ABSTRACT
This
made efforts to assess the management of Loans and Advances in Nigeria
Commercial banks. The research was prompted by the growing rate of bank loans
and advance default cases that result to collapse or disaster and se4rious
situation led to distress of many banks institution in our country. However,
the objectives set of this study includes; to ascertain the best conditions
that will be appropriate to manage and checkmate the granting of loans and
advances in the Nigeria commercial banks, to determine the causes of repayment
failure and defaults of loans and advances, to investigate the factors that
influence high degree of bad debt and doubtful debts etc. The researcher
equally formulated hypotheses in line to the objectives and research question.
The primary data was collected using questionnaire that was distributed to the
four banks of the study at the end 180 questionnaires was returned. The data
was presented using percentage frequency and the hypotheses were tested using
the z-test statistical tool. Then the study discovered the following, – that
honesty of the credit applicant, provision of adequate collateral security,
economic condition prevailing in the country, banking regulatory guideline of
transparency and accountability, strength of the applicant business and the
viability of the project are the pre-requisite factors banks considered before
granting loans and advances, that the major causes of failure and default of
loans and advance repayment include, fund diversion, risk/ unstable
environment, fluctuation of exchange rate and inflation, poor evaluation and
inadequate managerial skills, poor supervision and monitoring, poor sighting
and hasty investment, illiquidity of financial instrument and high interest
rate, and that the factors that
influenced high degree of bad debt and doubtful debts in the bank includes,
poor record-keeping and transaction, over-the counter (OTC) trading and
excessive insider abuse, poor transparency and honesty excess load
non-recovery, favouritism and incompetence & poor management etc. While the
following suggestions were given – there should be an increased and renewed
vigour on training continuously the workforce on the measure to curtail
incompetence in their operation, there should be an improve laws, regulations
and conditionalties that must strictly enforced and uphold to minimized load
repayment default, and distress, there should be strengthened attempt to
regulate, measure appraisal commercials banks regularly to discover and punish
any bank that “abuse” the prudential guidelines for loans etc.
The
general and pertinent view of the study
support the statement that the success or failure of the commercial banks in
achieving their objective of maximizing
profit depend s on how well the loans
and advances are managed.
TABLE OF CONTENTS
Title
page……………………………………………………………… i
Approval page………………………………………………………… ii
Certification………………………………………………………….. iii
Dedication…………………………………………………………….. iv
Acknowledgements…………………………………………………… v
Abstract………………………………………………………………. vi
Table of content
……………………………………………………. vii
CHAPTER ONE
1.0 Introduction………………………………………………………… 1
- Background of the Study ………………………………………. 1
- Statement of the problem……………………………………….. 3
- Objective of the Study,…………………………………………. 4
- Research hypothesis ……………………………………………. 6
- Significance of the Study ………………………………………. 7
- Scope of the Study…………………………….. ………………. 8
- Limitation of the Study…………………………………………………………. 9
CHAPTER TWO
2.0 Review of Related Literature ……………………………………… 11
2.1 The Introduction…………………………………………………..
11
2.2 The basic
commercial Bank’s Lending and Advances principles…15
2.4 Objective and
policies of Lending …………………………………17
2.5 The sources of
Commercial Banks Funds………………………….20
2.6 Lending
principles and practices in Commercial Banks………….. 23
2.7 Classification
of Bank Loans……………………………………… 26
References
………………………………………………………… 30
CHAPTER THREE
3.0 Research Design and Methodology ……………………………… 31
3.1 Introduction ……………………………………………………… 31
3.2 Research Method
used…………………………………………….. 31
3.3 Sources of Data ……………………………………………………
31
3.4 Population of
the Study …………………………………………… 33
3.5 Method of Data Analysis ………………………………………….. 33
References …………………………………………………………35
CHAPTER FOUR
4.0 Data Presentation
and Analysis ……………………………………. 36
4.1 Introduction …………………………………………………………36
4.2 Data
presentation Analysis ………………………………………… 37
4.3 Hypotheses Testing ……………………………………………. 45
CHAPTER FIVE
5.0 Summary of Findings, Conclusion and
Recommendations ……….. 55
5.1 Summary of
Findings……………………………………………. 55
5.2 Conclusion ……………………………………………………… 57
5.3 Recommendations………………………………………………. 58
Bibliography…………………………………………………….. 59
Appendix …………………………………………………………
61
CHAPTER ONE:
1.0 Introduction
1.1 Background of the Study
Commercial
banks are “retail banking institutions” that accept deposits and make
short-term, medium-term, and long-term credits available to government,
public/private business enterprises, and individuals. Some of their functions
include accepting deposit through current and savings accounts; fixed deposit
and others, granting of loans and advances, equipment leasing, loan
syndication; financing advisory services; trade and export finance; other
investments and foreign remittances. The relationship between Commercial bank
and others financial institutions in terms of functions, limits, and modus
operandi are spelt out in the Bank and other financial institutions Decree 25
Banking and other financial matters decree (BOFID)of 1991. The Banking and
other financial matters decree (BOFID) Decree 25 of 1991 in particular permits
some other financial institutions like Merchant Bank, Development Bank and
Insurance companies to engage in granting loans through mostly medium and long-
term in nature.
This
research work is mainly done on the management of loans and advance (short,
medium-term, and long-term) granted by the Commercial bank in Nigeria. Granting of loans and
advances is an integral part of the functions of the Commercial Bank but one of
the most risky one. It is based on its risky nature that made it an interest of
study focus in terms of its management by the commercial banks.
Filder
(1982:249), states that it is a known fact that loans and advances are granted
at a profit. Most loans and advances are granted out of the deposits accepted
by the commercial banks or funds borrowed at a lower interest rate. The
difference between the interest paid out plus share of management cost and the
loan interest received makes up the profit to the commercial bank.
The success or failure of the
Commercial Banks in achieving their profit objective very much depends on how
well the loans and advances are managed.
An
efficient lending policy will in every ramification reduce the incidence of
bank distress and generally increase the wealth of the owners of the bank as a
business. It will equally help in revitalizing and boosting the economic
activities in the country.
According
to Teriba (1990:21), a situation where the bank lending policy is weak and
inadequate makes loan and advances management difficult and this result to
shoot-outs of several problems in the development of the economy. Any economy
with inadequate level of loan and advances, stringent lending policy and
obvious huge bank bad-debts and provisions has a dull future in terms of its
overall development. It is this incidence of poor management of commercial bank
loan and advances in the Nigerian economy that has promoted my idea of
instituting this scholarly investigation as a way to findings lasting solution
to the problems.
1.2 Statement of the Problem
As
earlier noted, that granting of commercial bank loans and advances is one of
the most risky businesses entered into by the commercial banks. The risk nature
of commercial bank credit on customer who fail to meet up with their credit
facilities results to huge amount of bad-debts and provisions for bad-debts.
The
following fundamental problems rise from poor handling of commercial bank loans
and advance:
MANAGEMENT OF LOANS AND ADVANCES IN NIGERIAN COMMERCIAL BANKS (A STUDY OF FOUR COMMERCIAL BANKS IN ENUGU)
