1.1 Background of study
Union Bank of Nigeria plc is one of the first generation banks
started to the colonial era. Formally known as Baraclays bank DCO
(Dominion Colonial and Overseas) it was opened in1917.
In compliance with the directive of the government in
1968, that all companies (Including Banks) must be incorporated locally
in Nigeria in1969 and its name was consequently changed to Baraclays
Banks of Nigeria Limited with its registered Head office at 40 Marina
As a result of Nigerian Enterprises promotion decree of
1972 and 1977, the federal government of Nigeria acquired 52% of the
Bank shares Leaving 40% for Barclays Bank international ltd (Now
Baraclays-Bank plc) while the remaining 8% was taken up by the Nigerian
public Baraclays Bank plc sold 20% of its shares to Nigerian in 1979 and
the remaining 2% in June 1989. Thus, it became an indigenous bank
wholly managed by Nigerians. And the name was changed to Union Bank of
Nigeria Limited. In 1990 the name was further changed to Union Bank of
The bank is one of the commercial bank that survives and
strives during the nations economic unsteadiness. Union bank of Nigeria
plc currently has her corporate head office at 40 marina Lagos. This
Head office building “The STALLION PLAZA” is a 32 story edifice and is
now the most magnificent and tallest building in Africa.
The bank now has 9 Area office branches, including full
indigenous branch in LONDON and SOUTH AFRICA respectively. It has 5
staff training centres with on LAGOS, IBADAN, PORT-HARCOURT, ZARIA JOS.
The bank which is regarded as the largest employer of labour in banking
industry in Nigeria, now has a staff strength of 8 workers. It has
some group of company such as union merchant bank, union assistance and
The bank is about 75% computerian and has an outstanding
record in term of profitability. As at Septembers 30th 1998 bank’s
gross earnings total assets and deposit base stood at N13.8 billion
N102.4 billion and N77 billion respectively.
The principle and consent of budgeting centres around the
optional allocation scarce resources. Resources are limited but human
wants are not only unlimited but also multifarious. In order to make
the best use of available resources, the principle of budgeting has to
Every business organization, government, sole propertor and
banks employs the principle of budgeting as a control strategy. Even
individuals like salary earners hardly know that they are adopting the
principle of budgeting when at the end of the month, they try to
reconcile their monthly salaries with their expenses for the month.
The budgetary control strategy calls for the preparation of
plane in the form of ideas and values for the future. Budgeting cannot
be performed in isolation. This is one of the reasons that all
managers should be financially aware because almost every decision taken
will have financial implication and will therefore effect other
department, even if this means they have less money available for their
Clearly, once a budget has been established it is necessary
to set up control and procedures which enables the budget to be
Budgetary control is the establishment of budget relating
the responsibilities of executives to the requirement of actual with
budgeted results either to secure by individual action the objective of
the policy or the provide basis for its revision. It should be pointed
out that there is on significant difference between the principles of
budgeting control in either the banks or public sectors, the statement
implies that as budgets are established for various elements of the bank
managers are given responsibility foe the management of budget
resources in those.
Clearly, a strategy require information which has to be
related to the delegate responsibilities within the bank, these should
be related to the objectives of the budget and then be monitored as
out turn figures become available. Overall, it was felt that the
budgetary control process and demand that it places on financial
management skills represents the major challenges of change being faced
by the bank.
The budget can be a powerful tools for motivating people to
achieve the bank objectives or it can lead to either bad or good
consequence according the way it applied in various type of
Budgeting is essentially concerned with establishing a t
plan or target of performance which co-ordinates all the activities of
the business and calculating differences or various and analysising the
reason for them. One general purpose of budget in bank, sole proprietor
and government is to enable them to plan their financial resources which
will be consumed and generated during the course of the budget period
The period generally adopted for budgeting is one year and this usually coincides with the financial year of the bank.
Finally, in introducing an effective budgeting strategy,
management has to make penetrating critical and uncompromising study of
the business to determine its strength and weakness in relation to what
it is trying to achieve. Budgets should be capable of change when
circumstances changes so that the yardstick is a realistic attainable
one. The strategy should operate to assist motivation and not simply be
used as a bigstick or a pressure device.
1.2 STATEMENT OF RESEARCH PROBLEM
It is generally agreed that every business organization, government
and sole-proprietors should employ the principle and concept of
budgeting control as a tool in achieving set goals. Consequently, for
this research work, the following are the problems which this study hope
to provide solution to:
- The inability of banks to property forecast expenditure matched to
revenue given the instable economy and monetary policies generating
- Inability of the bank to state a detailed plan of action thereby reducing uncertainty.
