THE ROLE OF COMMERCIAL BANKS IN THE ECONOMIC
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The role of commercial bank in the development of the national economy is quiet important as commercial banks constitute the intermediary between the apex bank and the general public. Commercial banks provides the needed channel for savings, mobilize deposits from the surplus unit of the economic sector and provide the needed funds for investment and development in different sector of the Nigerian economy. Commercial bank also provides advisory services to prospective investors regarding the prospect and viability of the intended project.
The commercial bank is financial institutions which accept deposit inform of savings and current account, provide safekeeping and serve as channel for easy retrieval when needed. Commercial banks are greatly required in the country for the development of the nation. Hence they serve as means for obtaining loanable funds for developmental projects in other to achieve macroeconomic stability in the nation. They also facilitate international trade through the provision of foreign exchange and extend credit to importers. Commercial act as agent to other institutions in the collection of revenue, thereby providing funds for economic development.
Commercial banks are the pillar of accessing loans as they facility the grant of short-term, medium and longterm loans in the economy. Commercial banks facilitate easy payment through the provision of cheques and other financial instrument, they enhance international travels through the provision of travellers cheques, and they create money for the central bank and provide means for the transfer of funds which promotes economic activities. Commercial banks provide backup liquidity to the economy. They interprete monetary policy and provide some “value added” from transferring funds from savers to borrowers and providing liquidity. The research therefore seek to appraise The role of commercial banks in the economic development of Nigeria (A case study of Etsako west local government area of Edo state).
1.2 Statement of the Problem
Commercial banks are greatly required in the country for the development of the nation. Hence they serve as means for obtaining loanable funds for developmental projects in other to achieve macroeconomic stability in the nation. They also facilitate international trade through the provision of foreign exchange and extend credit to importers. Commercial act as agent to other institutions in the collection of revenue, thereby providing funds for economic development.
Economic development is the development of economic wealth of a community, region or nation so as to improve their well-being .It seek to improve the quality of life and economic well-being of a community through the creation and retention of jobs , incomes and the tax base. Economic growth can be viewed as the increase or growth of the GDP, real national income, or per capita income.. When the GDP of a nation rises economists refer to it as economic growth. SALMON VALLEY INNOVATION CENTER(2007) The Nigerian economy has been under economic depression with the dwindling level of the foreign exchange rate which has led to decline in international transaction with escalating cost of productions, goods and services. The general price of common goods and services has gone high and almost unaffordable by the masses.
This has led to retrenchment of workers in almost all sectors of the economy ranging from the oil and gas sector, banking sector, telecommunication etc. Consequently the income per citizen has gone low; there has been a decline in economic activities, savings and investment level .Consequently the national growth indices has also dropped. The current economic climate in the country therefore indicate the inherent deficiency in the banking sector to execute it statutory functions effectively. Commercial banks activities have not been maximally harnessed due to the harsh economic conditions. Therefore the problem confronting the research is to appraise the role of commercial bank The role of commercial banks in the economic development of Nigeria (A case study of Etsako west local government area of Edo state).
1.3 Objectives of the Study
1. To determine the role of commercial banks in the economic development of Nigeria.
2. To determine the role of commercial banks in the economic development of Etsako west local government area of Edo State.
1.4 Research Questions
1. What is the role of commercial bank in the economic development of Nigeria?
2. What is the role of commercial bank in the economic development of Etsako west local government area of Edo State?
1.5 Research Hypotheses
Ho1: Commercial banks play no significant role in the economic development of Nigeria
Ho2: Commercial banks play no significant role in the economic development of Etsako west local government area of Edo State.
1.6 Significance of the Study
The study is particularly important in view of the current state of the Nigerian economy which has over the years gone through recession leading to a decline in economic development of the nation. Consequently the shall elucidate on the role of commercial bank in economic development of Nigeria. The study shall also serve as a veritable source of information to financial and economic experts.
1.7 Scope of the Study
The study shall focus on the role of commercial bank in the economic development of Nigeria with a case study of Etsako west LGA.
1.8 Limitations of the Study
The study was confronted with the following constraints;
Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
1.9 Definition of Terms
COMMERCIAL BANK: Commercial bank is financial institutions which accept deposit inform of savings and current account, provide safekeeping and serve as channel for easy retrieval when needed.
ECONOMIC DEVELOPMENT: Economic development is defined as the development of economic wealth of a community, region or nation so as to improve their well-being. It seeks to improve the quality of life and economic well-being of a community through the creation and retention of jobs , incomes and the tax base.
ECONOMIC GROWTH:Economic growth can be viewed as the increase or growth of the GDP, real national income, or per capita income.. When the GDP of a nation rises economists refer to it as economic growth.
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