Assessment Of The Contribution Of Commercial Banks To Economic Growth In Nigeria

Assessment Of The Contribution Of Commercial Banks To Economic Growth In Nigeria

Abstract

The study concentrated on the benefactions of marketable banks to profitable growth of Nigeria. The specific objects of the study include to examined the effect of marketable bank loans on the gross domestic product, to ascertain relationship between marketable bank and total profit in Nigeria, to determine the correlation between marketable bank and total financial asset of Nigeria, and to explore the marketable bank on the net public income of Nigeria. Data for the study were sourced through CBN Annual report and journal papers which related to the subjects matter. The data collected were anatomized using SPSS. The exploration findings are marketable bank loans had a positive and significant effect on gross domestic product, marketable bank loan had a significant effect on total profit in Nigeria, marketable bank loan has a significant effect on net public income in Nigeria, marketable bank loan had a significant influence on total financial asset in Nigeria. Grounded on the findings the experimenter recommends that marketable banks should rethink and review their objects, programs and functional strategies, seek new request niches innon-traditional conditioning and fight for larger request shares.

Chapter One

Preface

Background of the study

Nigeria is the most vibrant African country with a population of about 140 million people. This represents about 20 of the population of the entire African mainland. The country is also one of the world’s top eight directors of crude oil painting in the world. The recent Composition IV Report( 2008) on the country posited that the frugality is likely to be part of the arising request in the world. still, despite the below submission, the country is amongst the poorest husbandry. The position of this country makes it ever important to examine the donation of the fiscal sector to the torrent of growth within the frugality. In substance, can we say that the fiscal institutions are well deposited to help the frugality in promoting growth thereby perfecting the well being of the crowd?( Oluitan, 2010).

The significance of fiscal institutions in promoting growth within the frugality has been extensively bandied in the literature. Beforehand economists similar as Schumpeter in 1911 linked the significance of banks in easing technological invention through their central part. He believed that effective allocation of savings through identification and backing of entrepreneurs with the stylish chances of successfully enforcing innovative products and product processes are tools to achieve this ideal. Several scholars later( Fry, 1988; King & Levine, 1993; McKinnon, 1973; Shaw, 1973) have supported the below assumption about the significance of banks to the growth of the frugality.

There are a number of reasons why the fiscal sector and its conditioning may impact the rate of profitable growth. fiscal interposers channel coffers to the most profitable sectors of any frugality. According to Nzotta( 2004), fiscal institutions channel coffers from supernumerary profitable units to deficiency units for investment purposes. This consists of the provision of loans and advances to the private and public sectors for the purpose and for the growth of domestic affair and creation of the import trade, agrarian product and provision of structure. also, Jhingan( 2004) argues that banks in developing husbandry play an effective part in their profitable development. He says there’s acute deficit of capital. People warrant the action and enterprise. Means of transport are uninhabited. Assiduity depressed. fiscal institutions help in prostrating these obstacles and promote profitable development. fiscal interposers cover directors and ply commercial control upgrading moral hazard threat. In particular, by furnishing liquidity, fiscal institutions permit threat antipathetic saviors to hold deposits rather in liquid but unproductive means. This rallying of savings allows increase in the quantum of coffers available to entrepreneurs.

The part of fiscal institutions in profitable growth has attracted the attention of experimenters and policymakers in the last century. There’s a large body of literature, both empirical and theoretical, which have examined this issue. The findings of these studies aren’t without contestation; while some studies find that fiscal institutions development has been necessary in accelerating profitable growth, others have suggested that it has not been veritably significant. According to Beck et al( 2000), Bekaert( 2005), a long list of scholars posit, a unproductive association between finance and profitable growth. La Porta et al( 2000) argues that well advanced capital requests especially those invested with rights that cover investors — promote the effective allocation of capital to systems with high rates of return, in turn stimulating savings, investments and profitable growth. substantiation from both single country( Guiso, Sapienza and Zingales( 2004) andcross-country( Levine, 2006; Demirguc — Kurt and Levine( 2001) studies suggest that husbandry with further advanced marketable banks begin to grow before, attain advanced growth rates, and achieve advanced situations of per capita income than husbandry with lower developed marketable banks.

The Levine( 2005) and Beck( 2009) argue that the positive effect of fiscal development over profitable growth can be explained by five mechanisms, whose operations reduce the negative impact of information asymmetries among profitable agents and the sale costs involved in their conditioning. According to them, fiscal system( 1) provides means of payments that facilitates a lesser number of deals’,( 2) concentrates the savings of a large number of investors,( 3) makes possible the allocation of coffers to their most productive profitable use, through the effective evaluation and monitoring of investment systems,( 4) improves commercial governance, and( 5) contributes to threat operation.

