THE ROLE OF COMMERCIAL BANKS IN INDUSTRIALIZATION

By

OKOH OGECHUKWU .S.

Presented To

Department of Accountancy

ABSTRACT

The purpose of this study is aimed at the role of commercial bank in industrialization in Nigeria.

In other words, it was a survey conducted to assess and analyse the contributions of commercial banks in industrialization and in the same view ascertain its role to the rural development.

Also across judgment of commercial banks in Nigeria was given including the early and modern banking system and also the problems encountering by most indigenous commercial banks in their ventures to evaluate the future of commercial bank in rural development.

The above fact were collected through the contribution of journals, Magazines, text book and seminar paper.

TABLE OF CONTENT

COVER PAGE I

TITLE PAGE II

APPROVAL PAGE III

DEDICATION IV

ACKNOWLEDGEMENT V

ABSTRACT VI

TABLE OF CONTENTS VII

CHAPTER ONE

1.0 Introduction 1

1.1 Statement of problems 6

1.2 Purpose of study 8

1.3 Significant of the study 8

1.4 Scope of study 9

1.5 Limitation of study 10

1.6 Definition of terms 10

CHAPTER TWO

2.0 Literature review

2.1 Contribution of indigenous

commercial bank 13

2.2 Attitudes of commercial banks to

industrial development 15

2.3 Activities, growth and development

of commercial bank 16

2.4 Problems encountered by

commercial banks in rural development 18

2.5 Prospects of commercial banks in

industry (Anambra state) 21

Chapter three

3.0 Summary 23

3.1 Conclusion 24

3.2 Recommendations 25

BIBLIOGRAPHY

CHAPTER ONE

INTRODUCTION

To facilitate an assessment of the role of commercial banks in industrialization, it is considered useful to describe the various types of bank operations in Nigeria. This will enhance understanding of the environment in which the banks operate. Thereafter, the basis of assessment will be considered along with statistic of actual performance over a period of time, against expectation in the context of the global situation.

Broadly, there are five types of banks in Nigeria:-

1. The Central Bank of Nigeria (CBN): this is the bankers to all banks.

2. The Development banks: There are three types of development banks, they are as follows:

a. Federal mortgage Bank: Promotes the development/financing of housing.

b. Nigeria Agriculture and co-operative bank (NACB): has its functions as the development of Agricultural industries.

c. Nigeria bank for commerce and industries: For the development of commerce and industries for especially the small to medium sides ones.

3. Saving Bank: To encourage the saving habits especially among the low income earners both in the urban and rural area e.g. Federal Saving Bank.

4. Commercial banks: Which operate in network and details of financial services and products.

The first three categories of banks, that is the central bank, the development bank and the savings bank are unique in the sense that they are all owned and controlled by the Federal government of Nigeria, although some outside equity is involved in the case of development banks.

As government owned banks, they have been set up to achieve specific objectives which are profit oriented but principally, they promotes specific ends such as development, control, promotion and regulations of economic activities in the country.

The last two categories commercial and merchant banks involve private initiative and participation. These two categories of banks are also segmented into, these with rather strong international base and those wholly indigenous banks owned wholly by the state government.

A phenomenon of the banking industries in Nigeria is recent explosion in the number of new commercial banks usually with the equity wholly owned by Nigerians or with majority shareholding by Nigerians.

These new banks are also generally managed by Nigerians carriers through the erstwhile of foreign owned banks. Traditionally, it has been determined that no action developed without commercial banking in her economy. It has been indicated that commercial banking constitutes the major parts of a nation's financial system.

Nigeria, thus, joined in the liberalization of the growling of operational licenses for banking. Apart from the liberalization of banking lecince which "Adekanya Femi" praised as a thoughtful decision he also said that government decision to Nigerians the top scholar of the banking industries was a most progressive, patriotic and timely decision.

The Indigenization decree of 1997 which her aided the Nigeria leadership of banks in Nigeria. in a Chikaya's opinion its partly responsible for the tremendous growth recorded in the banking sector in the recent time. No wise government will leave such a sensitive sector as the banking industry to the whim and caprices of foreigners he said. Although, he admitted that the banking industry had grown sizable since the indegenization policy, he opened that by his own standards, the development here been rather slow.

