THE EFFECT OF COMMERCIAL BANK LENDING ON THE GROWTH OF MANUFACTURING SECTOR IN NIGERIA

CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND

The financial sector, especially the Commercial Bank is very important in the smooth functioning of the manufacturing sub-sector of the economic.
Lending which may be on short or medium basis is one of the services that Commercial banks do grant loans and advances to individuals, business organizations as well as manufacturing sub-sector in order to enable them carry on investment and development activity as a means of aiding their growth in particular or contributing towards the economic growth of the country in general/ Felicia, 2011.
Commercial banks plays crucial role in mobilization and financial intermediation to deficit economic unit.
Consequently, these roles make them an important phenomenon in economic growth and development.
In performing these roles, it must be realized that banks have the potential, scope and prospects for mobilizing financial resources and allocating them to manufacturing sector and in return increase productivity therefore, irrespective of the sources of the generation of income on the economic policy of the country commercial banks would be interested in giving out loans and advances to their customers bearing in mind the three principle guiding their operations which are profitability, liquidity and solvency (Adolphus 2011).
However, the commercial banks decision to lead out money are influence by a lot of factors such as the prevailing interest rate, the volume of deposits, the level of their domestic and foreign investment, banks liquidity ratio prestige and public recognition to menton but a few. Regardless of the fact that the manufacturing sub-sector is the life wire of economy of a country development.
This study discovered that these is a high bank lending rate to the manufacturing sub-sector of the economy of which these is not positive relationship between high cost of funds and capacity utilization.
It is also discovered that the firms due to high bank lending and cost of maintenance has attributed to low productivity.
Okporobie (1989) observes that Nigeria manufacturing sub-sector continue to decline despite the priority given to the sector. Available data shows that performance of commercial banks against this directive has been disappointing. He also observed that without the development of manufacturing sub-sector, the nations quest for industrialization will certainly remain at stake.

1.2 STATEMENT OF THE PROBLEM

The problem of bank lending to manufacturing sub-sector may not necessary be as a result of insufficient funds at the disposal of commercial bank. It has been discovered that the sector still suffers some problems and major constraints among which are:
Insufficient funds channel to the manufacturing industries in their for bank lending. Information gaps as to the range of commercial banks and scope of services available in the financial sector. High bank lending /inflated interest rate on the manufacturing sub-sector.
The volume of deposit. Banks liquidity ratio

1.3 OBJECTIVES OF THE STUDY

1. To examine the effect of commercial bank lending on the growth of manufacturing sub-sector in Nigeria
2. To evaluate the impact of loans disbursed by the commercial banks to the manufacturing sector
3. To examine the extent to which commercial bank loans has gone in boasting the manufacturing productivity in Nigeria
4. To access the extent to which manufacturing sector performance enhances employment and economic productivity
5. To understand the role of commercial bank lending on the growth of manufacturing sub-sector in Nigeria

1.4 RESEARCH QUESTION

These are specific question/investigation which is asked in order for the researched to know the problem encountered by the money deposit banks and the Nigeria manufacturing sub-sector, This proffer solution to the problems.
1. Do the commercial bank lending have any significant effect on the growth of manufacturing sub-sector in Nigeria.
2. Has the loan disbursed by the commercial bank made any impact to the manufacturing sector.
3. Has the manufacturing productivity been boasted by the loans from the commercial banks.
4. Do the money deposit banks play any role on the growth of manufacturing sector in Nigeria
5. Do the loans/advance granted manufacturing sector impact on employment
6. Has the loans received by manufacturing industry enhance productivity and growth.

1.5 RESEARCH HYPOTHESIS

Ho: Commercial bank lending has a significant sector
Hi: Commercial bank lending has no significant effect on the performance of the manufacturing sector. T here is no significant relationship between commercial banks loans and advance and capacity utilized of the manufacturing sector.

1.6 SIGNIFICANT OF THE STUDY

The study will high light the relevance or the role of commercial bank lending on the performance of manufacturing sector in Nigeria.
It will give information on the possible areas for improvement.
Furthermore, the study will help commercial bank to access and appraise their role in their lending to the manufacturing sector in Nigeria.
The significance of this study could be seen from the effective mobilization of loans/advances to the manufacturing sector by commercial bank.
It would be necessary for the banking sector by commercial bank.
It would be necessary for the banking sector vis – a vis the commercial bank to be adequately capitalized so as to play its role well in financial intermediation. It will equally serve as a guideline to future work in the near future. This research will contribute to knowledge and act as the hero for further research.

1.7 THE SCOPE AND LIMTATION OF THE STUDY

This study looks into the effect of commercial bank lending on the growth of the manufacturing sector in Nigeria over the years from 2005 – 2010. This was when the policy of consolidation was introduced by Charles Soludo the enhance or increase the lending rate of commercial banks to the manufacturing sectors.
The limitation of this research is generally anticipated to include these of data collection and inaccessibility to relevant data for analysis and execution of the problems.
There are also the problems of time constraint, communication mans and finance which may set limits to analysis of the data to be collected.
However, in the process of carrying out the study, measures and available opportunities will be explored to enhance the success of this research work.
Also change in technology may affect the accuracy of the results generated.

1.8 DEFINITION OF TERMS

Banking Lending: Banking lending is a process thereby money or fund is been given to someone or an organization to be paid tack in agreed time. It is the rate in which the commercial banks lend out money to the public to help the economic and manufacturing sector to meet up their objectives
Economic Growth: It is the increase in the amount of the goods and services produced by an economy over time. It is conventional measured as the percent rate of increase in real gross domestic produce (GDP). It is an increase in an economic variable concerned may be real or normal and may be measured in absolute or in per capital terms increase in the value of an asset.
Manufacturing Sector: This refers to those industries which involves in the manufacturing and processing of items and indulge in either creation of new commodity or in value addition. The manufacturing sector accounts for a significant shares of the industrial sector in developed countries. The final product can either served as finished goods for sale to customers or as intermediate goods used in the production process. It is about the production of goods and services by initialized methods to produce standard goods.
Commercial Bank: These are financial institutions other than monetary authorities that have the liabilities in the form of deposit payable on demand and transferable by cheque (Bangko sentral Pliipinas). It’s a bank that deals with the general public, ccepting deposit from and making loans to large numbers of house hold and small firms.
Economy: Economy is the wealth and resources of a country or region in terms of the production and consumption of goods and services. It is a large set of interrelated economic production and consumption activities which aid in deterring how scarce resources are allocated.
Effect: An effect is a change that is a reject or consequence of an action or other cause. It is something brought about by a cause or agent. It is the power to produce an outcome or achieve a result.
Loans/Advances: This is a sum of money advance to business enterprise that must be repaid with interest at some point in the future.
Employment: This is a work which is done in order to make money. It is a state of being employed.
Capital Adequacy: This is also called regulatory capital or capital requirement. It is the amount of capital a bank or other financial institution has to hold a required by its financial regulatory. This is usually expressed as a capital adequacy ratio of equity that must be held a percentage of risk weighed assets.
Performance: This means to carry out a task or duty. It means to work or function well in a specific purpose.