THE IMPACT OF COMMERCIAL BANK LENDING ON THE ECONOMIC DEVELOPMENT OF NIGERIA

CHAPTER ONE

INTRODUCTION

1.1              STATEMENT OF THE PROBLEM AND PURPOSE OF THE STUDY

Lending is the action of lending money by bank it is also to allow somebody to use something temporarily on the understanding that it will be retuned or major way of investing balk funds. While impact is strong impetration or effect on somebody.

This research work is aimed at to find the effect of commercial bank lending on economic development of Nigeria.

• Over lending may lead to misappropriation of fund and consequently difficulty in repayment
• Few Nigeria are interest in utilizing commercial bank credit facilities and consequently, poor banking habit among the populace
• Misuse and mis-management of facilities so, the lending should ascertain whether the requisition is in the preferred or less preferred sectors of the economy. The bank has to ensure that the lending is a profitable one before embarking on it

Purpose of the study

The purpose of this research work is to analyze, empirically, the impact of commercial bank lending on the economic development of Nigeria and in light of the funding, offer suggestion on how the bank lending problem could be solved.

1.2              RATIONALE OF THE STUDY

This study if successful conducted and the recommendation can change the country we reduce lending, this can systematically attract the much needed condition to reduce poverty as regards lending in banking sector in Nigeria.

1.3              SIGNIFICANCE OF THE STUDY

The significance of the study is to achieve a greater success in contributing the little researcher can. There is growing recognition that the banking industry especially the commercial bank must play a greater role in economic development of this country.

Generally, every economic including those of the developed countries of the world need consent surveillance which can only be attained by studying the component of such economy. Any sector overlooked will on a long term view constitute a drop of ink that colour an ocean of water.

In the light of the above, this study will go a long way in bringing to light the problem and prospect of Nigeria economy as an exponent of commercial bank lending; where as the problem will on being identified become half way solved and the prospect one being recognized will be encouraged to be improved on.

Many respondent were reluctant at giving information needed since this relates to finance, people adopt continuous approaches while giving or answering question to that affect. Similarly, the researcher being students were limited to collecting data through consultation to the library, journals, magazines, newspapers and enquires from nearby bank operating within.

Therefore, the researchers were completed to base their assessment and analysis on material information in relation to the needs of the researcher in achieving their objectives.

1.4              BACKGROUND OF THE STUDY

This study is expected to improve Nigeria economy and national development. Lending has steadily increase in Nigeria in many years ago.

According to Dr. J. Orjih (1996) Element of banking, the saving mobilized by bank are invested in various way. One of the major ways of investing bank fund is by lending. The money which the bank collects from their customer are held by beak as debtors and the money is repayable on demand. As a result of the debtors status of the banks, they exercise prudence in handling the fund of depositors. They observe some principle are referred as cannon of bank lending which are basic factors which a banker should put into consideration before granting loan and overdraft to customers. They includes

Integrity and reliability of the customer

The customer to whom loan should be granted must be one who is very reliable and has to be of unquestionable integrity. The lending bank has to request for information about the customer to guide him in making decision on the lending proposal.

Purpose of the loan

The bank should ascertain the purpose of the loan this is important because the bank has to follow some specific internal and external operational policy guidelines while lending.

Security

This factor is considered last after the customer has passed other test. Security is what the bank will fall back to if all other consideration fail to work according to expectation and repayment becomes doubtful.

DEFINITION OF TERMS

Theses are some of definition of terms used in this research work. They include:

Commercial bank

These are mainly large retail banks that engage mainly in borrowing (including deposit acceptance and lending activities).

Lending

Lending is the way of investing bank funds

Fund

This is to extend a debt over a long period at a fixed rate of interest

Economic development

This is a process whereby a country real capital income increases over a substantial period of item due to increase in various productivity of various sector so economy.

Mismanagement

This is to manage something badly or wrongly. For example: mismanagement of natural resource / the economy

Profitable

This is a situation of bringing profit or advantage or to make a profitable investment.