THE ROLE OF COMMERCIAL BANKS TO THE INDUSTRIAL DEVELOPMENT SECTOR IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The practice of banking and financing in Nigeria is culturally rooted and dates back several centuries ago. In the 1940s, the traditional financial institutions provide access to credit for rural and urban low- income earners. They are mainly of the Informal Self Help Groups (SHGS) or Rotating Savings and Credit Associations (ROSCAs) types. The informal financial institutions generally have limited outreach due primarily to paucity of loanable funds. In order to enhance the flow of financial services to Nigerians, government has in the past, initiated a series of publicly financed micro credit programmes and policies targeted at productivity enhancement. Notable among such programmes were the Rural Banking Programme, Sectoral Allocation of Credits, the Agricultural credit Guarantee Scheme (ACGS) etc. Other institutional arrangement were the establishment of the Nigerian Agricultural and co-operative Bank limited (NACB), the National Directorate of Employment (NDE), the People Bank of Nigeria (PBN), the Community Banks (CBs) and the family Economic Advancement Programme (FEAP) all aimed at improving the economic growth of the nation. Year 2005 was remarkable in the history of Nigerian Banking Industry. The consolidation exercise Initiated by the Central Bank of Nigeria (CBN) on July 2004 came to head on December 31, 2003 with 14 banks unable to meet the #25 billion recapitalization requirement. The apex bank revoked the licenses of the 14 banks. Meanwhile, the 25 banks that successfully met the #25 billion minimum capital requirements represent 93.5% of the total deposits of the 89 banks that existed in country reconsolidation. In the process, about N406 billion was raised from the capital market while an inflow of 652 million was generated from outside the economy.

In order to lower industry cost of funds, the Cash Reserve Ratio (CRR) was reduced by 6% points from 11% to 5% with the difference expected to be invested by banks in special Central Bank of Nigeria (CBN) instrument with a tenure of 91days at 3% coupon rate. Furthermore, a 1- year treasury bill was introduced on July 1, 2005 with a view to restructuring the deposit profile of the federal Government. Similarly, in order to reduce inequality pressure, reverse inflationary trend and encourage long tenured investment, the 182 days non. Discountable bill was introduced. Commercial Banks are involved in the process of increasing the wealth of the economy, particularly the capital goods needed for raising productivity. In developing countries like Nigeria, income is very low and that as such low level investment can be made, if possible without requiring a long period effort at saving. Financial intermediaries have a vital role to play here, in raising both the savings and investment to the level necessary to achieve a self sustained growth. In manpower development, Banks contribute highly in training staff and development through both local and foreign facilitation. In order to strengthen our work force and take advantage of emerging market opportunities, Banks also recruit various  professionals with broad industry knowledge and hands- on experience.

In financing the economy, the bank has aligned its financial intervention in the economy with a clear understanding of high impact character of government’s privatization and deregulation program. The search made for the most efficient and effective domestic lending portfolio has meant that commercial Banks have led the financing of private investment in industrial development in the economy. The financial institutions are therefore capable of influencing the major savings factors namely; ability, willingness or saving propensities and opportunities. The need to achieve sustained industrial growth within any economy can be possible amidst strong financial institution and precisely within the existence such that are tailored to work in accordance with government policies and program in a bid to attaining the desired macro-economic objectives of a nation. Banks as components of financial sector consist of the apex i.e Central Bank, Commercial Banks, Development Banks, Merchant Banks and Specialized banks.

TOPIC: THE ROLE OF COMMERCIAL BANKS TO THE INDUSTRIAL DEVELOPMENT SECTOR IN NIGERIA

Format: MS Word

Chapters: 1 - 5, Abstract, References, Questionnaire
Delivery: Email

Number of Pages: 50

Price: 3000 NGN

In Stock

Buy Now