is an important activity of a Bank Loans advances
have long been accepted as the most important asset of the bank.
as loans/advances constitute the most profitable asset of the bank, it is also
the silkiest. Thus, when the asset in not properly managed, the bank may occur
losses, which may lead ultimately, lead to us distress. Therefore, this study
has evaluated the lending policies of commercial banks in Nigeria.
lending plugs a very important
role in the economic development of a country, it is not without its problems
especially if not properly managed. The incidence of poor credit analysis
coupled with corrupt practices of some lending official has put many commercial
banks in huge bad debt.
Nigeria Commercial banks therefore, need to carefully and periodically review
their lending policies, employ well trained staff and motivated credit
staff and enhance the effectiveness of their practices of the value of leans as the highest including
asset is to be fully realized while the danger of being the most risky asset is
to be minimized. This is Central to addressing the problem of bank distress in
of the Study
of the Study
of the Study
of the Study
of the Study
1.10 Definition of Term
of the Nigeria Banking financial Environment Pre-Sap and Sap Era
Management and Objective
and Characteristic of Bank Loan
Bank of Nigeria Prudential Guidelines
of Basic Lending Policy
and cause of problem Loans
2.10 Securities Available to Bankers
3.2 Restatement of research Question
3.3 Sources of Data
3.4 Nature of Data
3.5 Data Analysis Procedure
3.6 Limitation of the Methodology
ANALYSIS OF DATA AND INTERPRETATION OF RESULTS
4.2 Tabulation of Response into frequency Table
SUMMARY OF FINDINGS, RECOMMENDATION AND CONCLUSION
5.1 Summary of Findings
5.2 Implication of Findings and Recommendation
1.1 BACKGROUND OF THE STUDY
mechanism of lending dates to the Civilization of antiquity. The lending
operations of Nigeria commercial banks began with the Introduction of these
institutions in the 1890's. Commercial banks differ from many other financial
intermediaries, most of who specialize in the particular .loans or deposit
markets and in particular the commercial banks lending function is more diverse
and the criteria for such lending are more complex.
lending can be seen as an act of providing credit to customers for a definite
purpose with the banks receiving a commission known as interest for their
efforts. Lending is one of the most important and essential banking services of
commercial banks because interests from lending activities constitute a major
part of bank income.
time passes by, it has been realized that there is a very close relationship
between the lending activities of banks and economic growth and. development.
These have also led to many formal arguments as to the role and contribution of
commercial banking activities in the process of stimulating economic growth and
development. Since Nigeria is a developing economy, which seeks for rapid
economic growth and development, it provides adequate research materials
opportunity for students and scholars in this area of study.
basic principles behind lending activities include capital, collateral,
character, connection, condition capital, capacity. They are neither
independent nor evitable and it has to be followed rigidly but should serve
only as a guide. For effective performance of the bank lending to be
well-conceived and articulated, lending policies and guidelines have to be put
in place. These policies have to be guided by the current central Bank of
Nigeria prudential guidelines at any point in time.
lending is also restriction due to the constraints, which include factors such
as social-economic factors, competition, management policies and regulatory
is such a risky function of the banks, which the bank must ensure that before
lending out money, all necessary control measures to be put in place for the
customer or borrower to be able to repay bad the loan aspects of lending
regulations and sections of the law
that control the conduct of Banking business in Nigeria, which are Central Bank
of Nigeria Decree No 25 of 1991 and the Banks and other Financial Institutions
Decree (BoFID) No 25 of 1991 are also important in the study of bank lending in
Nigeria Commercial banks.
are various reasons why this study is based on the Appraisal lending policies
in commercial banks in Nigeria. Among these reasons is the fact that commercial
banks traditionally and will in the foreseeable future play a dominant role in
the Nigerian financial sector. This is because they represent the core of the
system. Furthermore, they account for a major part of the credit to the economy
rationale behind the study is because lending is important because it helps to
satisfy the credit needs of the society. It also contributes to the fulfillment
of the banks goals of profitability as the most profitable assets. It is a key
factor in creating deposits and developing other banker/customer relationship.
It is also the biggest single asset of banks and a main cause of the bank distress
via fraudulent lending and poor judgment lending to loss of funds, which do not
belong to banks. With the above reasons, lending policies of commercial banks
deserve a consistent and continuous study to ensure that lending practices do
not deviate from written policies.
1.2 STATEMENT OF THE PROBLEM
problem is recognized when doubt is raised, difficulty is created or
dissatisfaction occurs and a solution is needed. This problem must be stated
convincingly in such a way as not to leave the reader in any doubt about the
necessarily for finding solution to the problems.
the course of this research work, the statement of problem includes the
of lending policy management.
in applying sound macro-economic ideas to the nation's economic crisis.
of naira purchasing power.
of economic weapons to deal with the parallel legitimacy.
in lending policies regime, past and
provision of lending policy rate to the economy.
of economic and political stability.
of CBN policies and the commercial bank rate level.
appraisal of different lending rate systems or method before application.
