IMPORTANCE OF SMALL AND MEDIUM SCALE ENTERPRISES IN THE NIGERIAN ECONOMY

IMPORTANCE OF SMALL AND MEDIUM SCALE ENTERPRISES IN THE NIGERIAN ECONOMY

(A Case Study of Agatha Trading Company Nigeria)

ABSTRACT

The purpose of this research work is to expose the general public on how small and medium scale enterprises can provide employment and Transform the country’s economy. The sectors have the capability of providing employment to 70% of the country’s population. The work will show the practical aspect of employment creation through Agatha Trading Company (operations). The researcher work will also cover some organizations that promote SMEs in Nigeria. The researchers equally try to look at the importance of small and medium scale enterprise in the country’s economy.  One of the bases of this research work is for public to understand the importance of SMEs as a vehicle of effective growth and development in the country as it reduces unemployment. In order to check the validity of the subject matter; data were gathered using both primary and secondary data collection method. A well-constructed questionnaire as dispatch out to respondents (i.e. staff of Agatha Trading Company Nigeria) which were collected within four days of dispatch. The data collected was tested using chi-square test statistics and at the end it was discovered that Small and Medium Scale enterprise will provide adequate goods/services to ultimate users at the right time, right place, and in the right quantity. It will also encourage people to be independent on government and will increase employment which in turn increase the Gross domestic percentage (G.DSP) per capital income of the country and good standard of living.

 

CHAPTER ONE

1.1   BACKGROUND OF THE STUDY

One of the policy instruments which the Federal Government OF Nigeria adopted to speed up industrialization in the country is the promotion of small and medium scale enterprises (SMES). Their activities were encouraged, and the incentive given to them to boost the operation. Incentives, such as tax relief, import duty, restates on essential raw materials, loans and credit facilities through organizations like the small scale industrial credit scheme development, development of industrial centers to assist young entrepreneurs to perfect their skills and so on.      

These efforts were complemented by numerous financial institution set up solely to provide funds towards the industrial sector of the economy such as the Nigeria Industrial Development Bank (NIDB), Nigeria Bank of Commerce and Industry (NBC), Nigerian National Economic Reconstruction Funds(NNERFUN) and the like, all providing funds for operations or importations of vital raw materials. Father measures were taken by the Government towards the development of indigenous enterprises through the Nigeria Enterprises Promotion Decree of 1976 and 1977 with subsequent adjustment, which reserved certain enterprises mainly for indigenous entrepreneurs, while allowing foreign participation in others. This was further expanded through revitalization and commercialization were slated to be privatized in their operations, commercialized so that they could complete effectively with other private sector organizations offering similar services or products.

Recently, the federal government has established the Bank of Industries (BOI), to support small and medium scale enterprises despite all the initiative from the Federal Government that are operated, through banks and other financial houses, the small and medium scale enterprises, sub sector is still faced with a lot of problems that prevent them from the available funds and the delivery of such funds.
in view of the above, this research is therefore carried out to lay down the importance of small and medium scale enterprises to the Nigerian economy and the measure to be put in place to enhance their performance  so as to make way for effective performance of present and the future small and medium enterprises in the economy.

1.2   STATEMENT OF THE PROBLEMS

Commercial banks are generally week in granting loans to small and medium scale enterprises.

There is also poor administration of government in assisting programmes for small and medium enterprise development. Instead they are looking down upon and regarded as “No future ambitioned people” poor communication networking and lack of information made available either from experience or from other people also constitute the problem of development some government policies are also not to be overlooked as a potential small an medium scale problem. These policies tends to discourage any initiative put forward by a small and medium scale enterprise in their operation for instance a business man who is starting fashion designing business would be challenged with the government policy of loan on the importation of textile materials.

1. OBJECTIVE OF THIS STUDY

Objective of this study is to search for better ways to solve the above mentioned problems and proffer solutions to this. The discussion on small and medium scale enterprises (SMEs) is very wide and could be endless. Nevertheless for the purpose of this research the scope of discussion shall cover the following areas:

1. To find out the importance of the small and medium scale enterprises to the Nigeria economy.
2. To find out the role of the small and medium scale enterprises on economical Nigeria development.
3. To determine the problems encountered by the small and medium scale enterprises.
4. To identify those strategies that will enhance the success establishment and operation of small and medium scale enterprises.

1.4   SIGNIFICANCE OF THE STUDY

This project work is significance due to some numbers of reasons:   

1. The study will provide a yard stick with which to develop appropriate measures against the problem or factors that prevent the full utilization of enterprises. (small and medium scale enterprises).
2. It is the researcher’s belief that study will be of immense assistance to investors and entrepreneurs alike.
3. It will also enlighten the general public and prospective investors on the potentials of small and medium scale enterprises (SMES).
4. This will therefore, guide them on the type of viable enterprises to venture into.

1.5   RESEARCH QUESTION

To make this research work more explicit or clear, the following questions would be considered by the researcher:

1. Are individual advised to engage in small and medium scale enterprise?
2. How has small and medium scale enterprises impacted on the current economic development of Nigeria.
3. Does the government of Nigeria encourage small and medium scale business?
4. What do you think are the major financial sources of small and medium enterprises (SMEs)?
5. What is the motivational tool or force for small and medium scale enterprises?
   1. RESEARCH HYPOTHESIS

Hypothesis is a tentative statement of plausible assumption, the validity of which is yet to be known. Here statement of reasonable assumption is made and later subjected to test.

The study shall test the following hypothesis:

H_o:   Effective distribution system does not significantly increase organization sales volume.

H_i:    Effective distribution system significantly increases organization sales volume.

1. SCOPE OF THE STUDY

The research work shall cover the vital issues of small and medium scale enterprises through SMEs among others by limiting the scope of the study, to its relevance in the country economy, the benefit and what is stand to achieve as well as taking AGATHA as a major contributing stakeholders.

1.8   LIMITATION OF THE STUDY

The study is constrained by human factors which on the possible failure of individuals nor likely to tell the exact truth of what are available. Similarly, time has the tendency to hinder on intensive research work. But not withstanding the above effort has been made to overcome incidents obsolete as much as necessary, finally insufficient fund was constant because of vital information have to be sourced from the internet.

1.9   DEFINITION OF RELEVANT TERMS

a.     Management: Management is the continuous systematic process of planning, organizing or directing staffing and controlling resources of the organization (man, money and materials) so that, the individuals, the organization and the society can achieve certain objectives.

b.     Mental ability: This consists of creative thinking ability, analytical ability and general intelligence.

c.      Strategy: Is the determination of the long terms goal and objective of an enterprise and the adoption of courses necessary to carry out the goals.

d.     Self confidence: Base on a very adequate self confidence that an enhance problem solving or the ability to handle difficult situation.

e.     Technical knowledge: To know how related to the business that is ability to use tools, procedures and techniques necessary to ensure judicious utilization of resources.

THE ROLE OF MICRO FINANCE BANKS TOWARDS THE DEVELOPMENT OF NIGERIA ECONOMY

Over the years, microfinance has emerged as an effective strategy for enhancing economic growth across developing countries. Micro, small and medium enterprises are turning to Microfinance Institutions (MFIs) for an array of financial services. Credit allocation is a powerful instrument to fight  poverty, increase productivity, output and enhance economic growth. Access to financial services enable poor households to move from everyday-for-survival to planning for the future, investing in better nutrition, their children’s education and health and empowering women socially (Ehigiamusoe, 2005).

 

Microfinance banking and Economic stability has a nexus that cannot be overemphasized. This is because the growth of economy is dependent on the availability of liquidity (in terms of small credit niche) to small and medium scale enterprises. Government has in the past initiated series of publicly-financed micro/rural credit schemes and policies targeted at rehabilitating the poor. Among the programmes of government aimed at reducing poverty were rural banking programmes, sector allocation of credits and concessionary interest rate which were executed through agricultural credit schemes represented mainly in the institutional arrangements of the Nigerian Agricultural and Cooperative Bank Limited.

