THE ROLE OF FINANCIAL INSTITUTION TOWARDS THE DEVELOPMENT OF THE MARITIME INDUSTRY IN NIGERIA
ABSTRACT
Financial institutions occupy a vital position and play a lendable role in the economy of the nation. examining critically the place of financial institutions in the management of Loan syndication in the economy, loan syndication is a child of circumstances arising from legal lending restrictions, risk sharing and liquidity problems. The researcher would like to know despite the constraint prevailing is it still a supplementary option for business financing. For an economy to develop there must be a supplementary source of financing viable investment projects beyond the limits of an individual financial institution, it is on this basis that we would like to define the objectives. The research study is to include the followings to: identify those fundamental problems confronting Loan syndication and suggest how much problems can be solve, ascertain the effect of Loan syndication in the economic development, highlight the potential s of Loan syndication in the economy, and recommend that syndicated loan is not deferent from other loan. This study is expected to provide useful information on Loan syndication to the following. The students by the use of this project make researchers and source information on the rule of financial institution in the management of Loan syndication.
CHAPTER ONE
1.0 Introduction
1.1 Background of the Study
Financial institutions occupy a vital position and play a lendable role in the economy of the nation. Their major purposes are proper mobilization of find as well as provision of capital for industrial development, which is aimed at enhancing economic growth and development.
In the early year of banking operation in Nigeria, banks performed their intermediary function by giving loan mainly on individual basis (i.e separately) but as the country entered the threshold of development and more investment opportunities opened up, industrialist started demanding large sums of money which is provided by bank on medium or long term basis.
However, banking is a highly regulated industry the world over with restrictive monetary and credit guideline in loan growth and reserve requirement, sectoral allocation to priority sector of the economy, and excess liquidity mop-up through the assurance of stabiclation securities to the bank to mention a few due to these restrictions, it is difficult for a bank to meet up with the huge loan demanded of their customers. Also, it is well known that lending is not risk free, and that bank prefer to spreads their risk with others in the banking industry.
Against this background, banks come together forming what is known as “Consortium” to advance finds is called loan syndication and is sometimes called “Cosortun”. Lending it can also be define as the agreement between two or more lending institution to provide a borrower with credit facility utilizing common loan documentation.
Loan syndication is now being practiced in Nigeria starting from the 1960’s when a consortium of commercial banks and acceptance houses discounted trade bills for marketing boards under the produced bill finance scheme. Formalized loan syndication came into being during the oil boom of the 70s when there was need for adequate capital of finance the industrialization programmes. During this period, few merchant bank had been incorporated.
Loan syndication has assumed international dimension because of the need to provide adequate capital to finance the fast growing world economy. An international syndicated credit is manage and underwritten by one or more finance. Institution normally from a location other than the domicile of the borrower, lenders from different countries could provide the borrower with access from their countries or to move its own currency from other contracts of domicile.
1.2 Statement of the Problem
Investigation reveals the following problems of the financial institution and its role to the development of the maritime industry in Nigeria (A Case Study Of Maritime Joint Stock Bank) research work;
- To investigate why Loan syndication is not properly managed given priority attention by monetary authorities. Despite it’s strategic place in financing viable projects, capable of injecting foreign currency, creating employment, and facilitating rapid economic development.
- To examine critically the place of financial institutions in the management of Loan syndication in the economy, loan syndication is a child of circumstances arising from legal lending restrictions, risk sharing and liquidity problems. The researcher would like to know despite the constraint prevailing is it still a supplementary option for business financing.
1.3 Objectives of the Study
For an economy to develop there must be a supplementary source of financing viable investment projects beyond the limits of an individual financial institution, it is on this basis that we would like to define the objectives. The research study is to include the followings:
- To identify those fundamental problems confronting Loan syndication and suggest how much problems can be solve.
- To ascertain the effect of Loan syndication in the economic development.
- To highlight the potential s of Loan syndication in the economy
- To recommend that syndicated loan is not deferent from other loan. Rather it is subject to conditionalities, attracts higher interest rate, subject to default, and time lapses in packaging as a result of bureaucracy involved by consortium banks.
1.4 Research Questions
- Are there any fundamental problems confronting Loan syndication and suggest how much problems can be solved?
- Is there any effect of Loan syndication in the economic development?
- Is there any the potential of loan syndication in the economy?
1.5 Research Hypothesis
Hypothesis One
H0: There is no significant relationship between loan syndication and potential of loan syndication in the economy.
H1: There is a significant relationship between loan syndication and potential of loan syndication in the economy.
Hypothesis Two
H0: There are no fundamental problems confronting Loan syndication.
H1: There are fundamental problems confronting Loan syndication.
1.5 Significance of the Study
This study is expected to provide useful information on Loan syndication to the following. The students by the use of this project make researchers and source information on the rule of financial institution in the management of Loan syndication.
Financial institution via this project will learn how to keep to their Loan syndication agreements, it will also encourage the financial institutions to give financial accommodation through Loan syndication because it is more beneficial to them financial institution will also learn how to reduce the time frame in packaging a syndicated loan.
The borrower, with the aid of this project will know the appropriate procedures involved in obtaining loan through syndication. Since Loan syndication contributes immensely to the development of our economy both the government and the targeted audience will benefit from the project. The government with the help of this project knows more about the benefit of Loan syndication in our economy.
1.6 Scope of Study
The study focuses on the financial institution and its role to the development of the maritime industry in Nigeria using Maritime Joint Stock Bank as a case study.
1.7 Limitations of the Study
During the course of this study, many things militated against its completion, some of which are:
- 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.
- Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this institution 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.
CHAPTER TWO
2.0 Literature Review
2.1 Introduction
The review of relevant literature is the main topic of this chapter. A literature review covers theoretical and methodological contributions to a certain issue in addition to the state of knowledge at the time of writing. It provides information about the state of the art in relation to the subject you are writing about. It examines the body of work on the chosen subject. The literature evaluation in this study comprises the …
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