Impact of Commercial Bank on Economic Growth and Development of the Country
CHAPTER ONE
OBJECTIVES OF THE STUDY
The objectives of this research work are tacitly stated as follows.
- -To determine the contribution of commercial banks towards a positive economic growth and wealth creation.
- -To examine ways in which the commercial banks in Nigeria can be made to play better roles towards fund mobilization for economic growth and development.
- -To analyse the constraints and short comings facing commercial banks in Nigeria towards fund mobilization for economic growth and development.
- -To determine and test the effects of some relevant economic variable and factors on the real gross domestic product(GDP) of Nigeria.
CHAPTER TWO
REVIEWED OF RELATED LITERATURE
Introduction
Commercial banks are established to execute banking operation, ensure movement of funds from surplus economic unit to deficit economic unit at predetermined interest rates (influenced by prevalent market rate as well as the monetary policy rate of the Central Bank of Nigeria), and maximize returns to their shareholders. According to CBN’s 2022 statistical bulletin, the total credit facilities of commercial banks in 2017 was N14,662.14 billion as against the total deposit money bank’s credit to the economy of N6,443.09 billion in 2006. The value fell in 2018 to N13,965.28 billion before rising subsequently from 2019 to 2021 from N15,995.85 billion through N18,448.66 billion in 2020 to N22,115.59 billion in 2021. Achieving total economic development is the key to the sustainable development of every nation. Thus, ensuring a comfortable state, productionoriented policies, prompt infrastructural facilitation, and improving the standard of living of all citizens is the priority of every government. Nafziger refers to “economic development as economic growth followed by changes in distribution output, and economic structure. It is the improvement in the general economic wellbeing and standard of living of the citizen motivated by job creation, poverty reduction, increased national income, increased economic growth, increased education and labor-force skills, and supportive innovative technological”. According to Schumpeter, financial intermediation via banking system is essential for achievement of economic development. This is due to the functions of banks in savings mobilization and allocation functions, channeling of such funds to perfect productivity, improves technical changes, and spur the pace of economic growth. Different theories prevail on bank-credit and economic development in the literature. However, the study considers the finance-led growth theory, which premises that financial sector development is an engaging factor that provide mechanism that serve as stimulus for economic growth. The development of the financial sector will aid businesses, corporate organizations, and government to mobilize needed fund to achieve growth and development. Mohd-Nor supported this theory by emphasizing the importance of efficiently functioning financial institutions on improving economic development. This position further comprehends Bagehot, Schumpeter, Goldsmith McKinnon, and Shaw despite contradictory contention from Robinsonand Stern (2019) among others that economic development is not determined by financial sector development. These opposing economists therefore see financial sector development to react to economic development and not the other way around. However, the majority of empirical works on the finance-growth nexus has upheld and assert that financial sector development significantly impacts growth and development of the economy.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain impact of commercial bank on economic growth and development of the Country. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing a impact of commercial bank on economic growth and development of the Country
Summary
This study was on impact of commercial bank on economic growth and development of the Country. Three objectives were raised which included: To determine the contribution of commercial banks towards a positive economic growth and wealth creation, to examine ways in which the commercial banks in Nigeria can be made to play better roles towards fund mobilization for economic growth and development, to analyse the constraints and short comings facing commercial banks in Nigeria towards fund mobilization for economic growth and development and to determine and test the effects of some relevant economic variable and factors on the real gross domestic product(GDP) of Nigeria. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from selected banks in Uyo, Akwa Ibom state. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
In conclusion, recognizing the critical role of commercial banks as drivers of economic growth and development is essential for Nigeria’s sustainable development agenda. Leveraging the capabilities of commercial banks requires coordinated efforts to maximize their positive impact on economic growth, job creation, poverty reduction, and overall prosperity in Nigeria.
The findings of this study provide valuable insights for policymakers, regulators, commercial banks, and other stakeholders seeking to harness the potential of commercial banks for inclusive and sustainable economic development in Nigeria. By prioritizing financial sector reforms, promoting financial inclusion, and enhancing the resilience of the banking sector, Nigeria can unleash the transformative power of commercial banks to propel its economic growth and development aspirations.
Recommendation
Based on the findings of this study on the impact of commercial banks on economic growth and development in Nigeria, the following recommendations are proposed to enhance the positive contribution of commercial banks to the Nigerian economy:
- Policymakers should continue efforts to promote financial inclusion by implementing policies and initiatives that improve access to banking services, especially in rural and underserved areas. This could involve expanding the reach of banking infrastructure, incentivizing the establishment of bank branches in remote areas, and promoting the use of digital financial services.
- Regulators should strengthen oversight of the banking sector to ensure financial stability and consumer protection. This may include implementing robust prudential regulations, enhancing supervision of banks’ risk management practices, and enforcing compliance with anti-money laundering and counter-terrorism financing regulations.
- Commercial banks should increase lending to Small and Medium Enterprises (SMEs) by developing specialized products and services tailored to their needs. This could involve providing access to finance through targeted loan programs, offering financial literacy and capacity-building support, and fostering partnerships with government agencies and development finance institutions to de-risk SME lending.
- Banks should strengthen credit risk management practices to mitigate the risk of loan defaults and non-performing loans. This may include improving credit assessment processes, adopting advanced credit scoring models, and implementing effective loan monitoring and recovery mechanisms.
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