According to Obasi (2015), “Microfinance banking is a micro credit support services of banking operations that is concerned with small unit fund collection, allocation, administering, and management, for socio-economic growth, poverty alleviation on benefiting societies and political tranquillity.” According to Dandana and Nwele (2011), “microfinance banking service that is well implemented play important role in modern society, as it provides micro credit loans to small and medium scale farmers and enterprises. It reduces poverty growth level and creates an enabling environment for social and political tranquillity. Because microfinance lending when properly managed benefits the poor rural farmers, small and medium scale enterprises, artisans, et cetera, it helps to aid economic growth of its beneficiaries and their society through poverty reduction. Microfinance programmes that are well channelled help to improve economy, so, if the principles and ethics of microfinance banking are followed in implementations in Nigeria, economy will grow and the poverty profile of Nigeria would reduce properly.

 Microfinance according to the Central Bank of Nigeria (2005) is about providing financial services to the poor who largely constitute the 65% excluded from access to financial services of conventional banks. More so, lack of access to credit has been identified as the reason behind the growing level of poverty in many developing countries. This further emphasizes the crucial role microfinance institutions play in economic growth especially in their service for unserved and underserved markets (economically active person in rural and urban areas) to help meet economic and development objectives which include to reduce poverty (considered as the most important). Create employment, help existing businesses to grow or diversify their activities, empower women and other disadvantaged groups and even encourage the growth of new businesses (Khander, 2003).

 In 2005, the Central Bank of Nigeria (CBN) formulated a new policy framework to enhance the access of financial services to micro-entrepreneurs and low income households who require such facilities (soft loans and investable funds) to expand and modernize their operations and their contribution to economic growth and development in Nigeria. The objective is in line with the institution’s policy in ensuring financial inclusion for all, such that financial services reach the poor whether in rural or urban communities as this would help improve their productivity level and also help contribute to the nation’s gross domestic product (GDP). 

In 2004, the Central Bank of Nigeria asserts that the emergence of microfinance institution has been largely due to the inability of the formal financial institutions to provide financial services to both the rural and urban poor. In view of the need for financial inclusion, both the government and non-governmental agencies have, over the years, implemented series of microfinance programmes and institutions as well as governmental agencies providing policy strategies needed to improve the productivity of micro, small and medium scale enterprises.

IMPACT OF UNEMPLOYMENT ON NIGERIA ECONOMY

IMPACT OF UNEMPLOYMENT ON NIGERIA ECONOMY

ABSTRACT

This study examines the impact of unemployment on Nigeria economic. The term unemployment has been defined as a situation whereby those who are willing and able to work do not find job. This is mostly seen among graduates of various institutions of learning especially in underdeveloped nation like Nigeria. The study was designed to investigate the impact on unemployment on Nigeria economy. The research focuses on determining the causes and effects of unemployment and how the problem of unemployment in Nigeria will be reduced to a minimal level or even eradicated. It focuses on this objective: to determine the relationship between unemployment and economic growth in Nigeria (GDP).The method of analysis used in testing the hypothesis is the t-test, f-test e.t.c. Data for the study was obtained from the Central Bank of Nigeria statistical bulletin. The major findings were that unemployment has a negative effect on the gross domestic product (GDP) of the Nigerian economy. Some suggestions and policy recommendations were made based on the findings

CHAPTER ONE

1.0     INTRODUCTION

1.1     BACKGROUND OF THE STUDY

One of the greatest challenges facing the Nigeria economy is unemployment which has maintained a rising trend over the years. The total labour force in Nigeria is made up of all persons aged 15-64 years excluding students, home keepers, retired persons and stay-at-home to work or not interested. Unemployment in Nigeria is defined as the proportion of labour force that was available for work but did not work in the week proceeding the survey period for at least 39hours.

Unemployment is generally seen as a macro-economic problem as well as socio-economic problem .Unemployment arises as a result of insufficient and non-availability of jobs to correspond with the growing population, even those who are employed sometimes live with the fear of being unemployed due to job insecurity and retrenchment of workers. There is employment of factors of production if they are engaged in production. The term unemployment could be used in relation to any of the factors of production which is idle and not being utilized properly for production. However, with reference to labour, there is unemployment if it is not possible to find jobs for all those who are eligible and able to work. Labour is said to be underemployed if it is working below capacity or not fully utilized in production (Anyawuocha, 2013)

Unemployment can either be voluntary or involuntary. Voluntary in the sense that one chooses not to work because he or she has means of support other than employment. Example is an idle rich man. On the other hand, involuntary unemployment exist when persons who are eligible and willing to work at the prevailing rate of pay are unable to find work. (Anyanwa 1995). According to the central bank of Nigeria (2014), unemployment rose to 450% during 2014 statistics on unemployment rate. Unemployment has been seen as a world-wide economic problem and has been categorized as one of the serious impediments to social progress .Apart from representing a huge waste of a country’s manpower resources, it generates welfare loss in terms of lower output thereby leading to lower income and well being of the people (Akinboyo, 1987, and Raheem 1993). Unemployment is a very serious issue in Africa (Vandemortele, 1991, and Rama 1998), and particularly in Nigeria (Oladeyi, 1994 and Umo, 1996). The need to avert the negative effect of unemployment has made the tackling of unemployment problems to feature very prominently in the development objectives of many developing countries.

The socio-economic effect of unemployment includes: fall in national output, increase in rural-urban migration, waste of human resources, high rate of dependency ratio, poverty, depression, frustration, all sorts of immoral acts and criminal behaviour e.g prostitution, armed robbery e.t.c. The social effect of unemployment brings to light the need to proffer possible solution to salvage our nation Nigeria

1.2     STATEMENT OF THE PROBLEM

Working with the data from the national bureau of statistics, it indicates that the national unemployment rate in the first quarter of 2017 was 14.6%, compared with 13.7% in 2016. The urban and rural rates were 14.4% and 15.0% respectively compared with 10.2% and 14.8% in 2016. Further analysis showed that the distribution of unemployment ranged from 14.1%vfor the age group of 25-44 to 23.5% for the age group of 65-70. Desegregation according to geopolitical zones showed a very uneven distribution with the south-south zone having the highest unemployment rate of 29.5% and south-west at the rear with 8.5%. Between these extremes were the north-east with 18.5%, south-east 18.1%, north central 15.8% and north-west 14.2%. It is based on the increasing problem posed by unemployment on individuals and the nation at large that government has been embarking on various policies to control and reduce unemployment but yet has not yielded any positive result, rather it seems to be escalating. Drastic measures must be taken by government to curtail this problem of unemployment. The statement of problem is based on the economic, social and political effects of unemployment

1.3     RESEARCH QUESTIONS.

1. Is there any relationship between unemployment and economic growth?

2. Do unemployment have any significant impact on economic growth?

3. What are the factors affecting Unemployment and Economic Growth in Nigeria?

1.4     OBJECTIVE OF THE STUDY

The general objective of this study is examine the impact of unemployment on Nigeria economy. The specific objective include:

1. To determine the relationship between unemployment and economic growth in Nigeria
2. To examine the impact of unemployment on economic growth in Nigeria
3. To identify the factors affecting Unemployment and Economic Growth in Nigeria?

1.5     RESEARCH HYPOTHESIS

The null research hypothesis for this work is;

1. Unemployment does not affect economic growth in Nigeria

1.6     SIGNIFICANCE OF THE STUDY

The significance of this study is to make research on the effect of unemployment for most qualified graduates of various institutes of learning and also qualified skilled labour. The result of this study will provide useful information needed by government to fight unemployment and help create employment opportunities in Nigeria.

