EFFECT OF GOVERNMENT POLICY ON COMMERCIAL BANK LENDING ABILITY IN NIGERIA
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL
EFFECT OF GOVERNMENT POLICY ON COMMERCIAL BANK LENDING ABILITY IN NIGERIA
THE EFFECT OF GOVERNMENT POLICY ON COMMERCIAL BANK LENDING ABILITY IN NIGERIA, IN ABSTRACT
This study work is intended to satisfy people with an interest in the effect of government policy on commercial banks’ lending capabilities in Nigeria (1999-2005), particularly bankers from across the world who conduct financial transactions with Nigeria.
Newspapers, journals, and union bank Bullion were used to get the data needed to complete these questionnaires.
Finally, the title of this project, the effect of government policy on commercial bank lending ability in Nigeria (Union Bank), does not provide enough information; thus, an investigation into the extent of actual effect on commercial bank lending ability is required.
THE EFFECT OF GOVERNMENT POLICY ON COMMERCIAL BANK LENDING ABILITY IN NIGERIA, CHAPTER ONE
1.0 INTRODUCTION
This chapter discusses the study’s background, problem statement, aims, research question, significance of the investigation, hypothesis, scope limitation of the study, and item description.
1.1 BACKGROUND TO THE STUDY
Nigeria’s banking system has changed dramatically in the 35 years since independence. Banking evolved from an industry dominated by a small number of foreign-owned banks in 1960 to one in which public sector
ownership predominated in the 1970s and 1980s and in which Nigerian private investors have played an increasingly important role since government policies had a significant influence on developments in the banking industry since the mid-1990s.
Beginning in the 1960s and intensifying in the 1970s, extensive government interference characterised financial sector policy, with the goal of influencing resource allocation and promoting indigenisation.
Since 1987, financial sector changes have been enacted that include elements of liberalisation as well as measures to improve prudential regulation and address bank distress.
The impact of government policies on commercial bank lending in Nigeria since independence all examine how banks were affected by public ownership and financial repression policies, the reasons for the growth of local private sector banks,
the causes of financing distress in the banking industry, and the effectiveness of financial reforms implemented. First, we intend to investigate two linked issues concerning government control of financial markets. The public ownership of banks, as well as the disregard of prudential control in favour of allocative regulation,
had a negative impact on banking lending, particularly in terms of the quality of the banks’ loan portfolio. Second, the efficacy of financial liberalisation and other financial sector changes to improve the efficiency of intermediation in the banking industry has been limited.
Because of the legacy of pre-reform interference in banks lending, which left major sectors of the banking system in financial trouble, but also because some of the reforms were improperly sequenced and others were not implemented consistently.
Concerning commercial banks. Although other financial institutions such as development finance institutions (DFIS), insurance companies, and a plethora of finance houses, hire purchase companies, and mortgage companies have been established in Nigeria,
banking continues to dominate the financial and merchant banks together accounted for 85 percent of the total asset of the emerged during the 1980s. Some of these banks were established by state governments, but the vast majority were established by private Nigerian businessmen.
After 1986, the fast expansion of local private banks, notably in the merchant banking sector, resulted in 66 commercial banks operating in Nigeria by 1992.
Despite the expansion of new entrants, the three major banks have maintained their dominance in the banking market, accounting for 48 percent of total commercial bank deposits, with Afric bank accounting for the remaining 7 percent.
The banking industry has been plagued by widespread financial instability; about half of all banks in operation were deemed distressed or possibly distressed by regulatory authorities in 1995. The majority of the troubled banks were held by the state government.
1.2 STATEMENT OF THE PROBLEM
The climate in which commercial banks operate is a direct outcome of the banking sector being subject to severe control of Nigerian government lending. Banks and non-bank financial institutions compete with one another. It is now survival of the fittest for the Nigerian Central Bank,
as well as direct participation by the federal and state governments throughout the post-independence period, economic nationalism and developmental goals were major motivations for interventionist policies.
These policies had the characteristics of financial repression in that they lowered interest rates and diverted resources away from sectors where the private rate of return would have been maximised.
