Post-reform Appraisal of Commercial Bank Investment and Lending Activities in Nigeria
CHAPTER ONE
Objectives Of The Study
Commercial banks promote economic growth and development through their lending and investment activities.
This study intends to review the extent to which the Nigerian Commercial banks have contributed to the economic growth through lending and investment.
- To ascertain how effective their lending activities has been in regards to reconciling the dual objective.
- To investigate the lending procedure of Afrik Bank and Diamond Bank and then identify the nature of investment they undertake.
- To review the extent to which deposit nature affects lending activities in Diamond and Afrik Bank.
- To ascertain the effect of monetary policy on banks’ lending ability.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
The origin determinants, trend, importance and implications of bank recapitalizations have been scantly discussed in the literature. Soyinbo and Adekanye (1992) and Adams (2003), traced recapitalization to take its roots from bank failures. According to them, most banks in Nigeria failed as a result of inadequate capital base, mismanagement of funds, overtrading, lack of regulation and control, and unfair competition from the foreign banks. Thus, recapitalization is one of the banking reforms to tackle these problems.
According to Omoruyi (1991), recapitalization appears to be the main driving force at banks’ reforms. It focuses mainly on reconstructing, rebranding and refurbishing the banking system to accommodate the challenges of bank liquidation.
Obviously, adequate capital base is very crucial to the success of any bank. Apart from its multiplier effect on the economy as a whole, it acts as a buffer and security for banks. As Spong (1990) puts it, “Commercial Banks must have enough capital to provide a cushion for absorbing possible loan losses, funds for its internal needs and expansion and added security for depositors. Adequate capital increases the confidence and financial state of stockholders. Bank regulators view it as an important element in holding government banking risks to an acceptable level.
Demirguc-Kunt and Levine (2003) argued that recapitalization drives bank consolidation (mergers and acquisitions) so that increased concentration goes hand-in- hand with efficient improvements, Boyd and Runkle (1993), Sulaiman (2004) and Imala (2005) buttressed this argument. They stressed further that consolidated banking system enhances profit efficiency and lower bank fragility. More importantly, high profits arising from this provides a buffer against adverse shocks and increases the franchise value of the banks.
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 FOUR
DATA PRESENTATION AND ANALYSIS
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of hundred and twenty (120) questionnaires were administered to respondents of which 100 were returned. The analysis of this study is based on the number returned.
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS:
Introduction
This chapter summarizes the findings on the post-reform appraisal of commercial bank investment and lending activities in Nigeria, Diamond bank plc and Afribank Plc as case study. The chapter consists of summary of the study, conclusions, and recommendations.
Summary of the Study
In this study, our focus was on the post-reform appraisal of commercial bank investment and lending activities in Nigeria, as case study. The study is was specifically focused on Commercial banks as it promotes economic growth and development through their lending and investment activities. This study intends to review the extent to which the Nigerian Commercial banks have contributed to the economic growth through lending and investment. It was narrowed down the following specific objectives; ascertaining how effective their lending activities has been in regards to reconciling the dual objective; To investigate the lending procedure of Afrik Bank and Diamond Bank and then identify the nature of investment they undertake. To review the extent to whDiamond bank plc and Afribank Plcich deposit nature affects lending activities in Diamond and Afrik Bank and ascertaining the effect of monetary policy on banks’ lending ability.
The study adopted the survey research design and randomly enrolled participants in the study. A total of 100 responses were validated from the enrolled participants where all respondent are staff of Diamond bank plc and Afribank Plc, Enugu State.
Conclusions
With respect to the analysis and the findings of this study, the following conclusions emerged;
The work concluded that bank lending and investment are the highest earning assets and contributes to the profitability of bank and practical recommendations were made based on the findings such as character, integrity, policy and ability of the borrower should be the most important factor in lending and not collateral provided and that there is need for standard and computerized national identification card for Nigerian citizenry.
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