The significance of this study lies on the fact that huge amount of resources (human and capital) are unemployed which could cause poor economic performance. This thesis will help policy makers to establish the extent of the effect of unemployment and inflation rates on economic growth. This thesis will improve the body of existing literature and also serve as a policy document. The problems of high level unemployment and inflation need to be addressed in order to improve economic growth.

1.7     SCOPE AND LIMITATIONS OF THE STUDY

The scope of this study is centred on the effect of unemployment on the Nigerian economy. The regression analysis was also based on the use of time-series data extracted from the central bank of Nigeria statistical bulletin. The method of analysis used in testing the hypothesis is the t-test, f-test e.t.c. Possible suggestion and recommended were also made.

It is worthy to note that every research work posses alot of problems and limitations. However, the difficulties encountered includes, inadequate and non-availability of relevant data owing to the fact that unemployment in most under-developed countries e.g Nigeria is not evenly distributed and thus varies from one place to another, financial constraint, high cost of transportation and the difficulty in locating the various research centres.

THE EFFECT OF EXCHANGE RATE FLUCTUATION ON THE NIGERIA ECONOMY

THE EFFECT OF EXCHANGE RATE FLUCTUATION ON THE NIGERIA ECONOMY

ABSTRACT

This research work is centered on examining effect of exchange rate fluctuation on the Nigeria’s economic growth from 2007 to 2018. The specific objectives of the study is to determine the effects of exchange rate fluctuation on the Nigeria economy, evaluate the effects of interest rate on economic growth in Nigeria and examine the effects of inflation rate on economic growth in Nigeria. The main type of data used in this study is secondary; sourced from Central Bank of Nigeria Statistical Bulletin of various issues. The regression analysis was used to analyze the data. The result revealed that exchange rate fluctuation has significant effects on Nigeria economic growth and development, interest rate has no significant effects on Nigeria’s economic growth (GDP) and inflation rate has no significant effects on Nigeria’s economic growth (GDP). Therefore, the study recommended that the effort of the government should be geared towards maintaining a stable and sustainable exchange rate, since the stability of these could enhance industrial output. There should be an increase in the exchange rate of Naira in order to enhance economic growth, Interest rate should be at a minimum, in order for the purchasing power of an average Nigeria to increase. And that the government should encourage domestic production and consumption of goods and services and necessary policies in place to improve the value of Nigerian currency so as to reduce inflation.

CHAPTER ONE

1.0     INTRODUCTION

1.1     BACKGROUND OF THE STUDY

The exchange rate is perhaps one of the most widely discussed topic in Nigeria today. This is not surprising given it’s macro-economic importance especially in a highly import dependent economy as Nigeria (Olisadebe, 2015). Macroeconomic policy formulation is a process by which the agencies responsible for the conduct of economic policies manipulate a set of instrumental variables in order to achieve some desire objectives. In Nigeria these objectives include achievements of domestic price stability, balance of payment equilibrium, efficiency, equitable distribution of income and economic growth and development.

Exchange rate policy involves choosing where foreign transaction will take place (Oladipupo,  & Onotaniyohuwo, 2016). Exchange rate policy is therefore a component of macroeconomic management policies the monetary authorities in any given economy uses to achieve internal balance in medium term. Specifically internal balance means the level of economic activity that is consistent with the satisfactory control of inflation. On the contrary, external or sustainable current account deficit financed on lasting basis expected capital inflow. Exchange rate is the price of one country’s currency expressed in terms of some other currency. It determines the relative prices of domestic and foreign goods, as well as the strength of external sector participation in the international trade (Obadan, 2016). Exchange rate regime and interest rate remain important issues of discourse in the International finance as well as in developing nations, with more economies embracing trade liberalization as a requisite for economic growth (Obansa, Okoroafor, Aluko and Millicent, 2013).

In Nigeria, exchange rate has changed within the time frame from regulated to deregulated regimes. Ewa, (2011) agreed that the exchange rate of the naira was relatively stable between 1973 and 1979 during the oil boom era and when agricultural products accounted for more than 70% of the nation’s Gross Domestic Products (GDP). In 1986 when Federal government adopted Structural Adjustment Policy (SAP) the country moved from a peg regime to a flexible exchange rate regime where exchange rate is left completely to be determined by market forces but rather the prevailing system is the managed float whereby monetary authorities intervene periodically in the foreign exchange market in order to attain some strategic objectives (Mordi, 2006).

The key element of structural adjustment programme (SAP) was the free market determination of the naira exchange rate through an auction system. This was the beginning of the unstable exchange rate; the government had to establish the foreign exchange market (FEM) to stabilize the exchange rate depending on the state of balance of payments, the rate of inflation, Domestic liquidity and employment. Between 1986 and 2018, the federal Government experimented with different exchange rate policies without the any of them to make a remarkable effects in the economy before it was changed. For instance from 1982 – 1983, the Nigerian currency was pegged to the British pound sterling on a 1.1 ration. Before then, the Nigerian naira has been devalued by 10% and also between 2015 to 2018 the Central Bank of Nigeria fixed the Nigeria Naira at between N300 to N350 against one dollar ($1) (CBN, 2015). Apart from this policy measures, the Central Bank of Nigeria (CBN) applied the basket of currencies approach as the guide in determining the exchange rate which was determined by the relative strength of the currencies of the country’s trading partner and the volume of trade with such countries. Specifically weights were attached to these countries with the American dollars and British pound sterling on the exchange rate mechanism (CBN, 2016). One of the objectives of the various macro–economic policies adopted under the Structural Adjustment Programme (SAP) in July, 1986 was to establish a realistic and sustainable exchange rate for the Naira; this policy was recommended in 1986 by the International Monetary Fund (IMF). On exchange mechanism and was adopted in 1986. This inconsistency in policies and lack of continuity in exchange rate policies aggregated unstable nature of the naira rate (Gbosi, 2014). It is against this background that this study seeks to examine the effects of exchange rate fluctuation on the Nigeria economy.

1.2     STATEMENT OF THE PROBLEM

Exchange rate fluctuation is generally considered undesirable in any economy because of its perceived effects on the economy. The fluctuation of exchange rate in Nigeria therefore, raises an important research and policy problem on its effects on the economy. The use of exchange rate to stimulate economic growth is as old as the history of international trade. For instance, extensive literature has documented different exchange rate regimes adopted by countries, in order to stimulate economic growth. Exchange rate volatility might strongly affect the growth performance of open economies through the trade channels on the short-run (IMF 2014, European Commission 1990). From a long-term perspective, fluctuations in the exchange rate level constitute a risk for growth in emerging markets economies as they affect the balance sheets of banks and enterprises where foreign debt tends to be denominated in foreign currency (Eichengreen and Hausmann, 2015). That is, exchange rate fluctuation inflates the liabilities in terms of domestic currency thereby increasing the probability of default and crisis.  Thus, it has become imperative to empirically establish the effects of exchange rate fluctuation on the Nigerian economy. Relying on past empirical evidence on this subject matter given so recent developments in the economy might be misleading. It is against this problem that this study seeks to examine the effects of exchange rate fluctuation on the Nigeria economy.

1.3     OBJECTIVE OF THE STUDY

The objective of the study is to examine the effects of exchange rate fluctuation on Nigeria economy. The specific objectives of the study include:

1. To determine the effects of exchange rate fluctuation on the Nigeria economy.
2. To evaluate the effects of interest rate on economic growth in Nigeria.
3. To examine the effects of inflation rate on economic growth in Nigeria.

1.4     RESEARCH QUESTIONS

The researcher seeks to find the answer to the following three questions:

1. Does exchange rate fluctuation in Nigeria have any significant effects on economic growth?
2. Is there any significant relationship between interest rate and Nigeria’s economic growth?
3. Does inflation rate have any significant effects on Nigeria’s economic growth?

1.5     RESEARCH HYPOTHESES

Based on the objectives of the study, the following hypotheses were formulated.

H_o1: Exchange rate fluctuation has no significant effects on Nigeria economic growth and development.

