The Role of Commercial Banks in Industrial Development of Nigeria (a Case Study of Union Bank Plc Bauchi)
Chapter One
OBJECTIVE OF THE STUDY
The objectives of the study are as follows
(i) To identify the problems facing the industrialist as regard to finance.
(ii) To find out how industrialists obtain their loans from the banks.
(iii) To determine the problems facing them in paying back the loan.
(iv) To ascertain effect default in loan repayment has in the banking business.
(v) To identify the best solution in handling the problem.
(vi) To identify whether Commercial Bank charges high, moderate to industrialists.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Commercial Bank Credit and Economic Development
Essang and Olajide (1974:21) define a commercial bank as a monetary institution owned by either government or private businessmen for the purpose of profit. In pursuit of the profit, the bank undertakes a number of functions. One of these functions is the acceptance of deposits from the public, there deposit are in turn given as credit to trade industry, agriculture etc, which lead to more production and employment (Stephen and Osagie, 1985; Ekezie, 1997; Ijaiya and Abudulraheem, 2000). To Aryeety (1996) credit is the amount extended out with a future date of payment. The NDIC prudential guide lines of 1990 however, provides a wider of credit, and this includes aggregate of all loans, advances, overdrafts, commercial papers, Banker acceptance, bills discounted. Leases and guarantee (NDIC, 1990). Muftau (2003), on the other hand, defines agricultural credit granted to farm and ranch operators to assist in planting and harvesting crops to support the feeding and care of livestock. Credit to agricultural sector could take the form of an overdraft, short-term, medium- term or long-term depending on the purpose and gestation period of the project. Such credits granted to framers to purchase inputs are paid directly to the suppliers who must furnish the bank with evidence of delivery. This is done to avert diversion of fund, which is common with Nigeria Farmers. Discussing the importance of credit to agricultural sector, Nzotta (1999) posited that it reactivates, expand or modernizes all types of agricultural enterprise which are considered economically feasible and desirable to the achievement of stated economic goals of self-sufficiency in agricultural production. While Qureshi, et al (1996) reported that such credit removes financial constraints faced by farmer, as it provides incentives to adopt new technologies that would otherwise be more slowly accepted. Thus, the availability of credit enables farmers to switch quickly to new technologies which enable the achievement of a rapid productivity and growth. According to Ijere (1996) “Credit can be considered from its ability to energize or motivate other factors of production. For example, it can make the latent, potential or under-used capacities functional. He further said that credit act as a catalyst that activates the engine of growth enabling it to mobilize its inherent potentials and to advance in the planned or expected direction. It follows, therefore, that the greater the influx of capital, the more the propensity of the economy to move in its given path. As summarized by Fosu (1992) Amin (1996), Umoh (2003) “Credit thus constitutes the power or key to unlock latent talents, abilities, vision and opportunities, which is turn act as the mover of economic development. Contributing to the argument about Commercial bank Credit and agricultural output, wells (1970) confirms that commercial bank credit contributions to economic development by enhancing production and productivity and thus higher income and better quality life for people. Agricultural credit in Nigeria dates back to the 1930s but organized credit to farmers did not start until 1972 when the Nigeria Agricultural and Cooperative Bank (NACB) were established (Ajakaiye, 1984). He further said that agriculture is the largest sector of Nigerian economy, though its contribution to the Gross Domestic Product (GDP) has declined from 67% in 1950 to 18% in 1980. According to the Federal Ministry of agriculture publication (1980), 58% of farming-related borrowings was obtained from family and friends; 24% from professional private money lenders, 15% from merchant and only 3% from commercial banks and other institutional sources. As Garba (2000) noted, they are grossly, inadequate and unsatisfactory for the credit needs of the farmers. Thus, there is the need for lager credit sources. The importance of bank credits to agricultural production is well established in many countries. In the study by Sohail (1991) on the relationship between bank credits and agricultural out puts in Pakistan, they found out that a statistical significant relationship existed between bank credit in Pakistan and the agricultural outputs. Moreover, Yaron (1997) also argued that directed credit programmes were associated with the adoption of modern technologies such as green-houses in Morocco and tube wells in North West Bangladesh and these innovations were associated with increase in production gains in the agricultural sector. May (1970) reported that countries that emphasized the agricultural sector ended up with faster industrial growth than those that focused on industries alone? Hence, agricultural sector may therefore be the faster road to industrialization. Emmanuel (2008) carried out a study on the impact of macroeconomics environment on agricultural sector growth in Nigeria. The macroeconomic policies included in the model are: credits to the agricultural sector, nominal interest rates on the loan, exchange rate, world prices of agricultural produce, foreign private invest-government expenditure and inflation rate. Using multiple regression analytical technique (ordinary least square), he discovered that nominal interest rate is positively related to the index of agricultural production. This implies that at higher nominal interest rate, more credit facilities are made available to the operators of the Nigerian agricultural sector, but at lower nominal interest rate, credit facilities are no more widely available. The index of agricultural output is also positively related to world prices of Nigeria major agricultural commodities. This implies that better world prices enhance agricultural output growth in Nigeria. Similarly, the index of agricultural production was positively related to government expenditure on agricultural. Moreover, it was discovered that the index of agricultural production is negatively related to the level of inflation, implying that as inflation becomes high, and the index of agricultural production declines. He thus recommends that macroeconomic policies that enhance favourable exchange rates, make agricultural credit widely available at low interest rate, reduce the rate of inflation, increase foreign private investment in agriculture, would not fortify government investment in the sector but would be invaluable in supporting agricultural output growth in Nigeria. Johnson (1975) studied Japanese industrial development and concluded that without the prior increase in agricultural productivity, the financing of Japanese industrial development would not have been possible. He also compared USSR to Japan in terms of their decision on industry and agriculture. During the decade following 1929, the USSR concentrated its attention upon industrialization and fought its peasants instead of teaching them how to increase output per acre. This led to tremendous price inflation, but during the 30 years preceding World War 1, the Japanese were more sensible. Overall, their output increased just as rapidly as that of industry and agriculture. Thus, supply of savings from agriculture was the critical factor in Japans rapid industrialization and this is often understood as the main reason why she succeeded in her supplying herself the necessary investment funds in the early stages of industrialization (Binswanger, 1989). The experience of Japan shows that appropriate expenditure by government (on agricultural research, extension credit and roads) can have spectacular effects on the output of peasants and that agricultural instead of acting as a brake on the rest of the economy, can be turned into a leader generating demand for other sectors (manufacturing sector), and also providing them with capital.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to the role of commercial banks in industrial development of Nigeria (A case study of Union bank plc Bauchi).
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information on the role of commercial banks in industrial development of Nigeria (A case study of Union bank plc Bauchi). 200 staff of selected Union bank plc Bauchi was selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
DATA ANALYSIS
The data collected from the respondents were analyzed in tabular form with simple percentage for easy understanding.
A total of 133 (one hundred and thirty three) questionnaires were distributed and 133 questionnaires were returned.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain The role of commercial banks in industrial development of Nigeria (A case study of Union bank plc Bauchi). 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 the challenges of commercial banks in industrial development of Nigeria
Summary
This study was on The role of commercial banks in industrial development of Nigeria (A case study of Union bank plc Bauchi). Four objectives were raised which included: To identify the problems facing the industrialist as regard to finance, to find out how industrialists obtain their loans from the banks, to determine the problems facing them in paying back the loan, to ascertain effect default in loan repayment has in the banking business, to identify the best solution in handling the problem and to identify whether Commercial Bank charges high, moderate to industrialists. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of selected Union bank plc, Bauchi. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made HRMS, accountants, customer care officers and marketers were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
The study found a positive and significant role of commercial banks in industrial development of Nigeria (A case study of Union bank plc Bauchi. Specifically, the study found out that, inflation rate and interest rate (cost of capital) negatively affects manufacturing sector output. While loans and advances and money supply positively affects manufacturing sector output.
Recommendation
It is therefore recommended that, government through the Central Bank of Nigeria should pursue policies that lower interest rate (cost of capital) and reduce inflation on one hand and increase money supply as well as loans and advances to the investors in order to increase the output of the manufacturing sector which is capable of stimulating economic growth.
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