- Inadequate policies formulated for budget implementation in union bank for budget Ogui road branch .
- Budgeting will lower moral and productivity if unrealistic targets are set and if it is use as a pressure tactic.
- The inability of the bank to know fully which future cost it will
incure in rending certain service to the public and also the rev to be
received as a result of jobs carries in each department .
- Lack of well-oriented programs to felicitates the need to use budget as a control strategy.
1.3 PURPOSE OF RESEARCH STUDY.
There is a strong belief that good operation of budgeting controls os
great value to Union Bank planning and control are indispensable in the
The following are the purpose of the study:
- To know the type of budgets and budgetary control strategy applied.
- To ascertain the efficiency and effectiveness of the strategy applied
- To ascertain how budgeting and budgetary control strategy assist management in decision making.
- To highlight the problems in the present day system of budgeting in
Union Bank 4 need be, the ways of improving on its budgeting.
- Efforts will be made to compare the accepted rules of budgeting
control strategy as contained in the view of the related literature and
what obtained in practice as discovered from data collection.
1.4 STATEMENT OF HYPOTHESIS
For the purpose of this research, the following assumptions were made:
- Null Hypothesis (Ho): Bank run some motivational programme so as
avoid conflict and also budgeting as a control strategy help your bank
to achieve efficiency in its operation
Alternative Hypothesis (Hi): Banks do note run some motivational
programme so as to avoid conflict and also budgeting as a control
strategy do not help banks to achieve efficiency in its operation.
- Null Hypotehsis (Ho): Bank managers prepare budgeting as a control
strategy alternative hypothesis (Hi): bank managers do not prepare
budgeting as a control strategy.
1.5 SCOPE / LIMITATION
The study is a case study of Union Bank Ogui Road Branch Enugu. The
time period under consideration is four (4) years that is between 1994
It is worth mentioning that personnel problem affecting this
bank are not within the scope of this study expect where such problem
directly related to budgetary control.
In general it is also worth mentioning that for practical
purpose it would be impossible to discuss all these areas in department
in this research. It should be noted that out of the so many tools of
control employed by Union Bank to achieve their various objective this
study is only concerned with the budget aspect of it.
1.6 RESEARCH QUESTIONS.
The following research questions were formulated by the researcher for the conduct of this project.
- How long does it take the bank to prepare a budget.
- To what extent does the lower management participate in budget
formulation of the bank by given their view and ideas on how things
should be done?
- What does the bank consider to be major objective of a budgeting control strategy?
- To what extent does the central bank policies and guidelines affect the Union Bank budget.
- What type of budget does the bank prepare?
- What measure should be taken to ensure that budget implementation strategies are properly used?
1.7 SIGNIFICANCE OF STUDY
It is expected that the result of this study will help improve banks budgeting control strategy.
Budgeting as a control strategy assist the banks in control of costs
by providing a budget yardstick by which actual cost can be measured.
Budgeting enables management more effectively to plan co-ordinate,
control and evaluate the activities of the business. The budget provides
relevant information to decision makers and at the time they must
choose between alternatives, therefore a budget implicitly incorporates
control at the point of the decision. The most important of budget is to
aid in the accomplishment of corporate objectives.
1.8 DEFINITION OF TERMS.
The definitions contained in the text are from accounts books, journals and lectures used as references.
Budget; A financial or quantitative statement
prepared and approved prior to defined period of time of the policy to
pursued during that period for the purpose of attaining a given
Budgetary control: Measures taken to ensures that approved provision are not over spent with out approved additional or supplementary provision.
Budgeting : A word given to the formulation of plans for a given future period expressed in quantitative financial terms.
Appropriation: Statement showing that amount voted
and expenditure there of with a view to indicating an excess of
expenditure over the or surplus of the vote to another with in the
Vire –Warrant: Is an authority to vire fund from one sub- head to other with in the same head of account.
Fixed Budget: Budget prepared for only one level of
activity and consequently, one that is not adjusted automatically to
changes in the level of volume.
Flexible Budget: Budget which by recognize variable
costs in behavior between fixed and output or turnover is designed to
change appropriately with such fluctuation.
D.V.E.A: Means department vote expenditure and
Account. This is a ledger where the amount released for use in the
financial year is allocated is spent per each sub –head.