H₀₂: Interest rate has no significant effects on Nigeria’s economic growth (GDP).

H₀₃: Inflation rate has no significant effects on Nigeria’s economic growth (GDP).

1.6     SIGNIFICANCE OF THE STUDY        

The significance of this research work lies in the fact that if the cause of the unstable exchange rate of the naira is identified and corrected, the economy will rapidly grow and develop into an advance one. This is so because if the unstable exchange rate of naira is proved to be affecting the macro- economy major variables badly, including Real exchange rate, Real interest rate, inflation rate, gross domestic product and trade openess of the country, attempts should be made to stabilize the exchange rate. This is because these variables are gauge for the measurement of growth and development of any economy.

Importantly, this study would help the government and the central bank of Nigeria (CBN) to identify the strength and weakness of each foreign exchange system and hence adopt the policy that suits the economy best. This will definitely enhance growth and development of the economy, the study will also serve as a guide to future researchers on this subject.

1.7     SCOPE OF THE STUDY

This research work is designed to examine of the effects of exchange rate fluctuation on the Nigeria economy between 2001-2018 a period of seventeen years. The scope consist of the regulatory and deregulatory exchange rate period i.e. the fixed exchange rate and the floating exchange rate period. The main type of data used in this study is secondary; sourced from Central Bank of Nigeria Statistical Bulletin of various issues. The study is further limited to the following variables used in the models; dependent variable – Gross Domestic Products (GDP) while the independent variables are Exchange Rate (ENRT); Interest Rate (INRT) and Inflation Rate (INFRT) for the period 2001 – 2018.

1.8     DEFINITION OF TERMS

Gross Domestic Product (GDP): Gross Domestic Product is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.

Foreign exchange: Foreign exchange is a means of payment for international transaction; it is made up of currencies of other countries that are freely acceptable in settling international transactions.

Exchange control: This is a foreign exchange arrangement in which the government purchase all coming foreign exchange and is the only source from which foreign exchange can be purchased legally.

Exchange rate: An exchange rate is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in relation to another currency.

Interest rate: An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited or borrowed (called the principal sum)

Inflation rate: inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.

THE CONTRIBUTION OF THE DEPOSIT MONEY BANKS (DMBS) TO THE DEVELOPMENT OF NIGERIA ECONOMY

THE CONTRIBUTION OF THE DEPOSIT MONEY BANKS (DMBS) TO THE DEVELOPMENT OF NIGERIA ECONOMY

(A CASE STUDY OF UNITED BANK FOR AFRICA PLC, NASARAWA BRANCH)

ABSTRACT

This study examined the contribution of the Deposit Money Banks to the development of Nigeria economy. The specific objectives are to explore the relationship between economic growth and the level of financial intermediation.; Ascertain the impact of banks’ lending interest rate on economic growth through investment; identify the problems facing Deposit Money Banks in the discharge of their responsibilities. The research work adopted an expo facto research design. The data were analyzed using Ordinary Least Square (OLS). The findings of the study revealed that there is a mixed and positive relationship between interest rate spread and the growth of the Nigerian economic and that there are no problems facing Deposit Money Banks in the discharge of their responsibilities. The study finally recommends that government and other monetary authorities should use selective credit control measures in order to persuade banks to grant more loan and advances to the private sectors which are the engine of economic growth in Nigeria and that efforts should also be made by government to regulate the interest rate charged by banks on lending to businesses in Nigeria

CHAPTER ONE

INTRODUCTION

1. Background of the Study

Deposit money banks are financial institutions that played an intermediating role in financing industrial expansion in both developed and developing economies (Bada, 2017). Deposit money banks plays significant role in the finance mobilization and allocation of financial resources to productive investments and, in return, promote sustainable performance and economic development of Nigeria.

One of the key functions of deposit money banks is financial intermediation and issuing of loan facilities to governments, organizations and virtually every sector of the economy. These economic sectors range from the manufacturing, agriculture, services, construction, transport, mining, oil and gas among others (Ugiagbe & Egbeonu, 2016). Obviously, both the public and private sectors of any economy need banking sector credits for more productive activities as prerequisites for enhancing a nation’s overall performance.

Economic growth or development is a sustainable increase in the value of goods and services in an economy within a given period of time. This could be measured by nominal gross domestic product, real gross domestic product, gross domestic product per capita or gross domestic product growth rate. The nominal gross domestic product is the total value of goods and services produced in an economy without adjusting for an inflation rate. A real gross domestic product is the total value of goods and services produced in an economy after adjusting for an inflation rate (Ugiagbe & Egbeonu, 2016).

Jhinghan (2015) defined gross domestic product per capita as the total value of goods and services produced in a country divided by the total population within a given period of time, while, gross domestic product growth rate is the rate of increase in the value of goods and services in an economy within a given period of time.

Lucas (2018) noted that the development of any economy is greatly enhanced through a vibrant banking industry which serves the function of mobilizing savings from small and largesavers in the economy and channels same to the fund users for investment purposes. All the sector of the economy needs funds to remain in operation and contribute to the nation’s overall performance. For it to survive andperform effectively there must be an investment which is synonymous with funding, hence the bankingindustry becomes a very relevant funnel. Soludo (2004) asserted that in Nigeria, deposit money banks arethe largest financial intermediaries that transfer funds from surplus sector to the deficit sectors of theeconomy.

The role of Deposit Money Banks financing is seen as a suitable source for the development of Nigeria economy to enableit to meet both new investment opportunities and operating expenses. Deposit money banks credit tomanufacturing sector serves as financial intermediation between the deficit and surplus units whichenhanced large-scale production and has a backward and forward effect on economic growth (Tokunbo, 2017).

Banking industry provides credit facilities to individuals and companies, for one kind of economic activityor the other. It could be for industrialisation purpose, manufacturing, agricultural production, mining andquarrying, execution of contract among others. It is against this background that this study examines the contribution of the deposit money banks to the development of Nigeria Economy.

1. Statement of the Problem

Deposit money banks credit allocations in Central Bank of Nigeria statistical bulletin 2018 indicated that the real sector in Nigeria is still finding it difficult to access financial resources especially from the deposit money banks that hold the larger part of total financial sector assets, also nominal interest rate is high which equally caused many investors to avoid bank-borrowing. Anyanwu (2017) argued that the low level of investments has hindered the growth of productivity in Nigeria. These low investments have accounted largely to banks’ unwillingness to make credits available to manufacturers, as a result of the mismatch between the short-term nature of deposit money banks’ financing and the medium to long-term nature of financing needed by manufacturing industries. It is on this note that this study seeks to examine the contribution of the deposit money banks (DBMs) to the development of Nigeria economy.

At this juncture, it might be necessary for one to ask if the financial market in Nigeria is underdeveloped to support the investment needed to boost economic growth. This may be partly due to dearth of empirical studies which will shed light on how deposit money banks can contribute meaningfully to economic growth in Nigeria. In particular, to contribute to economic growth the nexus between growth and investment, quality of service, savings mobilization must be clearly understood through an empirical investigation. This is so far lacking or insufficiently explored. In summary this study seek to find solution to the following problems:

1. Poor / Low credit allocation of fund by Deposit Money Banks to real sector in Nigeria.
2. High interest rate on loans granted to real sector in Nigeria by Deposit Money Banks
3. Problem of low investment as a result short terms loan granted by Money Deposit Banks against the long term loan required by the real sector of the economy.
   1. Objectives of the Study

The general objective of this study is to examine the contribution of the Deposit Money Banks to the development of Nigeria economy. The specific objectives are to:

1. To explore the relationship between economic growth and the level of financial intermediation.
2. Ascertain the impact of banks’ lending interest rate on economic growth through investment.
3. To identify the problems facing Deposit Money Banks in the discharge of their responsibilities.

