LOAN SYNDICATION A SOURCE OF BUSINESS FINANCING

CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND TO THE STUDY

The relative insufficiency of funds for capital investment is a common factor in every economy especially in developing countries of the ward, like Nigeria. Finding a solution to these problems of providing funds for capital investment has been a major pre-occupation of financial institutions in Nigeria one of the solution that come up is syndicated loan, which h is aimed at spreading risks and weakening the impact of restricting laws and regulations lending by financial institutions. Loan syndication is basically defined as an agreement between two or more lending financial institution to provide a borrower with credit facility using common roan documentation.

The spectacular growth of Loan syndication as source of financial instruments for business organization occurred as response to several economic factors in Nigeria.  Notable among these were:

- Restrictions on credit expansion of government and monitoring authorities to minimize.

- The scraping of import licence requires which enables more users of imported equipment and machineries to source and warning some into the country.

- Deregulation of interest rates made Loan syndication attractive to both business organization and financial institutions.

In addition there are/certain legal and regulatory limitations on lending activities of commercial and merchant banks such as the statutory lending limit as provided in banking Act of 1969 section 13 (1), the liquidity requirements etc.