EFFECT OF DEPOSIT MONEY BANKS CREDIT SUPPLY FACTORS ON PRIVATE SECTOR CREDIT FINANCING IN NIGERIA

EFFECT OF DEPOSIT MONEY BANKS CREDIT SUPPLY FACTORS ON PRIVATE SECTOR CREDIT FINANCING IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1. Background to the Study

Finance remains crucial and indispensable to the investment and capital formation activities of the private sector - considered as the engine room of the economy (AfDB, 2011), particularly, in developing economies like Nigeria. Adequate finance, therefore, remains the life blood of the private sector without which working capital formation and private investment are stifled, emergence of new businesses is rendered impossible, existing businesses are deprived of the desired growth and expansion, and ultimately, economic development and progress becomes unachievable. This is the reason why scholars such as Schumpeter (1911) and Levine (1997) are of the opinion that strong financial development or inclusiveness in an economy, that supports private sector initiatives, is a precursor for a strong and virile economic growth. There is also a strong consensus among studies that credit to the private sector is an important mechanism through which financial development matters for economic growth (Akinlo & Oni, 2015). There are basically two broad finance sources opened to the private sector: internal and external. The inadequacies of internally (or self) generated funds to sustain the operation of the private sector necessitated the need for external sources of funding. Various external sources of fund are available to the private sector with the advent of financial system. These include stock or equity market. bond market, leasing companies, venture capital and money market such as banking institutions. The banks, deposit money banks (DMBs), in specific, however, remains the major source of funding to or financier of the private sector in developing economy in Africa for several reasons among which are as rightly reported by the African Development Bank (AfDB) (2011): Most alternative external sources of finance to bank credit such as stock exchanges, bond markets, leasing companies, and venture capital providers, remain underdeveloped in Africa. Leasing finance, for instance, accounts for less than 2 % of gross fixed capital formation of most African countries and remains underdeveloped compared to other regions. Similarly, bond and stock markets rarely exist and when they do, they lack liquidity. These low penetration rates result from the poor level of financial sector development, dominance of banks in the financial sector and companies’ lack of familiarity with these sources of funding. DMBs in the performance of the intermediation role of mobilising funds, otherwise known as deposits, from the surplus unit of the economy and channelling such deposits into productive investments, championed by the private sector, remain dominant among financial institutions, in the provision of the much-needed external source of funds to the most active sector of the economy in Africa, Nigeria inclusive (Assefa 2014; Emmanuel, Abiola, and Anthony,2015; Marijana, 2009). These financial supports are often in form of loan advances and overdraft for a short, medium or long period which are capable of establishing a claim payable in the near future (Trading Economics, 2016). Studies have shown that a strong and inclusive financial system, characterised by efficient provisioning of bank credit, has a positive and significant effects on output and employment opportunities (Emmanuel, et al, 2015). The critical role played by the private sector in an economy, cannot afford to be down played with lack of funds. The immeasurable achievement of the private sector at economic endeavoursh as endeared and compelled the federal government of Nigeria, in recent past, to embark on some important reforms in the economy aimed at ensuring maximum involvement and participation of the private sector to drive a sustainable growth in the economy. For instance, the privatisation and commercialisation Acts of 1988 and the Bureau of Enterprise Acts of 1993, which objectives were aimed at full or partial relinquishing of erstwhile held government (or its agencies’) equity or other interests in public assets to the private sector, had their sole aim at strengthening the role of the private sector in the economy to guarantee employment and capacity utilisation. There were also an attestation to, and recognition of, the private sector’s capacity at efficient and effective resource utilization and high propensity to achieving desired economic goals. Several other reforms embarked upon by the apex bank, targeted at banking financial institutions in Nigeria, DMBs in particular, to put them on solid footings and repositioning them to better perform their primarily role of financial intermediation, had its primary goal aimed at entrenching a sound and enduring financial foundation that is supportive and capable of leveraging the activities of the private sector. According to Sanusi (2012), the bank is the central nervous system of any market economy; the recapitalisation policy in 2008/2009 became necessary in order to implant a sound banking system that supports economic development.

Format: MS Word

Chapters: 1 - 5, Preliminary Pages, Abstract, References
Delivery: Email

No. of Pages: 115

NB: The Complete Thesis is well written and ready to use. 

Price: 10,000 NGN

In Stock

Buy Now

Masters Project Topics in Banking and Finance

Our Customers are Happy!!!

See What Some of Our Customers are Saying About Us