EMPIRICAL ANALYSIS OF COMMERCIAL BANKS LENDING POLICIES TO THE PRIVATE SECTOR (A CASE STUDY OF UNION BANK OF NIGERIA PLC)



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EMPIRICAL ANALYSIS OF COMMERCIAL BANKS LENDING POLICIES TO THE PRIVATE SECTOR (A CASE STUDY OF UNION BANK OF NIGERIA PLC)


ABSTRACT
In this study, researcher examined the empirical analysis of commercial banks lending policies to the private sector. A case study of union bank of Nigeria plc. The study is significance on the system of monetary and credit policy measure which the central bank has stipulated the amount of interest lending rates that are obtainable in the commercial banks. The empirical analysis which is based on experiments or experience which is intended not only to maintain adequate monetary policy measures but also to create a healthy balance of payment position which is to reduce the art of domestic price inflation. In this study empirical analysis give way to some of the problems which arise in this study entitled empirical analysis commercial banks lending polices to the private sector attempt to appraise the various ways through which the commercial banks disburse money in form of loans and advances to the private sector with a view to determine the extent of compliance with the central bank of Nigeria credit guidelines. From the understanding of this work the objectives of this study is to know whether the individual/companies that benefited from the loan actually make use of the fund for the purpose they applied the money for. This work gathers some findings which analyzes data collected from the banks and that form the beneficiaries of the loans. Through the view of this analysis, the conclusion of the study is that commercial banks with particular reference to union bank of Nigeria plc work in strict compliance with the central banks directives with regards to issuing loans and advances.
TABLE OF CONTENT:
CHAPTER ONE
INTRODUCTION
1.1     Background of the Study
1.2     Statement of the Research Problem
1.3     Objectives of the Study
1.4     Significance of the Study
1.5     Research Questions
1.6     Research Hypothesis
1.7     Conceptual and Operational Definition
1.8     Assumptions
1.9     Limitations of the Study
CHAPTER TWO
LITERATURE REVIEW
2.1     Sources of Literature
2.2     The Review
2.3     Summary of Literature Review
CHAPTER THREE
RESEARCH METHODOLOGY
3.1     Research Method
3.2     Research Design
3.3     Research Sample
3.4     Measuring Instrument
3.5     Data Collection
3.6     Data Analysis
3.7     Expected Result
CHAPTER FOUR
DATA ANALYSIS AND RESULTS
4.1     Data Analysis
4.2     Results
4.3     Discussion
CHAPTER FIVE
SUMMARY AND RECOMMENDATIONS
5.1     Summary
5.2     Recommendations for Further Study
Bibliography

CHAPTER ONE
INTRODUCTION
Background of the Study 
Over the years the Central Bank of Nigeria had stipulated the amount of interest and lending rates that are obtainable in our commercial banks, with a view to harmonize these rates in all commercial banks in all the country it will be of interest to note that the central banks credit policy guideline had been a reflection of the country’s economy form year to year.
The monetary and credit policy measures were designed to accelerate the rate of domestic production maintain healthy balance of payment position reduce the arte of domestic price inflation.  Monetary policy measures were also aimed at increasing the flow of credit to the priority sectors of the economy particularly the agricultural and manufacturing sectors so as to expand the production of home made goods and services.  The stand of monetary policy continued to be tight to complement a disciplined fiscal policy in order to achieve moderation in inflection any measure and ensure exchange rate stability.
History of Banking In Nigeria    
The Nigerian banking ordinance of 1952 and the banking act of 1958 and various amendments and innovations through 1969 laid the foundation for the operation of commercial banking in Nigeria.  The number of commercial banks operating in the country rose from eight (8) in 1959 to twenty five (25) in 1983.  as at 1995 there are 65 commercial banks in Nigeria with 1634 branches in urban areas 763 branches in rural area and 6 branches abroad totaling 2403 branches a significant increase.  While bank branches and offices increased from 160 to 1108 branches and offices in these period.  The total deposit liabilities also rose from 13.6 million Naira in December 1969 to 13.9 billion Naira at the end of 1983.   Since 1977 and following the enactment or promulgation of Nigeria Enterprises promotion decree 1972 it has become mandatory for all banking institutions in the country to be at sixty percent (60%) Nigeria owned.  This showed that with the promulgation of Nigeria enterprises promotion decree Nigeria have started loving more than fifty percent (50%) shores in the commercial banks operating in the country following the current capitalization that us map out by the central banks on all the commercial banks operating in Nigeria.
The commercial banks have over the years proved to be the most important financial intermediary. They have facilities for the rapid transformation and improvement of our economy far and ways they are the largest single group in financial sector out weighting by shore volume of transactions all the other non-banks financial institution joined together throughout the whole world the commercial banks is playing a big role in shaping the economy.  They provide the tools contact and expand the money in circulation through the mass of bank rates.  In Nigeria however the government has sustained shareholding in the equity capital of the banks.  They have contributed immensely to the economic development through their deposit holding and credit to the Nigeria economy.

