COMMERCIAL BANKS LENDING POLICIES IN NIGERIA AND THEIR IMPLICATIONS (COMPAITIVE CASE STUDY OF THREE SELECTED COMMERICAL BANKS IN ENUGU ZONE, UNION BANK PLC, AFRIBANK PLC AND UBA PLC)
TABLE OF CONTENTS
Title page
Approval page
Dedication
Acknowledgement
CHAPTER ONE: INTRODUCTION
1.1 Background of the study
1.2 Statement of the study
1.3 Objectives of the study
1.4 Definition of the study
CHAPTER TWO: REVIW OF RELATED LITERATURE
2.1 What is a Bank?
2.2 Basic principle of commercial banking lending
2.3 Nigeria commercial Banks lending
2.4 Factors that determine lending in commercial Banks
2.5 Impacts of lending policies on Nigeria Economic
CHAPTER THREE: RESEARCH AND METHODOLOGY
3.1 Sources of Data
3.2 Location of Data
3.3 Method of Data collection
CHAPTER FOUR: SUMMARY OF FINDINGS
4.1 The following were observed during the analysis
4.2 The full compliance to the lending policies
4.3 The credit facilities
4.4 Limit Approved
4.5 Its proper implementation
CHAPTER FIVE: CONCLUSION AND RECOMMENDATION
5.1 Conclusion
5.2 Recommendation
Bibliography
CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
Back credit and lending function as we are aware evolved from a rather humble beginning as a result of the discovery made by the gold smith some continues ago, though only a small proportion of the money kept with him for security purpose was indeed required by the depositors at any one time and that he could safely lend the rest to borrowers and make interest charge thereon. The banking habit that latter inherited such practice felt that only about nine(9) to ten (10) percent of the bank deposit at a give time were therefore demand by the depositors.
However the commercial banks role of pooling funds together for the more surplus economics units to the deficit units of the country’s economy is what is regarded to as their leading function banks have in recent time been described as a machine of economic growth in an economy for the fact they perform this resources allocation function by mobilizing and channeling resources from savings surplus economic units to savings defeit units. In this position, they help in accelerating the trend of economic activities in various sectors of the economy, there by increasing the level of utility and wants of individuals and corporate bodies.
Well, as the above function is met, they would be more involved in the development of the economy because their raw material (money) is where other sector and sub-sector of the economy rotate.
More so, commercial banks have proved and are likely to remain the dominate financing intermediaries in Nigeria for they at present account for over 520 of the resources of the financial system to the economy and seemed to be more then units or sub-sectors able in all respects to influence the course of development.
This is why, not with standing the deregulation of the economy, banking is yet regarded as one of the most controlled or regulated in Nigeria. In monetary amendment guideline circular No 21 of January, 1987 the central bank of Nigeria (CBN) quoted as this in order to enhance the development of financial position and achieve a realistic resource allocation, the following change effected all control on interest rates were then removed in line tooth the emphresis on deregulation of the economy the second condition without in order to server as a signed to the desired direction of interest rate changes, the minimum rediscount rate would continue to be fixed by the central bank. This has gone further to show the benefits of commercial banks in the growth of the country’s economy. This is because in spite of the deregulation in the whole economy. The banks are still kept in check always and forced to operate within the policies of the monetary authorities.
1.2 STATEMENT OF THE PROBLEM
In Nigeria, as in most other developing countries of the world, poor banking awareness (especially in the rural areas) and under-litches militating against economic development. This ugly trend is as a result of poor and under develop banking system which has been identified for long. Actually, failure to develop a favourable bank lending policies and implication was pointed out as a major short coming of the west African currency Board (WACB) promoting the establishment of the central bank of Nigeria in 1958.
It was in 1937 that internal autonomy was achieved another commission was set up. During this period the federal government engaged the service of another financial expert of the bank of England, Mr. J.B. Loynes, it was his recommendation that led to the establishment of the central bank of Nigeria by the central bank of Nigeria ordinance of 17th march, 1959. it commenced of N1.5million of which N1.25 million was the amount paid up what infact appears annoying is that since the establishment of central Bank, the problem has remained unsolved despite all efforts made so far to get the bank improved in tending policies in Nigeria.
According to Iheneta (1988) he said that banks should shoulder some more social responsibilities to the shareholders. “It must be realized that bank are not charitable organizations like the international Red Cross”. They are in business to make profit and have compelling responsibilities to the their shareholders.
More so, the urge to a standard investigative research. A competitive Analysis of commercial banks lending policies and their implications.
1.3 OBJECTIVE OF THE STUDY
The aim of this research work is to undertake an in-depth analysis of the implications of lending policies on borrowers, commercial banks and the economy as a whole. Other specific objectives include:.
i. Assessing the extent to which commercial banks comply with statutory allocation of credit to the different sectors of the economy view the central bank credit guidelines.
ii. To test the rigidity of the commercial banks lending policies and their effect on the borrowing customers.
iii. To draw out lines of credit offered by these banks and their appraised process, highlighting the environmental influence that impinges on commercial banks lending policies in Nigeria.
Lending is of paramount importance in the economic hence the research work will investigate lending policies and practices of commercial banking system with country, finding out how realistic set making recommendation and suggesting ways to ensure effective implementation of those policies to achieve the desire objectives.
1.4 definition of terms
i. What is a bank: This is a financial institution that deals with money, in form of receiving drawing against such deposits on demand, issue of cheque and lending to customers.
ii. Financial intermediation: This is defined as the process by which financial houses serving as mediators accepts savings from individuals and house holds and lend these savings to the users.
iii. Funds mobilization: This is the process by which financial intermediaries put idle funds into effective use by collecting savings from those who have surplus idle funds (Net savers) and making them available to other (Net borrower’s) who need them for investment.
iv. loanable funds: This defined as the amount of bank founds which it can lend to its customers (or the public) at a particular time after making provision for legal reserve requirement.
v. Monetary policy:- It is a policy which deals with the discretionary control of money supply by the monetary authorities in order to achieve started or desired economic goals.
vi. Lending policy: The establishment of the direction and use of the funds from stock holder depositions others to control the composition and size of the loan portfolio and the determination of the general circumstance under which it is appropriated to make a loan. it is specifically designed by the management of the bank by which as lending practices are designed and controlled.
vii. Effective lending: A quantum of lending which maximizes the bankers objectives of liquidating and profitability and the economy’s objective of development.
viii. Lending: The facilities which a bankers offers to his customers or non-customer on the ground that such facility will be returned to the banker offer a specified time, on payment of some changes by the customers.
ix. PLC: Public Limited Company
x. CBN: Central Bank of Nigeria
Xi. WACB: West African Currency Board
Xii UBA: United Bank Of African PLC
Xiii. UBU Union Bank Of Nigeria.
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