LOAN ADMINISTRATION AND MANAGEMENT IN SELECTED THREE NIGERIAN BANKS

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

Nigeria as a developing nation is in dire need of a vibrant economy anchored on productivity, which is in turn anchored on liberal loan management and administration of Nigerian banks.  According to Moha (2006:110), for any developing country to escape the vicious circle of poverty, there has to be foresight and insight into the funding of entrepreneurial activities to stimulate production in all sectors of the economy. This function has to be undertaken by the banks through effective and profitable loan administration and management.

According to Lopez (2005:210), Japan was one country known for making fake products. These products, he noted, have been greatly improved as a result of liberal loans management and administration from banks.  In his own submission, Adeniyi (2006:62), said one major constrain to production in the Sub-Saharan Africa, is the poor funding. Leadership, he said, is the rallying point of all activities, which is far from policies. For any economy to be transformed, there must be efficient loan administration.

Accordingly, Moha (2006:181), opined that bank is the center point of macro economic nexus because all productive capacities in any economy hinge on its loan administration and management. Bank loans which activate the economy are those that are channeled to productive ends.

Ogwuma (1996:11), noted that the bane of Nigeria’s dwindling economy is excessive dependence on imported goods which in itself is a clear evidence of a castrated economy that cannot sustain itself.  Soludo (2006:08), in his submission noted that the heartbeat of any nation is its diversified and effective production sustained economy.  It is a bull-wave against external infiltration. He added that loan policy meaningfully framed and religiously implemented, is all that is needed to transform Nigeria.

Successful lending has direct effect on economic growth and development on the economy. It means that not only profit to the bank, but also creation of new investment opportunities,  creation of new jobs and increase of capacity utilization. Sambo (2005:93), stated that bank loans have to affect different sectors of the economy, viz, agriculture, commerce, mining, industry and different services, which yawn for holistic development.

DEFINITION

Loan administration means the range of activities involved in extending a credit facility to a bank loan applicant i.e. the borrower.

Loan management is the lending officer’s responsibility to supervise, monitor and keeping close contact with the borrower in his financial activities; culminating into planned visits, securing  the borrower’s periodic financial statements and reviewing requests for additional funds (Roussakis: 1977.5)

1. STATEMENT OF THE PROBLEM

The growth of any nation follows from the state of its economy. A vibrant economy implies diversified investments which generate employment opportunities. Macro economic environment is hinged on the state of the banking sector.  The government has a lot to control in the banking sector in order to re-direct the economy to vibrancy through efficient loan policy and administration. It is expected that the loan policy and administration should encourage investment in all sectors of the economy.

Over the years, government has been controlling the loan policies of banks to effect desired changes in the economy. More often than not, these manipulations do not achieve maximum targets. Also credit policies fail to meet the targets. Many borrowers often do not apply the funds judiciously as stipulated in the loan policy. This has a deterring effect on subsequent loan administration and management of banks.  Sometimes, banks fail to recover the face value of loans as well as the interests.  This drastically affects further loan administration. Some loan policies may not be in the interest of the nation at large, in which case, the Central Bank may be forced to directly effect policy changes.

The headway to monetize the economy may be hindered by socio-economic even political and religious factors.   This implies dynamism in the formulation of loan policies by banks and effective administration to effect desired changes.   But however, good, the formulation implementation has always not been full.  This study looks at these hitches and their analyses.