Femi Adekanya Business concord page 19 (1989), Adekanya explained that liberalization of the licensing of bank will bring improvement in the service rendered by existing banks. Through competition, every bank will continue to loose customers which will put the bank in a very tight corner. It may then lead to the collapse of the banks.

In consideration of the establishment of more commercial banks which enhance idustrialization, the researcher quotes Femi Adekanya: "As a firm believed in free enterprises government should continue to license more banks". He also quote: I do not think it is time to help stop when you look at the strategic and compare our population to number of banks currently in operation, you will discover that we need more banks. He gave the customers to banks ration in the country as 6400:1 which we compared with that of developed countries and concluded with that we need more banks. He preferred indigenous commercial banks to merchant bank because commercial banks can grow in urban area and thereby contributing to growth of the economy through industrialization, more easily as opposed to merchant banks.

More emphasis, should be placed on the opening of more branches by the existing commercial banks in Nigeria. Banks appear to be under branched in addition to the nation itself being under banked.

STATEMENT OF PROBLEM

Apart from the non-profit organization, every other business nature operates with the motive of making profit for the desired level of profit to be realized, in the banking sector or manufacturing industries, government policies must be rather friendly for smooth operation to be achieved.

Nigeria like many other developing countries is highly under bank. This is manifested in the large number of people per bank. Banking is not yet developed amongst the rural area because of the low level of literacy and African culture that exhibits such development exhibits such development. the commercial bank seem to avoid the establishment of branches in the rural areas as a result of the absence of industries in the area, coupled with absence of banking habit among the populace which will ultimately hinder development through industrialization. This has paved way for the establishment of community bank.

Industries sustain from loans and allowances which they receive from commercial banks at a very minimum interest rate to boost development through individualization. Worse also is the fact that those loans when granted, repayment are slummed at all cost, and this has increased the level of bad and doubtful dept to banks. To the industries sometimes, collapse and closure is always the care after declared bankrupt.

However, some problems that are inherent in the Nigeria socio - economic and political system create difficulties for Nigerian indigenous commercial banks as a result in fact industries are affected.

1.3 PURPOSE OF THE STUDY

The main purpose of this work is to thoroughly define and identify the contribution made by commercial banks towards industrialization in the state.

It is hoped that on complexion, the researcher shall have meaningfully appreciated the topic of study, recognize its problems and finally attain a reasonable conclusion.

1.4 SIGNIFICANCE OF THE STUDY

It is the contention of the researcher that this research study shall be of value to industrialists and commercial banks, future academic in this area, and interested individuals outside the corporate organization.

To the banks and industries, management may retort to implementing some of the recommendation to their advantage. Also, the study would enable government to know allure their attention is need on politics and other measures.

1.5 SCOPE OF THE STUDY

The researcher does not intend to produce a pamphlet or a text book in the area of the intends to cover only the impact of commercial banks on industries in the state.

To achieve this, the researcher shall x - ray the role played by the banks, the attitude of the industrialist and its impact on the commercial banks and the industries.

However, text books shall from time to time be resorted to make certain point clear.

1.6 LIMITATION OF THE STUDY

The major limitation of this study was the failure of some banks and industrialist to disclose relevant facts and data that would enhanced a district quality of this work. Also posed its constraint is fund, as a result the researcher could not get to most of the industries to see things himself.

1.7 DEFINITION OF TERMS

Terms can mean many things or different people on the perspective in which one views it. But considering our main focus, we will divulge everything about terms in the area of conditions offered or accepted.

Therefore, we have different types of terms as used in business, first of all, let us hock at:

TURN OVER

This is used to explain the sum total income accumulated as a business resulting from sales completed or services rendered. Turnover helps to determine the state of the business. In this since, we mean whether the business is progressing or retrogressing. Turnover also helps to ascertain the reduction in activity of the business following a fire.

Variable charges

This term are charges which vary in direction proportion to the business activity. Thus, if production per say 25%, the purchase of raw materials will also be reduced by the same percentage. This also arise in respect of items like the cost of packing material for finished goods and payment to transporter for the carriage and delivery to consumers of such goods. In the event of a total disruption of business of a fire or other inspired risks, such variable charges can also no buyer be incurred and will therefore, not result in any loss to the insured.

Standard charges

If related to those administrative cost which will still be incurred despite a reduction in production or trading. This include such items of cost as rent and rates payable in respect of the premises occupied for the business, and the interest payable on debentures, mortgages, bank over draft, and loans together with the related bank charge.