1. Research Questions
2. What is the relationship between economic growth and the level of financial intermediation?
3. What is the impact of banks’ lending interest rate on economic growth through investment?
4. What are the problems facing Deposit Money Banks in the discharge of their responsibilities?

1. Statement of Hypothesis

H₀₁: There are no significant relationship between economic growth and the level of financial intermediation.

H₀₂: The Deposit Money Banks’ lending interest rate has no significant impact on economic growth through investment.

H₀₃: There are the problems facing Deposit Money Banks in the discharge of their responsibilities.

1. Significance of the Study

This study through its findings and recommendations will be significant in the following ways.

1. Policy Makers and Regulators in the Industry:  To policy makers and regulators in the industry, it will present a scheme, through its analysis that could assist them in formulating policies that will not only positively impact on banks’ performances but also remain relevant in the economy of Nigeria.
2. Bankers: To bankers in general, it will expose the relationship existing between Deposit Money Banks and the Development of Nigeria Economy.
3. Academicians: In the academic arena, this study will prove to be significant in the following ways: v It will serve as a body of reserved work and knowledge to be referred to by researchers.  It will add value and enrich other literatures on banks’ performances in Nigeria and the world at large. It will suggest ways of enhancing the performance of the banking industry in Nigeria and the entire Nigerian economy. This will in turn, boost development positively which is usually affected by banks and their activities.

1. Scope of the Study

The scope of this study is limited to the contribution of the deposit money banks to the development of Nigeria Economy. Since the Nigeria banking industry is so large with over 20 banks, the scope of the study is further limited to United Bank for Africa Nasarawa Branch.

1. Limitation of the Study

This study was carried out successfully but while in the course of gathering data, the researchers were confronted with the mention and analyzed problems,

• Time Constraint: The researchers had no enough time to carry out their research as have been planned because this project write up was coincided with other academic activities such as attending lectures, doing assignments and test
• Financial Constraint: Due to the economic situation that things are hard to come by, fund frustrated the researchers, but was able to take control of it.
• Materials: The researchers had no sufficient materials as to lay hands on books on the research topic. Also, the Bank Officials visited were reluctant initially to give useful information until a repeated visit.

1. Operational Definition of Terms

Deposit Money Banks: Deposit money banks are resident depository corporations and quasi-corporations which have any liabilities in the form of deposits payable on demand, transferable by cheque or otherwise usable for making payments.

Economic Growth: – is an increase in the capacity of an economy to produce good and service compared from period of time to another.

Banking: – is a financial institution concerned with providing all types of financial assistance (medium as well as long term) to business unit in the form of loan under writing, investment and guarantee operations and promotional activities and economic development in general.

Financial Intermediation: – is a productive activity in which an institutional unit incurs liabilities on its own account for the purpose of acquiring financial assets by engaging in financial transaction on the market.

Interest Rate: An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited or borrowed (called the principal sum).

PUBLIC DEBT MANAGEMENT IN NIGERIA: A STUDY OF THE IMPACT OF DOMESTIC DEBT ON THE ECONOMY (1999 - 2019)

PUBLIC DEBT MANAGEMENT IN NIGERIA: A STUDY OF THE IMPACT OF DOMESTIC DEBT ON THE ECONOMY (1999 – 2019)

ABSTRACT

The study examined public debt management in Nigeria: a study of the impact of domestic debt on the economy (1999 – 2019). The specific objectives of the study include: to determine the quantum of federal government domestic debt from 1999 to 2019; to analyze the relationship between domestic debt and the GDP in Nigeria and  evaluate the impact of domestic debt to economic growth to economic growth in Nigeria. The researcher made use of quantitative and historical designs and the data were analyzed using regression analysis. The findings of the study revealed that the quantum of Nigeria domestic debt have increased over the years as the value of domestic debt outstanding have increased from N794.81 Billion in 1999 to 14,272.46 billion in 2019.  The study also revealed that there is a significant relationship between domestic debt and the gross domestic product of Nigeria and finally it is seen from the study that domestic debt outstanding have significant impact on the economic growth in Nigeria. Based on the findings the researcher recommends that policy makers should integrate appropriate measures towards ensuring suitable management of domestic debts so as to enhance the productivity level of the country and government should ensure that contracted national debts are directed towards encouraging investment in the country so as to increase capital formation in the country and consequently a sustainable economic growth.

CHAPTER ONE

INTRODUCTION

1. Background of the Study

All over the world, countries incur debts, either from the international community or internally. This is necessary in order to boost domestic investment and hence accelerate economic growth and development (Anyanwu and Erhijakpor (2014). Borrowing does not negate any economic principle, so far its expenditure are channeled into regenerative investments that will guarantee and facilitate the repayment structure, debt liquidation and value addition in terms of supporting the standard of living of the citizens (Ogwuma, Ikenna and Odili (2015).

Public debt is one of the methods of financing government operations; governments can also create money to settle her debts in order to avoid interest payment, though creation of money will only reduce interest cost and will not cancel the debt itself which may cause hyperinflation. And in some other times government might increase tax so as to finance debt repayment in the economy. Public debt is in different forms: internal or domestic debt and foreign or external debt. Domestic public debts are usually contracted through debt instruments such as Treasury Bills, Bonds, Treasury Certificates, Federal Development Stocks and Ways and Means Advances, provided by the Central Bank of Nigeria (Nzotta, 2004).

Public Debt Management is the process by which the government acquires and uses the debt effectively and efficiently. Debt is manageable as long as the cost of acquiring debt is reasonably low and debt obtained is used efficiently in such a way that it helps growth and efficient allocation of resources in the long run. Debt is used efficiently if the ratios of debt service to total revenue and external debt service to exports fall or remain constant. The underlying assumption is that the projects for which borrowed money is used would generate sufficient output and exports for debt repayment. Public debt management typically involves activities ranging from the formulation of a debt/borrowing strategy. This strategy is generally based on country’s debt situation, financial market situation, need of new finances, use of borrowed money, meeting of debt service obligations on time and maintenance of information systems and databases (World Bank and IMF, 2001). These activities need to be governed under an explicit and clear legal mandate and organized under a framework where roles and responsibilities of the agencies involved are well specified.

In the wake of persistent saving-investment gap, export-import gap and fiscal deficit, a prudent public debt management is essential tools for sustainable macroeconomic stability of the Nigerian economy. Nigeria has run persistently large budget deficits in recent decades. These large and persistent budget deficits have generated considerable concern in Nigeria and there is a widespread perception that it will reduce growth, and could lead to a crisis if the deficit continues for long or become too large (Okonjo-Iweala, 2014).

Nigeria’s experience indicates that an escalating debt profile presents serious obstacles on a nation’s path to economic growth and development. The cost of servicing debt may expand beyond the coping capacity of the economy, thereby impacting negatively on its ability to achieve the desired fiscal and monetary policy objectives. Furthermore, a rising debt burden may constrain the ability of government to undertake more productive investment programmes in infrastructure, education and public health.

Nigeria Government over the years has been funding her budget deficit through public debt or borrowings which have been described as an important instrument of fiscal policy available to government to fund the development of a nation. It has been that budget deficits demonstrate that government expenditure is high relative to its revenue; this gap has been identified to be filled with public debt (Mankiw, 2013). Public debt which includes both internal (domestic) and external debts is considered when the revenue realized by the governable is insufficient for its projected expenditures (Rahman, 2012). It is on this note that this study seek to examine public debt management in Nigeria: a study of the impact of domestic debt on the economy (1999 – 2019).

1. Statement of the Problem

The inability of Nigeria to accumulate domestic resources so as to fill the usual budget deficit experienced in the country over the years occasioned the consistent dependence on public debt which is often typified by adverse lending conditions, instability of foreign exchange rates and the potential repudiation that occasions debt overhand, hence exerting negative effects on the economic growth of Nigeria (Akinwunmi and Adekoya, 2018). This issue has also been ascertained to impede domestic capital creation thereby triggering the reduced provision of basic amenities for citizens in the country (Udoka, 2010).