Since 1986, the allocation control has been liberalised to some extent, however limits over lying areas remain in place. This section describes the Union Bank of Nigeria’s efforts to affect resource allocation in banking lending through the application of administrative controls policies relevant to bank public ownership.
During the colonial period, the denomination of banking by expatriate banks instilled tremendous anger among Nigerians, particularly businesspeople and politicians.
The expatriate banks were perceived to be acting solely in the interests of their foreign owners rather than in the interests of Nigerians and the Nigerian economy in general.
They were accused of discriminating against indigenous businesses in loan allocation and failing to finance the country’s developmental needs, instead focusing on the provision of short-term loan-related finance to foreign companies.
As a result, the government’s goals after independence included gaining more local control over banking lending and improving credit availability for indigenous entrepreneurs and key sectors.
During the 1960s, the Nigerian Union Bank was given broad authority to regulate the quantity, pricing, and direction of bank loans. Because of inflationary pressures in the early 1990s, the Union Bank of Nigeria issued stabilisation securities to those banks with surplus liquidity,
these powers were used to further monetary control, which was a priority throughout most of the post-independence period. As a result, the banking system’s aggregate liquidity fell,
contributing to a steep spike in interest rates on later bank deposits. When some banks began to default on their interbank lending obligations, the availability of funds on the interbank market shrank dramatically.
Depositors remove funds from banks suspected of being more secure when the extent of the industry’s instability becomes clear. Because of the challenges associated in deposit mobilisation,
as well as the failure to service a substantial portion of their loan portfolios, the distressed banks grew progressively unlawful and overdrawn on their accounts with the Union Bank of Nigeria.
Because the problem of lending has effectively mobilised deposits for banks, our work is intended at finding a night response to the challenge stated.
1.3 OBJECTIVE OF THE STUDY
The study’s goal is to learn more.
1. The impact of lending policies on commercial banks’ ability to make loans.
2. to measure the impact of government policy on the country’s inflation rate.
3. whether monetary policy will reduce inflation in the country.
4. how government policies on commercial banks affect their ability to make loans
1.4 RESEARCH QUESTIONS
1. How does lending policy affect commercial banks’ ability to make loans?
2. Did their country’s inflation rate change as a result of government policy?
3. What role does monetary policy have in influencing inflation?
4. How does the government’s policy on commercial banks influence their ability to make loans?
1.5 RESEARCH HYPOTHESIS
1. Ho: Lending policy has no effect on a commercial bank’s ability to provide loans.
Hi: Lending policies have an impact on a commercial bank’s ability to make loans.
2. Ho: Government policy has no effect on the country’s inflation rate.
Hello, the country’s inflation rate is affected by government policy.
3. Ho: Inflation has nothing to do with monetary policy.
Hi : Inflation is influenced by monetary policy.
4. Ho: Government policy on commercial banks has little effect on them.
The ability to make a loan.
Hello: Government policies on commercial banks have an impact on them.
The ability to make a loan.
1.6. SIGNIFICANCE OF THE STUDY
The study is crucial since many banks have been introduced and more are planned to hit the loan government’s efforts.
It is critical to the functioning of banking lending because it allows them to analyse the degree of profitability of their banks and identify unproductive ones.
It will also be the initial source of information for new bank employees and those looking to lend money. Again, students in banking and finance and research who are interested in this area of study will benefit from setting their bank lending aims.
1.8 DEFINITION OF TERMS
1. COMMERCIAL BANKS: This is a financial institution that accepts deposits from the public and makes a profit by lending money to the public.
2. LENDING: The granting of money to a customer with interest on the condition that the bank has sufficient security to back up the loan when it matures.
3. INTER BANK CLEARING: This is an arrangement in which banks settle instruments drawn on them by their customers in the clearing house, and commercial bank representatives deliver cheques drawn on other banks and collect instruments drawn on them by the bank.
4. LIQUIDITY: The liquidity of an asset refers to the ease with which it can be converted into cash with certainty. A bank must maintain a suitable amount of non-earning assets in its portfolio, such as cash call money, treasury bills, and other short-term maturing instruments.
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL