LENDING AND CREDIT ADMINISTRATION IN FIRST BANK OF NIGERIA PLC, OSOGBO MAIN BRANCH.

ABSTRACT

This research work looked into Lending and Credit Administration in Commercial Banks. It is mainly carried out to know the effective way in Lending and Credit Administration in Nigeria Bank with reference to Fist Bank of Nigeria Plc. This project is divided into five chapters; Chapter one consist of the study relating to First Bank Nigeria Plc. Etc. Chapter two; It consists the meaning of credit, evaluation of credit which commercial bank can use as a medium of lending money to their customers. Chapter three deals with research methodology, it introduces the sample size, the sources of information, method of collecting data, population of the study etc. Chapter four is the analysis and data collection and also testing hypothesis. Chapter five comprises of summary of the major findings, conclusion and recommendation of the study.

CHAPTER ONE

INTRODUCTION

1.1    Background of the Study

Essentially, banks originally emerged as deposit takers. They eventually metamorphosed into intermediates of funds and thereby started assuming credit risk. Credit, thus, became the business of banking, and the primary basis on which a bank’s quality and performance are judged.

Empirical studies of banking crises all over the world have shown that poor assets quality (predominantly loan) has been the most frequent factor in bank failures. Stuart (2005) emphasized that the spate of non-performing loans, is as high as 35%. Table 1 shows the ratio of non-performing credits (NPC), to total loans and advances (L and A) in Nigerian Commercial Banks between 1999 and 2009. Umoh (1994) traced the rising non-performing loans’ ratio in banks’ books to poor loan processing, undue interference in the loan granting process, inadequate or absence of loan collaterals, among other things, which are all linked with poor and ineffective credit administration.

In essence this paper focuses on the concept of credit, evaluation of credit and recovery processes.

The paper is divided into five sections, comprising the introduction, review of literature, evaluation and rating of credits, liquidity and credit management and finally, conclusion and recommendations.

1.2    Statement of the Problem

          Liquidity and credit management have implication on bank profitability and the authorities’ depositors and shareholders. It could trigger off mass cash withdrawal thus plunging the bank into deeper crisis. In analyzing the credit and liquidity management of First Bank of Nigeria Plc, I shall examine its assets quality, which includes its performing and non – performing loans. In addition efforts would be made to look into the bank’s capital adequacy ratio and its shocks of risk assets different measures of liquidity and solvency.

1.3    Research Hypothesis

          The following hypothesis is developed and tasked to ensure a more effective and result oriented research work.

Hi: the liquidity of Commercial banks could be determined efficiently from the effectiveness of its credit management.

Ho: the liquidity of a universal bank could not be determined efficiently from the effectiveness of its credit management.

Hi: lending and investment operations of Commercial banks depend widely and extensively on its liquidity.

Ho: Lending and investment operations of universal bank does not depend widely and extensively on its liquidity.

1.4    The Purpose of the Study

         A bank is considered liquid it has sufficient cash and other liquid assets in its portfolio together with the ability to raise fund quickly from other sources to enable it meet its payment obligations and financial commitment in a timely manner, therefore the main purpose is to highlight how liquidity and credit management in this Nigeria Banking Industry is being discovered and the extent to which First Bank of Nigeria Plc is guided in the management of its lending functions.

1.5    Scope or Delimitation of the Study

          Commercial banks act as intermediaries by collecting deposits and paying interest on them and granting loan charging the borrowers interest at the higher rate. Improving these services to borrowers and the depositors the main goal of the bank is to make profit. Apart from granting loans bank also generate profit on investments. In order to maximize their earnings every bank attempts to structure its assets and liabilities such a manner as to yield the highest returns, subject to some constraints.

          A bank is considered liquid if it has sufficient cash and other liquid assets in its portfolio, together with the ability to raise fund quickly from other sources to enable. It meets its payment obligation and financial commitments in a timely manner. This study therefore aims to cover the extent to which First Bank of Nigeria, Plc is guided by the above enumerated theories in t he management of it lending functions and know now it has been able to survive over years in spite of the global liquidity problems to supplement his effort the lending practices and procedure of the bank will also be evaluated.

1.6    Limitations of the Study

          The research was faced with many problems in the course of collecting information relating to this project, as many staff is not willing to divulge related information. The directions at various departments dealing with credit management and liquidity in first bank refuse to disclose detail information relating to liquidity and credit management. Access to departmental ledger account was denied through verbal information relating to questions, asked was given another limitation was the inability to cover various branches of Nigerian banks, which are throughout the federation. This was mainly due to the financial and logistical difficulties that such exercise of this would entail.

The Significance Of The Study

Liquidity is defined in its broadest sense as the ability to meet cash quickly and at a reasonable cost. Credit management is the way universal bank, lend money out to borrowers. However, this study tends to reveal the problems that one involved in the liquidity is essentially that of having sufficient fund to meet at all times this demand of money that may be made on a bank. Bank must be maintain adequate liquidity in order to provided for and line in deposit for and other liabilities, to satisfy unforeseen increased investment in particular desirable earning assets when such opportunities arises the liquidity requirement of any bank out of the bank. It is the responsibility of management to measure these requirements and to anticipate them on a current and continuous manner.