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THE ROLE OF COMMERCIAL BANKS IN THE ECONOMIC DEVELOPMENT OF NIGERIA

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THE ROLE OF COMMERCIAL BANKS IN THE ECONOMIC DEVELOPMENT OF NIGERIA


ABSTRACT
In the last fifteen years Nigeria has been experiencing the most serious economic crisis. The first major factor that put the country’s small – scale on the tendons position was the main stay of the economy. Nigeria being among the major producer of crude oil, suffered adversely from the effects of hurt in the world oil market. Nigeria depend on oil exportation for over 90% of its foreign exchange earning and 85% it government revenue. An appraisal of the contribution and constraints militating against effect fulfillment of bank objectives is provided. I also observed that if banks declare huge profit in a year, it is for the benefit of the economy since part of it is invested in preferred sectors of the economy. And as well will invariably create employment. Situation where government takes action to penalize bank for declaring so called huge profits leaving out manufacturing and oil companies is not encouraging at all. A case in point in the natural housing funds decree of 1990, which require banks and insurance companies to invest an amount equipment to not less than 10% of their loan and advance rate.  Or above these current account rate. Such policy, it must be enforced, it should cut across all sectors of economy.

TABLE OF CONTENTS
Title Page         -       -       -       -       -       -       -       -       -       i
Declaration      -       -       -       -       -       -       -       -       ii
Approval page -       -       -       -       -       -       -       -       iii
Dedication       -       -       -       -       -       -       -       -       iv
Acknowledgment     -       -       -       -       -       -       -       v
Abstract   -       -       -       -       -       -       -       -       -       vi
Table of Contents     -       -       -       -       -       -       -       vii

CHAPTER ONE
1.1      Introduction     -       -       -       -       -       -       -       1
1.2      Statement of the General Problems -       -       -       2
1.3      Aims and Objectives of the essay     -       -       -       5
1.4      Significance of the study -       -       -       -       -       6
1.5      Scope of the study   -       -       -       -       -       -       7
1.6      Definition of Terms  -       -       -       -       -       -       8-10

CHAPTER TWO
2.0      Literature Review     -       -       -       -       -       -       11
2.1   Historical background of Commercial Bank     -       12
2.2      Functions of Bank in the Economy-        -       -       -       15
2.3      CBN Regulation on Commercial Banks    -       -       21   
2.4      The Business Environment and Future Prospect -  25

CHAPTER THREE
3.0   Summary, Conclusion and Recommendation  -       27
3.1      Summary         -       -       -       -       -       -       -       -       27
3.2      Conclusion      -       -       -       -       -       -       -       29
3.3      Recommendations   -       -       -       -       -       -       30-33
Bibliography    -       -       -       -       -       -       -       34


CHAPTER ONE
1.0   INTRODUCTION
The aim of every government is to provide its people with basic services, leadership and protect the entire people’s interest within its power, for a government to do this, it must have a sound and adequate financial planning to make it possible to cater for the people’s need

To a large extent, any government which comes into power has to depend on banks and other financial institution for keeping of some of its development project also, the government agencies and general pubic depends largely on loan from the banks to carry out their day to day business affairs.

Generally, the main aim of every bank is to minimize the last to running affairs of the bank and at the same time maximizes owner’s profit.  Some bank like the Central Bank of Nigeria (CBN) and development banks, the farmers have the main aim of correcting the economy while the later one established purposely to develop some sector of the economy.
Note:  Eg. Industry, agriculture etc.  This bank despite the fact that they make profit, they are not profit oriented.

Therefore, this research is based on the role played by commercial banks to the Nigeria economy with particular interest.

1.1   STATEMENT OF GENERAL PROBLEM
The present improvement in the banking industry may not wholly attributed to the rapid increase in the number of banks but is the rapid growth of our economy that brought about by the structural adjustment programme (SAP)

Though banking industry plays an important role in the economy of any nation and there is no doubt, it is an indispensable role to the Nigeria economy.

With these, this not to say that they do not have lapses.   Among the factors that leads to the inefficiency in the banking industry are: -

a.           FINANCIAL DISTRESS
Financial distress in the Nigeria financial system is a problem that has of recent, assume an intractable dimension.

b.          BAD MANAGEMENT
The singular factor leaves a high stone of management which usually determine by academic/professional qualification, relevant experience, technical know how, business reflect, ability to formulate and implement good policies, leadership qualities and styles etc.  Because of the relative attractiveness of banking especially with respect to the pay and prospect, people from different professions find themselves in the mid system of banking operations without proper grooming the fact that banking is a district profession of its own with intricacies and idiosyncrasies.
c.     INADEQUATE CAPITAL BASES
There is a saying that says a lifeguard in a swimming pool must himself be a good swimmer, for a bank to enjoy confidence of depositors, it must have strong capital base as evidence of strength.  It is important that bank operates profitably for the share holders have to increase through accreting to statutory and general in services.

d.     RISK ASSET PORT FOLIO
This is no doubt a reflection of poor management most banks do not have clear investment or credit policy and there is absolutely no control on credit.  In most cases, it is the managing director or chairman or the promoters of these banks who have lending power and they lend mainly to their own business and to friends without business or without following the due assessments or control.
       


e.     BOARD ROOM CRISIS
It is unfortunate that a business which begins in a spirit of annuity and cordially at times turns into loss of face and tension among the sponsor.  Problems have in the past arisen on such topic as who plays what roles and people instability to concede to another, people opinion have cause dissentients in the board room even physical France as autocracy on the part of those who see themselves as the promoters or major shareholders can often cause board room crisis. The monetary authorities had to be carried into the management of some banks when things get out of hand until the crisis is over.  Board members engage in protected legal battles and by the end of the day who loses? The rest of us.

1.2   AIMS AND OBJECTIVES OF THE STUDY
The aims and objectives of this research work is to investigate into the role-played by the commercial banks, which cannot be over emphasized in the economic development of Nigeria.
The purpose of carrying out this research work is to:
-         Present a detailed and clear picture of the role played by commercial bank in the economic development of Nigeria.  Example of what extort commercial banks have fulfilled their roles in economic development.
-         Expose factor, which affect and determine the role of commercial banks in the development of the Nigeria economy.

1.3   SIGNIFICANCE OF THE STUDY
The significance of the essay is therefore based on
-         Identifying and analyzing advises to commercial banks on how to apply the economic situation in Nigeria.
-         Also in identifying, analyzing and providing advises to the government and central bank of Nigeria on how to adjust or improve the banking regulations.
-         It is also hoped that the findings of this research work regardless of its limitation would give the banking industries an insights knowledge of identifying ways to improve customer services in terms of economic development.
-         In enlightening customers of services available which are unknown to them.

1.4   SCOPE OF THE STUDY
The research specifically covers comprehensively the analysis of the major role played by the banking industry to the Nigeria economy. The primary responsibilities of all types of banks that we have in the industry have been touched in the literature review.

Generally, the author attempted to examine their role of commercial bank to the economy, though there are several financial and banking industries nation wide, I will limit my research to first bank of Nigeria Plc.  To represent the banking industry.  I particularly consider the sources of fund to the bank and how these fund are fully utilized to make its own contributions to our national development and at the same time, maximize owner’s profit.

1.5      DEFINITION OF TERMS
a.     BANKING
The business receiving money from outside as deposit for safe keeping and making payment accrued which the money is due for payment and also advancing loans to those who keeps money for safe keeping as well as the public at large.
b.     ACCOUNT
Is a period during which transactions takes at the end and in which settlement must be made
c.           BANKER
These refers to group of persons who receive money from individuals for safe keeping in the agreement that he will refund the said amount collected either on demand or at some certain date agreed upon.


d.     CHEQUE
It is an order written by the owner to the banker to pay on demand to the bearer of the cheque.
e      DISHONORED CHEQUE
A cheque, which the bank refused to attend to for one reason or the other e.g irregular signature, post dated cheque etc.
f.      LOAN
The amount of money that is lend out and that must be repaid within an agreed rate of interest usually for specific period of time.
g.     PASS BOOK
It supplied to the customer by the bank in which all entries are made of all deposits and withdrawals that are made.       
h.     UNPRESENTED CHEQUE
These are cheque drawn by the drawer but not yet presented for payment by the bearer.
i.      OVERDRAFT
Is usually created on a current account unlike a loan account where only periodical payments are made.  An overdraw account is a running account where drawing and deposits are made.  An overdraft account is a running account where drawing and deposits are made.  In an overdraft account as frequently as may be needed or received in connection with the business to meet the account related.



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