SIGNIFICANCE OF BANK CREDIT TO THE DEVELOPMENT OF NIGERIA BANKS

1.0 Introduction

1.1 Background of Study

In a developing country like Nigeria, the significance of bank credit to a firm cannot be over emphasized. It is there necessary that everybody known the roles played by banks through their credit in developing Nigeria firms and the economy of large. Although many of use have heard about bank credit and we pass through the bank on daily basis, majority do not known the vital rate played in our fast developing Nigerians various types of banks credit that exist and how the investors apply these credits to the development of the nation’s economy.

The credit component of the banks’ portfolio that contributes to the profit of the banks and which led to the problem of bad debts in Nigerian banks as a result of poor management. Credit as the name implies is described as the right to receive payments or the obligation to make payments on demand or at some future date on account of the immediate transfer of goods or money another (Uwuigbe, Uwalomwa and Ben- Caleb, 2012). It is based on the faith and confidence, which the creditor reposes in the ability and willingness of the debtor to fulfill his promise to pay. In a credit transaction the right to receive payment and the obligation to make payments originate at the same time.

In order to succeed in life, a man does not only work hard, but he also looks for means to improve on his work. These are situations whereby a man has all the skills needed to set up a business but does not have the means to the end of the whole show. That is why we feed that it timely at this point that is why we feed that it timely at this point o let people know the investment and now this will lead to the development of the nation at large source of financing both small scale and medium scale.

The issue of problem associated with loans advance management prompts the this central bank of Nigeria (CBN) to reduce the guidelines in a circular entitled “prudential guidelines for licensed Banks” the main purpose of this, is to ensure that the financial guideline ensure conformity with stand to facilitate comparison across banks. The true financial position of bank is often obscured by the accounting period involving its assets and liabilities. The prudential guidelines focus o the assets side of banks balance sheet i.e. loans and advances.

Ultimately, majority of educated people do not know the procedures of obtaining bank credit. All the foregoing have therefore influenced and dictated the topic the significance of bank’s credit to the development of Nigeria Banks with special References to unit Bank for Africa Plc.

1.2 Statement of the Problem

Investigation revealed that Bank makes most of their profit from lending but there are some problems limiting the ability of bank to lend. However, this study provides solution to the problem of bank credit and some of the problems are:

1. Operation of central bank in regulating the volume of money of circulation for example the uses of Bank rate open market operation, special directive and cash deposit ratio.
2. Inability of borrower the present acceptable security to bank.
3. Unwillingness of customer to deposit their money in the bank.
4. Unwillingness of members of public to borrow from the bank.
5. High interest rate charged by commercial bank on loan granted to public.

Furthermore, banks exist not only to accept deposit, but also to grant credit facilities, these business activities therefore inevitably expose banks to huge credit risks which might lead to financial distress, including bankruptcy. The demand for bank loans is typically higher in boom periods when tight monetary policy causes security price and the rate of deposit growth to decline. The increasing level of non-performing loan rates in banks’ books, poor loan processing, inadequate or absence of loan collaterals among other factors are linked with poor and ineffective credit risks management that negatively impacts on bank performances.

1.4 Aim and Objectives of Study

The aim of the study is to examine the Significance of Bank Credit to the Development of Nigeria Banks. In achieving this aim, the following specific objectives were laid out as follows:

1. To examine the effect of bank credit grant on business performance in the study area;
2. To determine the liquidity level has on the performance of banks in Nigeria;
3. To find out the factors militating bank credit grant have on the performance of the study area;
4. To investigate the impact of capital adequacy has on the performance of the study area;
5. To examine the impact of bank credit to development of Nigerian Banks; and
6. To explore the prospective investors to various credit available in the bank which the banks are ready and willing to grant such investor require for the credit facility.

1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

• Are there factors militating bank credit grant have on the performance of the study area?
• Is there any relationship between high interest rate and incidence of bad debt?
• What is the effect of bank credit grant on business performance in the study area?
• What is the liquidity level bank performance in the study area?
• What is the impact of capital adequacy has on the performance of the study area?
• What is the impact of bank credit to development of Nigerian Banks?
• What are the prospective investors to various credit available in the bank which the banks are ready and willing to grant such investor require for the credit facility?

1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

Hypothesis One

• H0: There is negative effect on significance of bank credit to the development of Nigeria banks.
• H1: There is positive effect on significance of bank credit to the development of Nigeria banks.

1.7 Significance of the Study

The result of the study will be beneficial to different people in different ways. It will be beneficial to stakeholders in development banking industry, management and staff of the development – banking sector where achievement has been minimal.

The study will benefit the public who will understand the role played by development banking and use to apply for micro credit loans. It will be equally beneficiary to investors who applied for medium and long-term loan on how development banking finances capital projects. It will also stimulate new thoughts and ideas on how development banking in Nigeria carries out its activities

Finally, the study forms the basis upon which further research can be activated.

1.8 Scope of the Study

The scope of this research is focused on the Significance of Bank Credit to the Development of Nigeria Banks. The study area utilized in the course of this research is the United Bank of Africa Plc.

1.9 Limitations of the Study

During the course of this study, there were some problems encountered which stood as limitations to the research work. Some of the limitations include:

1. Time Constraint:

   The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.

2. Establishment Policies:

   Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this research work. There were lots of information needed from the staffs of this establishment to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.

3. Financial Constraint:

   Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

4. Initial Cooperation Delay from Respondents:

   A particular limitation of this work came as a result of the respondent refusal to offer their cooperation at the initial time they were contacted. This contributed in making the success of this research study difficult.