Statement of Problem  
This study entitled “ empirical analysis of commercial banks lending policies to the private sector” attempt to appraise the various ways through which the commercial banks disburse money in from of loans and advances to the private sector with a view to determine the extent of compliance with the central banks of Nigeria credit guidelines.
For sometime now there have been a large stream of articles books and researches on commercial banks lending polices. This is so because of the need for fund by both the private and public sectors for development purposes. Frankly commercial banks do not have their individual lending policies but can adjust within the stipulated standard with an aim to utilize their customer’s deposit to attain the goal of optimum profit.
It is disheartening to team that the efforts of various government (federal and state) towards the attainment of self-sufficiency in the industrial agricultural product have been on persistent increase.  There have been great shortage of most of the essential food product and raw materials. They do not seem to be any significant improvement with regard to output or productivity of private sector. In the area of loans and advances that people now cast doubt over the ration ate of commercial and allied bank loans or credit scheme.
Some people have gone as far as asking the following questions.  Do real and deserving industrialists and agriculturist especially in the areas actually receive these loans? What impact have these loans created in the private sector of the economy?
In an attempt to answer the above questions and more it because necessary to review an why other:
i.                               The sources of commercial banks funds and types of advances
ii.                             Credit policy guidelines as projected to direct by the central banks of Nigeria (CBN) with a view to determine the sectoral allocations to the private sector.
Iii Typical commercial banks lending policies to determine the extent of its compliance with that of central bank.  And based on this of review an analysis is made based on the requirement used to advance money to individual and companies.  Hence my decision to appraise the commercial banks lending policies to private sector.         
 Objectives / Purpose of the Study
This study entitled “ empirical analysis of commercial banks lending policies to the private sector” is discuss toward appraising the central banks of Nigeria credit policy guideline regarding loans and advance disbursed by the commercial banks to individual and companies with a view to determine it’s effectiveness and compliance to the rules laid down.  Whether the individual/ companies that benefited from the loan actually make use of the fund for the purpose they applied the money for.
The researcher will also have on insight (understanding) into the sectoral allocations of these loans and advances from the view point of preferred and less preferred sectors of the economy.  The study is directed towards determining the use to which this borrowed money are put by the beneficiaries with a view to determine whether or not the loans are utilized for the purpose for which they are meant for.
The study is also geared towards borrowing whether these commercial banks actually give these loans or they give these with stringent conditions making it impossible for poor individuals or small-scale industries to obtain these and repay with much high interest rate accompanying it.     
Significance Of The Study
This study is important in the sense it shows the ways loans and advances made available to individuals and companies by commercial banks with a view to enable them carry on their business and operations with intention to repaying back such loans at an agreed future period and the agreed interest rate being the cost of the loan.
The study is also significant because the finding will be help to commercial banks customers (the beneficiaries) and there fore help the policy makers to make amend the exists lending policy and formulate new and appropriate lending polices or facilities in such a way to reduce these problems to list minimum.
It will also be of immense benefit to future researchers on the same subject matters or in similar circumstances. The study will also provide data for planning purpose.
Furthermore it will help central banks of Nigeria to know whether their credit guidelines are being followed as prescribed.  

Research Questions
To commercial bank staff
1.     Through what sources do you raise your find?
2.     What find of loans do you grant to your customers?
3.     What type of securities qualifies one for your loans?
4.     What problem do you encounter in the issuance of loans in relation to:
i.      Repayment of these loans when?
ii.      Utilization of the loan? Yes or NoTo beneficiaries:
i.       What is your business name?
ii.      What kind of business do you deal on?
iii.     Is your business registered? Yes /No if yes state the registered name.
iv.     Do you know of the existence of any bank assistance in the from of loan? Yes/No if yes state the name of the banks and the number of times you applied.
v.       What are the procedures involved in the course of applying for the loan?
vi.     Were you given loan in every case? Yes/No if No state why.  
Scope And Limitation Of The Study
However due to loan resources and time the researcher has concentrated he work on commercial banks operating within Enugu state.
In a study of this type a lot of constraints are bond to come up the work will be constrained by many variables.  The greatest identifiable ones are time finance literacy level of the respondents and general economic problem.
Time:       Since the research work is carried out on student level in particular during the time of lecture and examination the researcher has to allot her time in such a way that the demands of other courses had to be met.
Finance:  Second to the time factor is the insufficient fund which is another factor inhibiting this research work. The project will be single handedly financed by the researcher.  And as a result it will be cumbersome to cover some inevitable expenses like transport purchase of stationary typing and binding labour etc. this will in turn affect the sample size and geographical area of coverage of this study.
Respondents: The unwillingness of the bank official to provide adequate and relevant information required for this research. Some of the official interviewed though technically skillful in the area of loan and advances were not allowed to give all the information in view of the confidentiality of such information in the bank.
Literacy Level:        Another inhibiting factor is the literacy level of the beneficiaries.  Majority especially form agricultural sector are ignorance of the implication of the loan they don’t have any answer to any question thrown to them.
General Economic Problem:  The last but not the least among the limiting factors in this research work is the general economic problem currently facing the entire country.          
   
Brief History Of Union Bank Of Nigeria Plc
The history of union bank of Nigeria Plc started with the opening of colonial offices in Lagos Jos and Port-Harcourt in 1917.  In 1925 the bank was acquired by Barclay bank and its name was changed to Barclay band D.C.O (dominion colonial overseas)
Barclays bank (union bank) sold 50 percent of it’s shares to Nigeria in 1979, thus reducing her equity holding to 20 percent. Following this development the bank’s name was charged to union bank of Nigeria limited to reflect the new ownership structure i.e.
Federal government Nigeria 52percent
Private investors                 28 percent
Barclay bank           20percent
In June 1989 Barclay’s banks (i.e union bank of Nigeria) sold its remaining 20 percent equity holding to private Nigeria investor’s i.e.
Federal government of Nigeria          52percent
Private Nigeria investors                  48percent
Thus the bank is now an indigenous banks wholly managed by Nigerians. Today the bank has over 225 branches spread throughout the country and branches outsider Nigeria. The bank also have a staff strength of over 11,300 (eleven thousand three hundred) employees 




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