The consistent upsurge in Nigerian’s domestic and external debt profile without an obvious growth in its capacity usage have over time caused the frequent quest for debt scheduling and cancellation expired by Nigeria and several other developing countries across the globe (World Bank, 2002). Following the issues created by endogenous factors stemming from domestic debt which includes extra-tax burden, deflection of the society’s limited capital from the productive private sector to the unproductive public sector and the economic exogenous factors such as exchange rate and interest rate particularly couple with the oil price drop which led Nigeria into recession and also intensified its debt stock cause the need for debt relief which was initiated in 2005 (Nwankwo, 2010).  Numerous studies aimed at examining the effects of public debt management on economic growth have been carried out over time across countries of the world. Noticeably, a significant number of these studies and other related researches are bereft of strategic empirical evidences in developed countries, Nigeria and other developing countries (Saifuddin, 2016; Idenyi, Ogonna and Ifeyinwa, 2016; Jernej, Aleksander and Miroslav, 2014; Muhammad, Ruhaini, Nathan and Arshad, 2017; Siew-Peng and Yan-Ling, 2015; Egbetunde, 2012; Amilcar, 2016; Rahman, 2012; Hadhek and Fatma. 2014; Naeem, 2017; Muhammad, 2017; Mousa, and Shawawreh, 2017).

The questions then are: How has the Nigerian government been funding her budget through debt financing? What ratio is the debt financing to total budget been? What roles has domestic debt financing played in the budget? What impacts has this domestic financing played on the economy? Following the gap in the research focus and literature of previous researches, this study examines public debt management in Nigeria: a study of the impact of domestic debt on the economy (1999 – 2019).

1. Objectives of the Study

The broad objective of this study is to examine public debt management in Nigeria: a study of the impact of domestic debt on the economy (1999 – 2019).

The specific objectives of the study are:

1. To determine the quantum of federal government domestic debt from 1999 to 2019.
2. To analyze the relationship between domestic debt and the GDP in Nigeria.
3. To evaluate the impact of domestic debt to economic growth to economic growth in Nigeria.

1. Research Questions
2. What is the quantum of federal government’s domestic debt from 1999 to 2019?
3. What is the relationship between domestic debt and the GDP in Nigeria?
4. What is the impact of the domestic debt to economic growth in Nigeria?

1. Statement of Hypothesis

H₀₁: There is no significant relationship between domestic debt and the GDP of Nigeria.

H₀₂: Domestic debt has no significant impact on economic growth of Nigeria.

1. Significance of the Study

This study is focused on providing evaluation of public debt management in Nigeria: a study of the impact of domestic debt on the economy (1999 – 2019). It will also serve as a tool in revamping government policies towards loan procurement and debt servicing in Nigeria. This work may also serve as a yardstick for research and documentation on Nigeria’s debt crisis. Other significant are itemized as follows:

The research is meant to be particularly educative in the sense that it is going to help us expose some of the experiences Nigeria has acquired in the course of servicing her debts. It will also enable us to know whether Nigeria’s relationship with her creditors has been beneficial or not to the general economic development of the Nigeria economy.

In as much as a lot of write-up and publications have appeared from these long periods of Nigerian debt servicing, most of these expression have neither economic nor even any basis at all. Besides very few Nigerians are really concerned with the main issues involved or have critically analysed Nigerian foreign debt situation. Though, such analysis can be very difficult, complicated and time consuming, indeed that only those qualified and equipped can meaningfully undertake or embark on such. Essentially, this research is a blood attempt in that direction.

Finally, this study is meant to be beneficial to the policy makers, business investors, bankers, financial managers, the general public and the Nigerian economy as whole as well as other developing nations who may embark in the art of serving or borrowing foreign loans.

1. Scope of the Study

The scope of this study shall cover the examination of public debt management in Nigeria: a study of the impact of domestic debt on the economy (1999 – 2019).

1.8     Limitation of the Study

The limitations of this study include some of unavoidable constraints and problems encountered in the process. They are as follows:

1. Finance: The problem of finance was not left out in the course of research to this study. This type of study required little money and time to enable the researcher visit the necessary places for collection of data. Insufficient fund hindered an in-depth study of this research since it was financed from meager pocket money of the researcher.
   1. Time: Since this study is one of the many courses offered by the researcher, the researcher was constrained by time to carry out an indent research on the study.

1.     Operational Definition of Terms

Public Debt: The public debt is how much a country owes to lenders outside of itself. These can include individuals, businesses, and even other governments. The term “public debt” is often used interchangeably with the term sovereign debt. Public debt usually only refers to national debt.

Domestic Debt: Domestic debt is the component of the total government debt in a country that is owed to lenders within the country. Internal government debt’s complement is external government debt.

Public Debt Management: Public Debt Management is the process by which the government acquires and uses the debt effectively and efficiently. Debt is manageable as long as the cost of acquiring debt is reasonably low and debt obtained is used efficiently in such a way that it helps growth and efficient allocation of resources.

 GDP (Gross Domestic Product): According to Okeke (1990: 297) Gross Domestic Product is the total value of goods and services produced in the country at a given time normally a year.

THE ROLE OF SMALL SCALE BUSINESS IN THE DEVELOPMENT OF THE RURAL SECTOR ECONOMY IN ABUJA MUNICIPAL AREA COUNCIL (AMAC)

 

Role Of Banking And Finance In The Development Of Nigeria Economy

 

Role Of Banking And Finance In The Development Of Nigeria Economy 

CHAPTER ONE

1.0            INTRODUCTION

The history of Banking in Nigeria started back in 1892 with Eider Dempster company which engage itself in the business of moving coins around the country, later that year African banking cooperation was found which provide services to elder Dempster company failure of the bank led to the formation of bank of British West African, but between 1929 – 1951 lead the establishment of indigenous bank and even more today where a lot of them have collapsed as result of mis-management, under capitalization among the factors.

Bank have crucial role to play in a nation’s quest economic development. They serve as major institutional mechanism for mobilizing resources from surplus unit of the economy and channeling these to deficit unit through credit expansion. According to Usman (1997)  Bank occupy center stage in the effect of accelerating of both local and foreign resources for investment purpose”. In any economy, the financial system is the hub of productive activity, as it perform the vital of financial intermediation. It is the primary provider of payment services and fulcrum of monetary policy implementation.

         

As cited by Dicko (2005) the neo-classical production theory identified capital and labour among others as critical factor determining growth in output. But in developing countries with abundance of cheap labour, capital is very scare and expensive. The financial institution by providing the much need capital for output the growth fill an important gap in the development process”.

It could also be emphasized that there have been significant contribution by post Kenyesians economist such as Devidson (1994) and Mishy (1975), following the seminal work of Melemon (1973) and Shaw (1973). They emphasis that financial system does matter in facilitating economic development under a liberalized and reformed environment. Dikleo (2005) is of the opinion that the concept of development and growth has universally transformed to a wider phenomenon. Some 50 years ago it focused on economic variable only.

Today it encompasses indicator (HDI) have replaced the tradition per capital income’ as indicators of development”. The main thrust of his project is to identify whether the financial system and the banking system in particular has been able to social economic roles of equitable wealth creation.

1.1     BACKGROUND OF THE STUDY

This project centers on the role of Banking and Finance in the development of Nigeria economy with particular reference to united bank of African (UBA) Nasarawa Branch.

The project will give a highlight on the development of banking in Nigeria and laid down emphasis on the different kinds of Banking and their various function of the effect the economy.

Nigeria has a vital growing market in African and has a recent years acquire important role in the world economy with a population of 120 billion (appropriately) people which endorsed with the fast and largely untapped natural resource with petroleum being the major foreign exchange earner. Nigeria banking system evolved it increasing assisted in resources mobilization for economic development prior to the establishment of the central bank of Nigeria in march 1958 operate as rudimentary banking system tailored to need of British government, had been as existence in the Nigeria.

