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BFN 407 COURSE GUIDE Docx COURSE GUIDE BFN 407 INVESTMENT BANKING Course Team Dr. Ibrahim D. Idrisu (Course Writer) - NOUN Mrs. Olakunbi O. Lawal (Course Writer) - NOUN Dr. Abdul Maliq Yekeen (Course Editor) – Uni. Abuja Mrs. Olakunbi O. Lawal (Course Coordinator) - NOUN NATIONAL OPEN UNIVERSITY OF NIGERIA i BFN 407 COURSE GUIDE © 2018 by NOUN Press National Open University of Nigeria Headquarters University Village Plot 91, Cadastral Zone Nnamdi Azikiwe Expressway Jabi, Abuja Lagos Office 14/16 Ahmadu Bello Way Victoria Island, Lagos e-mail: [email protected] URL: www.nou.edu.ng All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writing from the publisher. Printed 2018 ISBN: 978-978-8521-79-2 ii BFN 407 COURSE GUIDE CONTENTS PAGE Introduction……………………………………………………… iv Course Aims……………………………………………………… iv Course Objectives………………………………………………… iv Course Materials………………………………………………….. v Study Units………………………………………………………... v References and Textbooks………………………………………... vi Assessment……………………………………………………….. vii Tutor-Marked Assignment……………………………………….. vii Final Examination and Grading………………………………….. vii Summary…………………………………………………………. viii iii BFN 407 COURSE GUIDE INTRODUCTION The course BFN 407, Investment Banking is a three credit unit course prepared for 400 level students in B.Sc. Banking and Finance of the National Open University of Nigeria. It is an introduction to the study of Investment Banking. The course has eighteen units with appropriate local content for the learner. However it will be very useful to other readers who want to have understanding of the general concepts of the course. The primary aim of this course is to equip you with the basic fundamental principles, theories and practices of banking. The course will also provide you with a good and sound foundation upon which you will develop the full potentials and understanding of the concept of banks, functions and their operations. Upon the completion of this course, you should be able to understand the principles, theories, basic concepts and functions of banks, the role of both banking and non-bank financial institutions in the economic development of Nigeria. This course guide tells you briefly what the course is about, relevant materials that you require to make your study very successful. COURSE AIMS This course is geared towards equipping you the student with the basic concepts, theories of banking and a general overview of banking business. This will enable you take important financial decisions. This aim will be achieved in the following ways: • Introducing you to the Banking Laws and Regulations • Explaining the functions merchant banks and other regulatory authorities in Nigeria • Explaining the general overview of banking business and practices COURSE OBJECTIVES On the successful completion of this course, you will be able to: • explain the evolution, theories and growth of banks iv BFN 407 COURSE GUIDE • State and explain the functions of banking Institutions and discuss their roles in economic development of Nigeria. • explain the theories and principles of banking • discuss the functions of regulatory bodies in the banking sector • explain the role of the money and capital markets in the development of the Nigerian economy • Identify and discuss the role of non-bank financial institutions in economic development of Nigeria. • list the various categories of institutions operating within the banking and sub-banking sectors in Nigeria. • explain the legal framework within which banks and other financial institutions in Nigeria carry out their operations. I wish you success in the course and hope that you will find BFN 407- Investment Banking not only interesting but useful and rewarding. COURSE MATERIALS The National Open University of Nigeria provides you with the following items: • Course Guide • Study Units • Textbooks and Reference • Assignment file • Presentation Schedule STUDY UNITS There are 21 units under 4 modules in this course which should be studied carefully: Module1 Unit 1 Meaning and Evolution of Banking Unit 2 Theories of Banking Unit 3 The Central Bank Unit 4 Evolution of Merchant and Development Banks Unit 5 Commercial Bank and Investment Banks v BFN 407 COURSE GUIDE Module 2 Unit 1 Merchant Banking Unit 2 Structure and Performance of Merchant/Development Banks Unit 3 Development and Specialised Banks Unit 4 Laws Regulating the Establishment of Banks in Nigeria Unit 5 Loan Syndication Module 3 Unit 1 Distinguishing Features/Functions of Merchant and Development Banks Unit 2 Financial Institution: Overview of Banking Business Unit 3 Banking Financial Institutions Unit 4 Merchant Bank: Methods and Processes Unit 5 The Structure of The Nigerian Financial System Module 4 Unit 1 Measuring the Effect of Regulation