THE IMPACT OF BAD DEBT IN COMMERCIAL BANK LENDING IN NIGERIA

THE IMPACT OF BAD DEBT IN COMMERCIAL BANK LENDING IN NIGERIA

ABSTRACT

In carry out this research, Attempts was made to evaluate the causes and the effect of bad bests in banks lending to fulfill this task. We established the objectives of this study which included the identification of the causes of bad debt or the banks and the economy at large recommendation of possible solutions. In conclusion on the objectives, primarily data was collected through field survey of the study population of 30 respondents of which 20 respondents where successfully covered representing 66.7 percent of the total population extensive literature review was also carried out in libraries in Nigeria. The data obtained were presented in tabulation and percentage for analysis.

TABLE OF CONTENT

Title page                                                                                            i

Declaration                                                                                          ii

Certification                                                                                         iii

Dedication                                                                                                    iv

Acknowledgements                                                                              v

Abstract                                                                                               vi

Table of content                                                                                           vii

CHAPTER ONE: INTRODUCTION

1.1 Background of the Study                                                                        1

1.2    Statement of Problems                                                                        3

1.3    Purpose of the Study                                                                  4

1.4    Scope, Delimitation of the Study                                                 5

1.5    Research Questions                                                                   6

1.6    Need/Significance of the Study                                                   7

1.7    Research Hypothesis                                                                  8

1.7    Delimitation Scope and Limitations of the Study                         9

1.8    Operational Definition of Terms                                                  10

CHAPTER TWO: LITERATURE REVIEW

2.0    Introduction                                                                                 13

2.2    Theoretical Rationale                                                                 13

2.4    Cause of Bad Debt                                                                     24

2.4    Causes of Bad Debt                                                                   26

2.5    Poor Financial Analysis and Financial Knowledge                      28

CHAPTER THREE: METHODOLOGY

3.0    Introduction                                                                                 32

3.1    Research Design                                                                                 33

3.2    Area of Study                                                                              33

3.3    Study Population                                                                                 34

3.4    Sample Size and Sampling Techniques                                      35

3.5    Instrument for Data Collection                                                    36

3.6    Validity of Research Instrument                                                  36

3.7    Reliability of the Instrument                                                         36

3.8    Method of Data Collection                                                          37

3.9    Method of Data Analysis                                                             37

CHAPTER FOUR: PRESENTATION OF RESULTS

4.1:   Characteristics of the Respondents                                            38

4.2    Presentation and Analysis of Data                                              39

4.3:   Testing of Hypothesis                                                                 43

CHAPTER FIVE: DISCUSSION OF RESULTS

5.1    Discussion of the Findings                                                          52

5.2    Implication of the Findings                                                          54

5.3    Data Findings                                                                             55

5.4    Conclusion                                                                                  56

5.5    Recommendations                                                                      57

5.6    Limitation of Study                                                                      58

5.7    Summary                                                                                    59

Appendix II                                                                                  60

Bibliography                                                                                63

CHAPTER ONE

1.1 …

1.2    STATEMENT OF PROBLEMS

It is a well-known fact that there has been a public concern on the impact of bad debt on commercial bank lending on Nigeria economy. The various management in position has been accessed of giving loans to applicants without a good or reasonable security as collateral. This has immensely given room to economic problems/crises 14i that some customers even when given a reasonable collateral tends not to meet up with the demand of the agreement

This is as a result of borrower inconsistencies in responds to the demand made by the various banking institutions (commercial banks) for repayment of loans and advances made to them. This also in turn reduces the asset base of the bank as a result causing inflation in the economy, by devaluation of our naira in foreign exchange market, hence discouraging international/foreign investors from investing in the country.

However, the major issues are:

1.      How exactly does a commercial bank cope with the effect of bad debt?

2.      What really are the impact of bad debts on commercial banks in Nigeria economy.

3.      What length does this bad debt go in causing inflation which leads to devaluation.

4.      What roles do management play in ensuring that agreements stipulator are strictly followed.

5.      The role of foreign exchange market in investment in our country.

1.3    PURPOSE OF THE STUDY

The objectives of the study are aimed at the following:

To evaluate the impact of bad debts on commercial banks leading on Nigeria economy, to identify the problems aimed from bad debts. To identify its immediate remote causes, to determine its effect: on he economy in general. To make positive recommendations on how to possibly profound solutions and conclusions to it, to establish the level and impact of risk to an acceptable rate, and then suggest on how to improve the existing control method programme.

1.4    SCOPE, DELIMITATION OF THE STUDY

The scope of this study is intended to be more encompassing but was hampered by certain unavailable constraints; nevertheless, it is limited to commercial banks as well as their staff. Some of the constraints are our poor financial position which compelled us to restrict this volume due to the high cost of stationeries. The reluctance of some commercial banks to give out information concerning some factors were discussed in the literature review and the theoretical rationale.

The scope tries to find out the impact of bad debts on commercial bank leading on Nigeria economy; and as such, its findings cannot be generalized to other types of banks.

1.5    RESEARCH QUESTIONS

This study seeks to answer the following questions:

1.      Are there impacts created by bad debts on commercial banks leading on Nigeria economy?

2.      Does bad debts really come into place in commercial bank leading systems?

3.      Are banks really aware of the positive and negative effect/impact of bad debts?

4.      What are the problems posed by bad debts on the commercial banking sector and on the economy in general as regards bank leading?

5.      What is the nature of relationship between bad debt provision and profit, hence the effect on individual and on investment growth in the economy?

6.      Are there policies governing issues on bad debts on commercial leading on Nigeria economy?

7.      These policies governing issues on bad debts do they vary fr6m one commercial bank to the other or they do not vary?

8.      How often does this issues of ad debt affect the commercial banking sector of the country’s economy?

1.6    NEED/SIGNIFICANCE OF THE STUDY

THE IMPACT OF BAD DEBT IN COMMERCIAL BANK LENDING IN NIGERIA