Banking has contributed immensely to the Nigeria economy, it has provided services of employment opportunities and services to the masses on the businessman, client and the government from to time. There are various bank that can be classified or mention e.g. Central Bank, Universal Bank Merchant bank and Mortgage bank etc. the universal bank can be identified by the services they render such as saving bill of document and act as an agent to the customer, granting of loans, import and export financing. The universal bank institution in Nigeria can be classified into two major groups. These are purely indigenous bank owned 100% and minority foreign interest.  

However, prospect is therefore aimed at high the impact of the universal bank in the economic development of our great nation (Nigeria) by appraising their performance.

The introduction will not be complete without recognizing the apex of the banking industry that is the central bank of Nigeria (CBN) which is charged the responsibility of maintaining the monetary standard and sound financial structure with objective of creating approximately environment for economic growth and development.

1.2     STATEMENT OF RESEARCH PROBLEMS

The impact of bank services especially universal bank cannot be over emphasize. The main reason for this research work is to discover the problem militating against their operation, these problem have to be consider with the aim of giving relevant suggestion for improvement, the problem there among other things included.

Bank include those of poor record keeping, poor account system, embezzlement, fraudulent practice, poor organization planning control and loan portfolio management, problem of competition, the market for banking service is not homogenous its differentiation by preferential to the characterized of client or customer and by the traditional to which banking houses are accustomed.

1.3     OBJECTIVE OF THE STUDY

          The objective of this study are:

i.                   To investigate the manner through which united bank for Africa plc, Nasarawa branch make credit facilities available to their customers.

ii.                 To find out the response of customer to various credit facilities and their disposal.

iii.              To explore other means of financial assistance available to industries if any. It seek to discuss the role impact and implication of the policies and strategies of the government and stages of government and the Central Bank of Nigeria (CBN).

1.4     RESEARCH QUESTION

This is done to enable the researcher to gather information about his finding and to enable him solve the problems which his is faced with and this will be done through:

i.                   Conduction of interview with the management

ii.                 Questionnaire

iii.              Personal experience for example what are usually the reaction of the share holders?

1.5     RESEARCH HYPOTHESIS

          The following hypothesis is becomes relevant in this study.

1.     H0: does the nature of Universal Banking in  Nigeria affect the economy development

H1: The nature of the universal Banking in Nigeria does not affect the economy development.

2.     H0: The banking service does not have a role to play in the economy  development

H1: The banking service have a role to play in the economy development

3.     H0: Does banking sector been able to develop the economy in Nasarawa state.

H1: Banking sector has been able to develop the economy in Nasarawa state play in the economic development?

1.6     SIGNIFICANCE OF THE STUDY

The research is significant to business and to Universal bank, the government and any person intending to invest in Universal bank to also help investor both in public and private sector of the economy. To specific roles played by Universal bank in the development of economic which may include bank facilities and consultancy among others. It may enable the general public to realize the role and importance of universal bank toward economic development. The study will also enable utilize polytechnic who may want to know the role of banks.

1.7     SCOPE OF THE STUDY

The scope of the study is to look into impact of the universal bank in an economy as well as the way universal bank in Nigeria carry on their business in respect of development. It will however look at their agricultural financial scheme. This project goes further to look into problem facing universal bank and suggestion ways of improvement, the history of universal bank from 18-92-2000 will be looked into.

1.8     DEFINITION OF TERMS

Bank: A bank is a financial institution owned by the shareholder, the public or the government. These money and other valuable thing are kept. They give loans and overdraft to their client and perform other related universal activities to them.

Banking Services: The banking act of 1969 define banking or banking business as “The business of receiving monies from outside source as deposit irrespective of the payment of interest and granting a money loan and acceptance of credit or the purchase or bill and cheque. The purchase and sale of securities for account or other measuring of the obligation to require claims in respect of loan prior to their maturity or the assumption of guaranties and other warrantee for others.

Ceiling of Credit: This is the limit beyond which bank are not allowed to exceed in their lending policy usually given by central bank of Nigeria.

Customer: Account to legal decision by Lord Daley on great western Railway versus London and countey Bank in (1901) defined a customer as any person who as some sort of any account either deposit or current account or some relation with a banker”. Some of the required to be customer must be a major (not an intact or minor) not an insane person and he or she must have been bared by any court of law.

Overdraft: These are usually terms facilities design to improve export working capital as well as reduced problem.

Capital: Refers to money raised to start business or money invested in business.

Saving: Refers to money ledged or kept within a bank for safety purpose and interest is calculated and payable to the customers.

Bank Note: Refers to a price of paper money with value printed on it.

Negotiable of Bill: This is meant that bank purchase an outward bill for collection drawn by export or importer abroad such purchase would be made before the bill or remitted. Abroad for collection. A regular export can arrange a negotiation line up to an agreed limited with bank.

Letter of Credit: A bank at the instance of foreign buyer can authorized a Nigeria bank through an oversea bank to the importer have complaint of inadequate fund to finance the export to the oversea budget.

Loan syndication: It is a system whereby some one or more banking (financial institution) jointly arranged a loan for a client for a specific project.

Export In Financing: Can be defined as the activities of government of a country it is agent to promote an increase the financial aspect of an exported from the country to another country.

Bank Distress: This occurs when a bank is unable to meet up with or honour its current maturity financial obligation as they fall due for payment. This is also called technological insolvency and it donate only lack of liquidity.

Debt Factoring: This involves turning over the responsibilities for collecting a for debt to a specialized institution. It is an outright sole of debt to a financial company from cash to be realized for any immediate use if could be with or without resources.

Collateral Security: These are pledge or guarantee made or shown to the banks to secure a loan from the bank as supplement to some more marketable asset which include building, plant machinery, motor vehicle, when customer failed to redeem this pledge i.e. refuse to repay the given loan at the stipulated time, the bank will exercise its right at lien and auction  those to recover their money plus the actual interest.

CHAPTER TWO

2.0     LITERATURE REVIEW

2.1     MEANING AND BACKGROUND OF BANKING IN NIGERIA

According to agricultural credit act 1928 of Great British a bank is defined as any firm incorporation, company or society carrying on banking business.

Also Dr. H.L Hart on eminent banking authority an England in his book law of banking defines a “bank as a company carrying on business of receiving money and draft upon them from time to time by a customer to the extend of the amount available on their current account.

According to Dr. Wale Adewunmi in his book banking and finance in Nigeria Graham Born London (1989) agreed that the quality and usefulness to an extend by the manner of efficient staff by his action and without saying one word to that effect invited you to come back next time and even to encourage good image of bank. According to Dr. Wale is build through advertisement, publicity a contract with a nudle is efficient staff of bank remove and best badly client that images

According to Sayer’s (1961) in his book modern banking gave detail definition of bank thus: ordinary banking business consist of changing cash from bank deposit from person or incorporation come (one deposit) to another, give bank deposit in exchange for bill of exchange government bond, the secured or insecured promise to business to repay etc. from the legal view point section 41 of banking act 196 (formally, banking decree 1969) defined a bank as any person carrying on banking business and this include universal bank, and acceptance house, discount house and financial institution, and in his definition banking business means the business of receiving money from outside sources as deposit in respective of payment and granting of money loan and acceptance of credit or the purchase bill and cheque or the purchase of security for account of other or the incurring of the obligation of the acquire claims in respect of loan prior to their maturity or clearing and such other transaction. Oleshore O. in his paper presented in banking management in Nigeria at the banking and financial lecturer of department economy university of Ibadan (1984) in a matter in one his speech is of the view that customer must not been made that the bank is doing him a favour. That no amount of service, Bally – Goo advertisement or glumick can substitute for good performance  and service, which phase the customer, employees should be fully inform about subject important the bank such as policy, operations, services and objections.