on Performance of Banks Unit 2 Systems of Banking and Essentials of a Sound Banking System Unit 3 Money Market Unit 4 The Capital Market Unit 5 Merchant Banks and Development Banks International Operations REFERENCES AND TEXTBOOKS Akrani, G. (2013). Merchant Banking Meaning. Retrieved on 25 August 2013 from http://kalyan-city.blogspot.com/2011/10/what-is- merchant-banking-meaning.html Davies, J. H. (2002). A History of Money: from Ancient Times to the Present Day , Wales: University of Wales Press. Femi, A. (1986). "The Elements of Banking in Nigeria " Lagos: F &A Publishers Ltd Goldthwaite, R. A. (1995). Banks, Places and Entrepreneurs in Renaissance Florence, Great Britain: Aldershot, Hampshire, vi BFN 407 COURSE GUIDE Hoggson, N. F. (1926). Banking Through the Ages, New York: Dodd, Mead &Company.Retrieved on 25 August 2013 from Wikipedia, the Free Encyclopedia. Huerta de Soto, J. (1998). Money, Bank Credit, and Economic Cycles. Ludwig von Mises Institute. Translated by M.A.Stroup (2012).Retrieved on 25 August 2013 from Wikipedia, the Free Encyclopedia. Knapfel, J. (2013). Merchant Banking Definition.Retrieved on 25 August 2013 from http://www.ehow.com/facts_7151137_meaning- merchant-banking_.html Magaji, S. (1995): "Teach your Self the ABCD of Banking" Kano:Gargajiya Printers, Vol. 1 Nwankwo, G.O. (1972): "Indigenization of Nigerian Banking." Bankers Magazine. July. Nigerian Agricultural Corporative and Rural Development Bank Ltd. Customers Guide Unamka, P.C. & Ewurum, U.J.F. (1995). Business Administration. Enugu: Precision Printers and Publishers ASSESSMENT Self-Assessment Exercises are incorporated in the main text. You are to do them carefully to test your understanding of the materials as you go on. TUTOR-MARKED ASSIGNMENT The NOUN will direct further on the TMAQ you will do and submit. They will account for 30 per cent of the total course marks FINAL EXAMINATION AND GRADING At the end of the semester, you will write an examination that will count for the remaining 70 per cent of the course marks, you are to expect that all the areas of the course will be assessed during the examination. vii BFN 407 COURSE GUIDE SUMMARY On the successful completion of the course, you would have been equipped to take important decisions relating to Investment Banking and Bank practices. viii MAIN COURSE CONTENTS PAGE Module1………………………………………………………… 1 Unit 1 Meaning and Evolution of Banking……………… 1 Unit 2 Theories of Banking……………………………… 11 Unit 3 The Central Bank…………………………………. 15 Unit 4 Evolution of Merchant and Development Banks… 25 Unit 5 Commercial Bankand Investment Banks………... 31 Module 2…………………………………………………………. 44 Unit 1 Merchant Banking…………………………………. 44 Unit 2 Structure and Performance of Merchant/ Development Banks……………………………….. 53 Unit 3 Development and Specialised Banks ……………… 58 Unit 4 Laws Regulating the Establishment of Banks in Nigeria………………………………………….. 66 Unit 5 Loan Syndication………………………………….. 71 Module 3…………………………………………………………… 83 Unit 1 Distinguishing Features/Functions of Merchant and Development Banks…………………………… 83 Unit 2 Financial Institution: Overview of Banking Business 96 Unit 3 Banking Financial Institutions………………… 104 Unit 4 Merchant Bank: Methods and Processes………... 109 Unit 5 The Structure of The Nigerian Financial System… 118 Module 4………………………………………………………….. 123 Unit 1 Measuring the Effect of Regulation on Performance of Banks............................................................... 123 Unit 2 Systems of Banking and Essentials of a Sound Banking System........................................................... 129 Unit 3 Money Market……………………………………….. 140 Unit 4 The Capital Market………………………………….. 148 Unit 5 Merchant Banks and Development Banks International Operations…………………………………………… 159 BFN 407 INVESTMENT BANKING MODULE 1 Unit 1 Meaning and Evolution of Banking Unit 2 Theories of Banking Unit 3 The Central Bank Unit 4 Evolution of Merchant and Development Banks Unit 5 Commercial Bank and Investment Banks UNIT 1 MEANING AND EVOLUTION OF BANKING CONTENTS 1.0 Introduction 2.0 Objectives 3.0 Main Content 3.1 Meaning of a Bank, Banking and Banker 3.2 Evolution of Banking 3.3 The Growth of Banks in Nigeria 4.0 Conclusion 5.0 Summary 6.0 Tutor-Marked Assignment 7.0 References/Further Reading 1.0 INTRODUCTION Various attempts have been made to define the term bank or banker. In this first unit we shall commence with the meaning and evolution of banking. We shall refresh your memory on the definitions and meaning of banking, bank and banker. We will trace the origin of banking. We shall also look at the origin and growth of banks the world over and particularly, briefly consider the growth of banks in our country-Nigeria. 2.0 OBJECTIVES At the end of the unit, you should be able
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