In
other words, globalization is a process of expanding economic cooperation among
states and this does not necessarily imply a future breakdown of borders.
Globalization can also be defined as the
integration of national economies through trade and financial transactions. It
is a process that has tended to reduce the ability of microeconomic policy to
achieve its objectives without due consideration of countervailing effects of
competing policies adopted by other nations. The effect of globalization on
Nigerian banking performance has been the outcome of several factors among
which are the increase in the volume of international trade and capital flows,
technological improvement in the communication and data processing, and the
deregulation of the domestic market for international financial transactions.
The advance in information and technology, telecommunication technology tends
towards the building of strong Nigerian banking system, in order to aid its
efficient and effective performance, especially with the new reform of
recapitalization of twenty-five, billion naira (#25,000,000,000)
All
over the globe, foreign banks have entered into countries and added another
dimension to stiff domestic competition and in the process, significantly
affecting the structure of domestic banking markets. This is particularly
evident in the United States, central Europe, Latin America, and Asia, where
foreign old banks have captured a growing share of key markets (Rose, 1999).
The profiles of the foreign banks that have entered into joint ventures with
Nigerian banks are intimidating. They have the capacity and potentials to
restructure the banking system of any country. The strategic alliances between
the Nigerian banking system and foreign banks and the increasing resources of
Nigerian banks to foreign markets to raise capital funds are signs of movement
towards globalization and the Nigerian banking industry. This has to a large
extent aid a magnitude level of great performance in the industry and of course
tending it to a greater height.
Furthermore,
globalization has transformed the Nigerian banking performance in a profound
way by altering the size and structure of the firms that comprise it. Major
banks can now extend their branches network beyond national frontiers or built
a strategic base in foreign financial centers by acquiring either local banks
or subsidiary banks. The network of financial connections, among banks and
other financial institutions, is now embracing the global world.
Globalization has not only transformed the
Nigerian banking system and or aid it’s performance, but also has a positive
impact on wholesale financial markets as evidence by blurring-off the
traditional barrier between commercial banking and investment banking and asset
management motivated by the boom in equity and bond market, in high yielding
instruments and the wave of merger and acquisition, the Nigerian banks have
expanded or introduced into the field of investment banking by engaging in
security operations.
Also, globalization is simply viewed as the gradual
evolution of markets and institutions such that geographical boundaries do not
restrict financial transactions. Globalization of banking in any economy means
that domestic banks have opportunities to engage in banking operations
(accepting deposits, lending, borrowing or investing) in foreign markets. They
can issue or transact in foreign financial instruments denominated in foreign
currencies. Foreign banks can also perform similar functions in the domestic
economy. The impetus for globalizing the financial market initially came from
the deregulation of the foreign exchange and capital markets by governments of
the developed countries, especially the united states, the United Kingdom and
Japan. Perhaps the most celebrated of all these was the deregulation of the
London stock exchange in 1986, Which made London be the most open and
competitive capital market in the world (Eunamd Resnick, 2001). This was
followed by the widespread Liberalization of financial markets in both
developed and developing economies.
Advances
in telecommunication contributed in no small measure to the emergence of global
financial markets. This technological advancement, especially internet-based
information technologies, gives investors around the world immediate access to
the most recent news and information affecting their investments, sharply
reducing information costs. Another force that drives globalization is the increasing desire of
institutional investors and portfolio managers to diversify their investment
portfolio behind geographical boundaries. Finance theory holds that
international diversified portfolios are more efficient than domestic
portfolios.
Moreover
the stabilization of finance and financial risk have been attributed to an
increase in the financial capability for engaging precision finance, the
integration of national financial institutions and the activities of the
markets they engage in, and the emergence of the global banks and the
international financial conglomerate, each providing a mix of financial
products and services in a broad range of market and countries. Financial and
bank globalization has resulted in two distinct
development in the global bank;
The
traditional banking institutions have evolved into financial services of
creating new accounts. Additionally, non-banks financial institutions now
actively compete with banks both on an asset and liability sides of the balance
sheet thereby blurring the distinctions between banks and non-banks
institutions. Also, the rapid growth in the share of other earning assets in
the total asset and relative growth in the off-balance sheet items has
unprecedented.