However, it is a historical fact that deposit of establishment of indigenous bank universal in Nigeria is never the less dominated by the expatriated led to indigenizing the whole system.

G.O Nwanko on his book Nigeria Financial System Macmillan banking facilities in Nigeria are provided by expatriate bank led to the establishment of indigenous bank. On the other the satisfaction facility provided by the entire banking system as led to attempt to indigenalize the whole system.

According to Mr. Paul A. Ogwuna then the governor of the Central Bank of Nigeria in a lecture delivered at the National Institute of Banker (NIB) annual seminar said that in other to facilitate the growth the authorities need to stimulate the money market by introduction of routine rediscount facilities without to support medium and long term lending.

According to Dr. Orji H.O managing Director and chief executive progress bank in an article he feature in the Central Bank of Nigeria Bullion Vol. 13 April / June (1991) an appraisal of the Nigeria financial system said that the process of economic expansion might occur due to improvement in the financial system as potential in adequacy linked with the potential real investment and that as the financial constrain to development become acute in the 1980’s the banking sector traced up challenges by harnessing the available capital and saving in the system for potential investors.

The Nigeria banks lies their counterpart in Japan, Germany and India said by chief E.S.O Olisabu in a lecture delivered on 9^th February (1993). Organized lecture, can now play a major role in financial industry directly, not just saving it as in the past. This has implication for growth and development.

2.2     TYPES OF BANK

Basically there many types of Bank such as Central Bank, universal bank, mortgage bank, cooperative bank and merchant bank.

1)    Central Bank: It can be define as the only financial institution established and charge with the day to day management and control of nation monetary affairs, supervising and co-ordinating the banking and financial activities of the country.

According to Satera, the central bank “is the organs of government that undertake the major financial operation of the government and by its conduct of his operation by other means.

De lecole, in his word, a central bank is a bank which constitute the apex of the monetary and maving instructure of it country and should perform as best it can in the national economic interest following are function; central banks according to the De lecole accepted by the majority of economist.

                               i.            Regulator of currency: The central bank is the bank issue. It has the monopoly of note render money. It has it issue department which note and coin to universal bank.

                             ii.            Banker: Fiscal agent and adviser to the government. Central Bank every where act as banker, fiscal to the government, the central bank keep the deposit of the central and state government and make payment on behalf of government.

                          iii.            Custody and Management of foreign reserves: Central bank keeps and manages foreign exchange of country. It is an official reservoir of gold currencies.

(2) Universal Bank: It may be defined as an institution set up purposely to safe keeping of money, valuable good and document. It is also refer to retailer bank. Section 61 of decree no 25 of 1991 defined “banking business to mean the business of receiving deposit on current account, saving account or other similar account, paying or collecting cheques, drawn by or paid by customer; provision of financial or such other business as the government by other published in Gazette, designate as banking business.

The importance of universal bank can be best illustrated by a brief explanation of their major function.

a.     Pooling saving: Universal bank perform this very important function of all sector of the economy by making available the facilities for pooling saving through the acceptance of deposit from the public and then making these funds available for economically and socially desirable purpose.

b.    Payment Mechanism: One other important role performed by universal bank is the provision of payment mechanism or transfer of funds.

c.      Extension of credit: one of the primary function of universal bank is the extension of credit worily customers or borrower. A universal bank lend a certain percentage of cash lying in deposit on the higher interest rate than it pays on such deposit.

d.    Safe Keeping of Valuables: This function evaluate during the gold-smith-banker era when gold smith had the strong safe vault that were difficult to enter even by the best of burglars. This is one of the oldest functions of universal bank.

3.     Merchant Banks: “The concept merchant banking” has it origin in the pioneering activities of British merchant who later become acceptance houses. Merchant banking was pioneered in Nigeria by Philip Hill (Nigeria) Limited which universal operation in the country in 1960. It merged with Nigeria acceptance limited which later change it name to Nal Merchant bank.

Merchant bank can be defined as a financial institution that provide medium and long term loans, accept large deposit, bill and deal in stocks.

In Nigeria, section 61 decree no 25 of 1991 legally defines a merchant bank as “A bank whose business include receiving deposit on account, provision of finance, consulting and advisory service relating to corporate and investment matter, making to or managing investment on behalf of any person. The major function of merchant bank include:

i.       CORPORATE FINANCE: Corporate finance was often been as the glamorous side of merchant banking. It corporate finance department job is to advice to the expert on the rules and commercial law, accounting practice at home and abroad.

ii.     BANKING FUNCTION: The banking function of merchant bank is the most understandable function. This involve lending the bank’s money, issuing guarantee, arranging import and export credit needing temporary finance pending. The conclusion of finding arrangement.

iii.  Issuing house: Merchant bank act as houses at the Nigeria stock exchange.

4.     Mortgage Bank: It may be defined as a financial institution established for acceptance of fixed disposal member of the public with the aim of encouraging them to build their own houses by offering them longer time loan. According to decree No 9, (1997) the federal mortgage bank of Nigeria (FMBN) took over the asset and liability of Nigeria since inception in 1956.

The bank is charge with the responsibilities of supervising and controlling the mortgage institution in Nigeria providing guarantee for loan from private investment sources for building purpose and carrying our research activities and housing in rural and urban area. It is the apex financial institution for mortgage industries with asset and liabilities of the federal mortgage industries with asset and liabilities of the federal mortgage bank in Nigeria. The function of mortgage bank in Nigeria include:

i.       Provision of long-term credit facilities to other mortgage institution in the country at a rate and on term as may be determined by the board in accordance with government policy.

ii.     Encourage and promote the development of mortgage institution at state and national level.

5.     COOPERATIVE SOCIETY: Cooperative society is a firm of proprietors, traders or producer unite to foster their groups and individual business interests. Cooperative societies are business organization undertaken by people who are similar interest in West Africa. There are three main types of cooperative societies are found namely:

                                           i.      Producer co-operative society

                                         ii.      Consumer co-operative society

                                      iii.      Credit and theft co-operative society

Management / control General characteristic of co-operative societies

                            i.         Ownership: Any member or person with concern interest collectively own and bear risk.

                          ii.         Capital: Members is entitled to one share only. Any extra capital is raised from members through loans, only a small rate interest is on such loans.

                       iii.         Members have equal opportunities in the management, profit are share among member according to the society since this have equal visiting however usually some members are expected to see day to day running of the society.

                       iv.         Profit: Profit are share among member according to their purchasing power.

                          v.         They give loan the rural investor to facilitate rural development in the country

6.     Rural Banking: Federal environment as part of it effort in implementing its third national development plan introduced the rural banking scheme. The central bank of Nigeria due to the reluctant of some banks especially foreign bank in Nigeria to operate in rural area. The major objective of rural banking includes:

                         i.      Development of agricultural and agro-allied industry in the rural area with a view of achieving the nation objective a self sufficiency in food production.

                       ii.      Creating of credit through equity and loan for the uplifting of small scale industries.

                    iii.      Mobilization saving from the rural sector for the purpose of channeling them to profitable venture.

2.3     BANK SOURCES AND EMPLOYMENT FUNDS

          1. Central Bank in Nigeria source of food

          a. Capital subscribed and paid up (wholly held by the federal government)

          b. General reserve

          c. Currencies in circulation

          d. Deposit federal and state government, banking institution parastatals

2. Employment of Central banks in Nigeria: The central bank employed its state resources in 

a. Good bullion (value of a country currency)

b. Convertible currency, foreign bank securities.

c. Federal government securities for example Nigeria treasury bill, certificate fund stock

d. Advance granted by the federal government.

Universal bank sources of funds

Universal bank sources of funds offer their government owned bank

a.     The equity share capital subscribed by share holders

b.     Loan and short term advance from the government employment of universal bank resources. 

The bank employee and various resources of funds machinery and equipment.

c.      Invest in subsidiary companies

d.     Maintenance work capital

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