1.3 OBJECTIVE OF THE STUDY
objective of this study is to appraise lending policies on commercial banks in
Nigeria. The study will investigate to what extent commercial banks lending
practices conform to written policies and how these activities can be utilized efficiently
in bringing about rapidly economic growth and development in Nigeria.
1.4 SIGNIFICANT OF THE STUDY
is no doubt, very important not only to the bank but also to its various
publics. The significance of bank lending/credit lies in its function, which
have been highlighted by various authors (Kwankwo; 1991, Koch; 1992, Baba
Ahmed; 1995) are as follows.
ensure creation and management of risk assets
the highest earning asset in the bank balance sheet.
enables the bank to satisfy its obligations of maximum profitability -to the
also enables the banks to satisfy the legal and other regulatory objectives of
the monetary authorities especially in terms of quality of loan and sectorial
allocation of credit.
is a key element in the creation and maintenance of depositor relationship. A
depositor will eventually look up to the bank to give loans towards achieving
some business objectives.
lending is a vehicle through which the bank management trust to satisfy the
credit needs to the community or the market it serves by so doing, the bank
contributes to the community development objectives.
1.5 RESEARCH QUESTION
from the expositions in the objective stated above, the following research
what extent does commercial bank conforms to lending policies in Nigeria?
are commercial banks perceptions to credit analysis?
what extent does commercial bank in Nigeria perfect financial securities?
commercial bank in Nigeria conforms to CBN rates and Regulation?
are commercial banks in Nigeria perception to a non-performing loan?
what extent has commercial banks in Nigeria contributed to the economic growth
/ development of the country?
1.6 RESEARCH HYPOTHESIS
Ho: Lending policies is not a necessary factor
for economic growth and development.
H1: Lending policies is a necessary factor for
economic growth and development.
Ho: Lending policies is not properly managed in a
H1: Lending policies is properly managed in a
Ho: Lending policies has not encouraged
industrialization in Nigeria.
H1: Lending policies has encouraged
industrialization in Nigeria.
1.7 METHODOLOGY OF THE STUDY
Widespread incidence of bad loan was one of the major factors that brought
about the distress of banking industry as it led to serious depletion of banks,
capital. The problem of bad loan is in turn due largely to defective banks
lending as staked by Umoh (1994). For instance, Nwankwo (1991) stated that bank
lending which narrowly defined consists of bank's loan and advances are a
critical activity of banks, Merchant or commercial. Infact, bank lending is of
a paramount importance, that is not only the banks highest earning assets, it
is also the most illegal and most risky. Thus, while lending contributes
significantly to bank's profitability, it is not only a critical factor. In the
banks liquidly problems and ultimate insolvency and collapse of the banks.
Furthermore, lending is very important being a key element in the creation and
maintenance of depositors' relationship as well as promoting commonly
development through provision of credits for various development projects.
any gain saying, bank credits have great impact on the economy of a nation in
many ways, for instance, it facilitates economic activities by providing funds
for the needy sector, it has implications on the monetary stability and
domestic inflation my rate and the financial stability of the economy. It also
helps to satisfy the credit needs of the society.
view of the foregoing importance of lending, it is essential that every bank
put in place lending policies and practices that will ensure "effective
banking" in the sense that lending should ensure the realization of the
banks objective and obligation of maximizing profitability shareholder wealth
liquidity and national development. In other words, the banks lending policies
and practices should guarantee maximum profit, minimum risk, adequate liquidity
and acceptable level of development in the community it serves.
1.8 SCOPE AND LIMITATION
research is an empirical study of "an appraisal of bank lending policies
in Nigeria commercial Banks", however, the study is not intended to cover
all commercial banks, rather the scope will be limited to sample of some of the
currently existing commercial banks.
while the study undertakes questionnaire survey of good number of commercial
banks, it relies heavily on the published available records.
it is believed that the finding will have effect to the country's commercial
banks in general. Like any research work, the study is not without limitations,
there is the problem of inadequate data. The concept of secrecy as practiced by
banks where all the information given is not 100% correct, also stand as a
1.9 ORGANIZATION OF THE STUDY
The study consists of five chapters, which are stated as follows.
CHAPTER ONE: Consists of the introduction aspect of
the study "An Appraisal of lending policies in commercial banks in
CHAPTER TWO: Consists of the theoretical Background
and literature review of the study.
CHAPTER THREE: This has to do with the methodology of
CHAPTER FOUR: Is the analysis of data and
interpretation of results.
CHAPTER FIVE: Consists of the summary of findings, recommendation and
1.10 DEFINITION OF TERMS
EVOLUTION: The term is employed with no
historical bases to mean the origin of lending policies in commercial Banks.
INFLATION: This can be described as an increase
in the price of money or a general rise in price level.
DEREGULATION OF CURRENCY: This is a general slacking of currency
rules and policies aimed at boosting trade activities.
FOREIGN EXCHANGE: Any foreign currency required to carry
out commercial and service exchange between countries