THE ROLE OF COMMERCIAL BANKS IN FINANCING BUILDING PROJECTS IN NIGERIA

THE ROLE OF COMMERCIAL BANKS IN FINANCING BUILDING PROJECTS IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

Commercial banks are important financial intermediaries serving the general public in any society. In most cases, commercial banks hold more assets than any other financial institution. In some cases even more than central bank. Apart from their many functions, commercial banks facilitate growth and development. Banks lends in many areas or sectors of the economy. Viewed from the building and construction sector, they contribute to investment, employment creation, and by extension, the process of infrastructure and economic growth. However, the researcher is examining the roles of the commercial banks in Nigeria in financing building and construction projects in Nigeria (Farrel, 1985).

The building and construction industry in both developed and developing countries may be viewed as that sector of the economy which, through planning, design, construction, maintenance and repair, and operation, transforms various resources into constructed facilities. The types of public and private facilities produced range from residential and non-residential buildings to heavy construction, and these physical facilities play a critical and highly visible role in the process of development (Kheni et al., 2008). The major participants from the building industry include the architects, engineers, management consultants, general contractors, heavy construction contractors, special trade contractors or subcontractors, and construction workers, along with the owners, operators, and users of the constructed facility.

Olowo-okere (1985), (cited in Eshofonie, 2008) asserted that most countries put over 55% of their gross domestic investment into the creation of physical facilities, including infrastructure that is necessary for development. The building sector has various levels of manpower ranging from highly skilled professionals to completely unskilled labourers. In developing countries, physical construction activities alone provide between 2 and 6% of the employment demands of the nation and the subsidiary activities provide an additional 2 to 4%, while in the developed countries the figure rises to between 6 to 10% and 4 to  6 % (Cockburn and Charles, 1970; Okeola, 2009). Ibironke (2004) and Shittu and Shehu (2010) stated that the building industry plays a key role in satisfying a wide range of physical, economic and social needs and contributes significantly to the fulfillment of various major national goals.

The commercial banks form an important source by which many investors get funds to finance building and other real property projects. Commercial banks are money creating financial institutions that perform three major functions, namely acceptance of deposits, granting or loans and the operators of the payments and settlements mechanism.

THE ROLE OF COMMERCIAL BANKS IN FINANCING BUILDING PROJECTS IN NIGERIA