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IMPACT OF COMMERCIAL BANK IN NIGERIA ECONOMY A CASE STUDY OF UNITED BANK OF AFRICAN (UBA)

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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The practice of banking and financing in Nigeria is culturally rooted and dates back several centuries ago. In the 1940s, the traditional financial institutions provide access to credit for rural and urban low income earners. They are mainly of the Informal Self Help Groups SHGS or Rotating Savings and Credit Associations ROSCAs types. The informal financial institutions generally have limited outreach due primarily to paucity of loanable funds. In order to enhance the flow of financial services to Nigerians, government has in the past, initiated a series of publicly financed micro credit programmes and policies targeted at productivity enhancement.
Notable among such programmes were the Rural Banking Programme, Sectoral Allocation of Credits, the Agricultural credit Guarantee Scheme ACGS etc. Other institutional arrangement were the establishment of the Nigerian Agricultural and cooperative Bank limited NACB, the National Directorate of Employment NDE, the People Bank of Nigeria PBN, the Community Banks CBs and the family Economic Advancement Programme FEAP all aimed at improving the economic growth of the nation.
Year 2005 was remarkable in the history of Nigerian Banking Industry. The consolidation exercise Initiated by the Central Bank of Nigeria CBN on July 2004 came to head on December 31, 2003 with 14 banks unable to meet the 25 billion recapitalization requirement. The apex bank revoked the licenses of the 14 banks. Meanwhile, the 25 banks that successfully met the 25 billion minimum capital requirements represent 93.5 of the total deposits of the 89 banks that existed in country reconsolidation. In the process, about 406 billion was raised from the capital market while an inflow of 652 million was generated from outside the economy.
In order to lower industry cost of funds, the Cash Reserve Ratio CRR was reduced by 6 points from 11 to 5 with the difference expected to be invested by banks in special Central Bank of Nigeria CBN instrument with a tenure of 91days at 3 coupon rate. Furthermore, a 1 year treasury bill was introduced on July 1, 2005 with a view to restructuring the deposit profile of the federal Government. Similarly, in order to reduce inequality pressure, reverse inflationary trend and encourage long tenured investment, the 182 days non. Discountable bill was introduced.
Commercial Banks are involved in the process of increasing the wealth of the economy, particularly the capital goods needed for raising productivity. In developing countries like Nigeria, income is very low and that as such low level investment can be made, if possible without requiring a long period effort at saving. Financial intermediaries have a vital role to play here, in raising both the savings and investment to the level necessary to achieve a self sustained growth.
In manpower development, Banks contribute highly in training staff and development through both local and foreign facilitation. In order to strengthen our work force and take advantage of emerging market opportunities, Banks also recruit various professionals with broad industry knowledge and hands on experience.
In financing the economy, the bank has aligned its financial intervention in the economy with a clear understanding of high impact character of governments privatization and deregulation program. The search made for the most efficient and effective domestic lending portfolio has meant that commercial Banks have led the financing of private investment in industrial development in the economy.
The financial institutions are therefore capable of influencing the major savings factors namely; ability, willingness or saving propensities and opportunities. The need to achieve sustained industrial growth within any economy can be possible amidst strong financial institution and precisely within the existence such that are tailored to work in accordance with government policies and program in a bid to attaining the desired macroeconomic objectives of a nation. Banks as components of financial sector consist of the apex i.e Central Bank, Commercial Banks, Development Banks, Merchant Banks and Specialized banks.

1.2STATEMENT OF THE PROBLEM

Evidently, an important avenue for banks to boost the growth of the industrial sector of the economy is through efficient and effective saving investment process which ought to stimulate investment and productive activities. For the past three decades, the Nigerian economy has not shown any favorable sign of growth. for example, the real G N P growth rate figures was 2.8 in 1995 with negative figures in year like 1982 with 0.3 etc as depicted in the C B N periodic bulletin 1986
From this background we are therefore poised to answer the burning questions like.
1In what extent does commercial bank as a financial intermediate contribute towards funds mobilization for industrial growth and development of the country.
2 Is there any relationship between commercial banks financial industrial development growth in Nigeria
3What are the problems commercial banks encounter in their performance towards mobilization of fund for industrial development growth.

1.3 OBJECTIVES OF THE STUDY

The objective of this research work are stated as follows1.To determine the role of commercial banks towards a positive industrial growth and development.

2.To identify and analyze the constraints and short comings facing commercial banks in Nigeria towards fund mobilization for industrial growth and development

3.To examine ways in which the commercial banks in Nigeria can be made to play better roles towards fund mobilization for industrial growth and development.

4.To determine and test the effect of some relevant economic variables and factors in the real gross domestic product GDP of Nigeria.

1.4STATEMENT OF HYPOTHESIS

The following hypothesis are tested on this studyHo; Commercial banks have not played a significant role in the industrial growth in Nigeria
H1: Commercial banks have played a significant role in the industrial growth in Nigeria.

1.5SIGNIFICANCE OF THE STUDY

The usefulness of this study is that it will highlight to the nation as a whole on how best to manipulate commercial bank loans for financing in order to improve the state of industrial product in the country.
It will also give the government an overview of constraint of industrial financing and how best to manage commercial bank loan in order to yield output.
It will show commercial banks how to increase industrial financing for growth in the economy.

1.6 REASEARCH QUESTIONS

i Do commercial banks give loan for industrial financing
ii If so, to want extent has the industrial sector growth since the assistance started.
iii Is there any relationship between commercial banks financing and the Nigeria industrial growth

1.7 SCOPE OF STUDY

This study is designed to find out the role of commercial banks towards financing industrial activities in Nigeria. Emphasis is on United Bank For Africa U B A
The study will cover the period 1980-2007

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