AN EMPIRICAL ANALYSIS OF THE IMPACT OF DEPOSIT MONEY BANK ON THE MANUFACTURING SECTOR IN NIGERIA (1980-2017)

 CHAPTER ONE

BACKGROUND OF THE STUDY 

Manufacturing  is the capacity to produce goods with labour, materials and inputs produced by others. Simple forms of manufacturing have characterized all organised societies but the application of steam power to production in Britain in the late eighteenth and early nineteenth centuries significantly increased the capacity for production, and since this first industrial revolution, economic progress has in many peoples minds  been linked with the capacity to produce and trade in  manufactured products.

Manufactures now dominate world trade and typically are around 80 percent of world exports  in any year with developing accounting for nearly one- third of this. In the bulk of developing countries, outside the LDCs and the oil rich states, manufacturers account for a majority of export revenue. In terms of regional distribution, the  bulk  of  developing country manufactured exports come from East  Asia (70 percent in 2005) with approximately 40 percent of  those from china.

Export  data are also available by product category gives developing country and regional shares is manufactured  exports by selected types  of product. It  shows developing countries as a group taking more than 50 percent of world exports in the labour intensive, simple technology categories of textiles, footwear and leather 

The banking sector in Nigeria in 2006 financial year was oligopolistic in structure as only ten banks 11.1%  of the 90 operation accounted for 54.5% of total assets, 52.4% of total deposit  liabilities and 46.1% of  total  deposit liabilities of deposit money bank as at 31/12/2006 amounted  to #2,705 billion. Whilst aggregate  credit to the domestic economy amounted to #1,302.2 billion. In 2006, sectoral  allocation of deposit money banks credit continued to favour  the less productive sector of the economy as only 40.9% of the total credit went  to agriculture, solid minerals, exports and manufacturing down from 46.2%  in 2001.

In the year 2007, the general performance of banks was not significantly different from what happened in the previous year. Ten  banks out of the 89 in operations accounted for  55.3% of  total credit. At  3,047.9 billion, the aggregate assets, the level as at Dec 31 2006.

The manufacturing sector or service enterprise with capital investment exceeding   #950,000 in machinery and equipment. The importance of manufacturing  sector in the promotion of  economic development  has always been at the front developing  strategies.  More so, Nigeria  like  other developing  nations adopted the use of import substitution policy as a means of manufacturing. This aims of producing domestic consumer  goods in those industries.

Major functions of Nigeria deposit money banks

1.     Acceptance and safe keeping of deposits

2.     Granting credit facilities to consumers

3.     Transferring funds on the instructions to  customers

4.     Management of customers investments

5.     Acting as executors and trustees of “wills”

6.     Providing facilities for safe-keeping of important documents and other valuables.

7.     Providing foreign exchange facilities to travellers

8.     Advising customers on insurance matters

9.     Project finance

10.     Providing financial advisory services to customers

11.     Packaging real estate transactions.

Statement of problem

The nation had enunciated  import substitution and processing of raw materials policies in the past. These  had made  the sector to be dependent on the industrialised nation of the world  for capital equipment and contributed in no small way to our present economic predicament. The sector is currently heavily dependent  on importation of raw material and spare parts. This  has put pressure on the countries foreign exchange earnings.

Manufacturing sector like any other business cannot be carried on extensively  unless funds are available for maintenance and procurement of equipment and necessary inputs. on the other hand deposit money banks accused the manufacturer of loan given to them. Thereby not bringing high degree of loss in their banking activities.

Unfaithful and dishonest to them are being critized sequels  to this manufacturer. moreover the  small scale  business can hardly be over stressed, most manufacturer in Nigeria economy have been denied of attention report assessment or could  it be that the deposit money bank are not playing their role in promoting manufacturing?

Adequate funding is a requirement  for running  a successful business and it is certainly one of the major reasons for the poor performance of most companies in the Nigeria manufacturing sector. This is because banks are  wary of investing their distressed sector that is hemmed in by a hostile business environment is not encouraging. Sad enough, the evolving  scenario these  days, at least before the crash in the capital market, is that the capitalists and banks prefer  to advance facilities to clients to enable them invest in securities market. Such clients  would in turn  go to bad”  and watch their investments multiply over night without doing anything rather than too invest such money in any SME (small and medium scale enterprise) or so called “risky” business. This thinking of the capitalists and the banks further weakened  the real sector thereby denying the manufacturing sector the opportunity to generate employment. 

OBJECTIVE OF THE STUDY

1.     To find out  if inadequate credits from the deposit money banks to the manufacturing sector has contributed to the reduction in the productivity of the manufacturing sector.

2.     To  determine how the unwillingness of the deposit money bank to give loans to the manufacturing sector has affected. 

3.     Also to look into the problems that militates against the manufacturing sector apart from finance in Nigeria and the recommendation where necessary.

HYPOTHESIS OF THE STUDY

         The following hypothesis are tested on this study 

Ho: The manufacturing sector contribution has no significant impact to lending in the deposit money bank.

Ho: Deposit money bank interest rate has no significance effect on manufacturing development in Nigeria.

         SIGNIFICANCE OF THE STUDY

The result of the study will provide an insight into the relationship between deposit money bank credit and the manufacturing sector. It will provide the basis for which policies should be made by the government through the monetary authority (the central bank of Nigeria) towards the prioritizing of credits granted to the manufacturing sector. 

 Again, it will expose the important role the deposit money banks play towards the productivity of the manufacturing sector and to therefore make sure that there is a good working relationship between  sectors.

 The study makes clear the actual contribution and operations of deposit money banks in Nigeria. It will also sensitize the society on the importance of deposit banks in Nigeria.

 The study will be important to the policy makers and the government in  order  that to adopt and implement policy measures that will boost  the economy through the financial institution.

 It  will also depict the negative and positive side of the activities of the negative and positive side of the activities of the general public and bankers, for some correction and changes in order to boost the economy.

 Also, it is believe that the findings of this research will lead to further on how deposit money banks and the other manufacturing sector, which will eventually lead to the development of the economy.

 The usefulness of this study is that it will highlight to the nation as a whole on how best to manipulate deposit money bank loans for financing in order to improve the state of industrial product in the country.

 It will also give the government an overview of constraint of industrial financing and how best to manage deposit money bank loan in order to yield output.

 It will  show deposit money banks how to increase industrial financing for growth in the economy.

RESEARCH QUESTIONS

 These are self guide question used to guide the research in the course of providing solution to the problem

 The following are questions that arise when  drawing references from the study.

a.     How does deposit money bank significant to influence on the manufacturing output.

b.     Does manufacturing development depend on the deposit money bank loan.

c.      Do deposit money banks give loan for manufacturing finance?

d.     If so, to what extent has the manufacturing sector growth since the assistance started.

e.     Is there any relationship between deposit money banks financing and the Nigeria industrial growth?

LIMITATION OF THE STUDY

 The main task of the study is to given in full determine the impact of deposit money banks in fund mobilization for industrial growth and development but due to insufficient time for industrial growth and development but due to insufficient time frame for the purpose of simple and articulate analysis, the study is restricted to deposit  money banks specifically. The study is limited to the period of 2005-2010 which saw the significant impact played by the financial sector in the Nigerian economy.