The fiscal sector of any frugality in the world plays a vital part in the development and growth of the frugality. The development of this sector determines how it’ll be suitable to effectively and efficiently discharge its major part of marshaling fund from the fat sector to the deficiency sector of the frugality. This sector has helped in easing the business deals and profitable development( Aderibigbe 2004). A well advanced fiscal system performs several critical functions to enhance the effectiveness of intermediation by reducing information, sale and monitoringcosts.However, it’ll enhance investment by relating and funding good business openings, mobilizes savings, If a fiscal system is well developed. All these affect in a more effective allocation of coffers, rapid-fire accumulation of physical and mortal capital, and briskly technological progress, which in turn results in profitable growth.

Development in the real sector, as noted by Ajayi( 1995), influences the speed of growth of the fiscal sector directly, while the growth of the finance, plutocrat and fiscal institutions impact the real frugality. The profitable growth is a gradational and steady change in the long- run which comes about by a general increase in the rate of savings and population( Jhingan 2005). It has also been described as a positive change in the position of product of goods and services by a country over a certain period of time. profitable growth is measured by the increase in the quantum of goods and services produced in a country. An frugality is said to be growing when it increases its productive capacity which latterly yield more in product of further goods and services( Jhingan 2003). profitable growth is generally brought about by technological invention and positive external forces. It’s the mark for raising the standard of living of the people. It also implies reduction of inequalities of income distribution. Oluyemi( 1995) regards the fiscal sector of any frugality as an machine of growth that could greatly help in the creation of rapid-fire profitable metamorphosis. It can be concluded that no frugality can ever develop without an perceptible growth in the fiscal sector. An effective fiscal system is essential for erecting a sustained profitable growth and an open vibrant profitable system. Countries with well advanced fiscal institutions tend to grow briskly; especially the size of the banking system and the liquidity of the stock requests tend to have strong positive impact on profitable growth( Beck and Levine, 2002 in Nnanna, 2004).

Statement of the problem

The Nigerian fiscal sector, like those of numerous other less advanced countries, was largely regulated leading to fiscal disintermediation which braked the growth of the frugality. The link between the fiscal sector and the growth of the frugality has been weak. The real sector of the frugality, utmost especially the high precedence sectors which are also said to be profitable growth motorists aren’t effectively and efficiently serviced by the fiscal sector. The banks are declaring billions of profit but yet the real sector continues to weak thereby reducing the productivity position of the frugality. utmost of the drivers in the productive sector are folding up due to the incapability to get loan from the fiscal institutions or the cost of borrowing was too outrageous. The Nigerian banks have concentrated on short term lending as against the long term investment which should have formed the bedrock of a mannish profitable metamorphosis.

Since the relinquishment of the Structural Adjustment Programme( SAP) in 1986, in an attempt to quicken the recovery of the frugality from its deteriorating conditions, a great deal of interest has been shown in the conditioning and development in the fiscal sector. This is so because the restructuring of this sector was a central element of the SAP reform.

There have been several studies on fiscal sector development and profitable growth. still, utmost of them consider one element of the fiscal sector in relation to profitable growth. numerous studies have been conducted on capital request and profitable growth, banking credit and profitable growth, like wise foreign direct investment and profitable growth. The use of one element of the fiscal sector like capital request or Foreign Direct Investment as a representative of the entire fiscal sector is shy and in applicable. For acceptable analysis to be made for informed judgment to be reached there’s the need for the collaboration of at least three factors of the fiscal sector. To fill this gap thus, this study considered three factors of the fiscal sector comprising banking credits, capital request and foreign direct investment to the fiscal sector together in relation to profitable growth.

Ideal of the study

The end of this exploration work is to assess the benefactions of marketable banks to profitable growth of Nigeria with particular reference to crucial gravestone bank from 2011- 2015. The specific ideal of this exploration work includes the following;

1. To examine the effect of marketable bank loans on the gross domestic product of Nigeria.

2. To estimate the relationship between marketable bank and Nigerian total profit.

3. To ascertain the correlation between marketable bank and total financial asset of Nigeria.

4. To estimate the effect of marketable bank on the net public income of Nigeria.

Exploration Questions

Grounded on the below objects the experimenter asked the following questions;

1. To what extent does marketable bank affect the gross domestic product of Nigeria?

2. What are the connections between marketable bank loan and Nigerian total profit?

3. Is there any correlation between marketable bank loan and total financial asset of Nigeria?

4. What are the goods of marketable bank loan on the net public income of Nigeria?

Expression Of Suppositions

The experimenter developed the following exploration suppositions to guide this exploration work;

Ho Commercial bank loan doesn’t have any significant effect on the gross domestic product of Nigeria.

H1 marketable bank loan has significant effect on the gross domestic product of Nigeria.

Ho There’s no relationship between marketable bank loan and Nigerian total profit.

H1 There’s significant relationship between marketable bank loan and Nigerian total profit.

Ho There’s no correlation between marketable bank loan and total financial asset of Nigeria.

H1 There’s correlation between marketable bank loan and total financial asset of Nigeria.

Ho Commercial bank loan doesn’t have any significant effect on the net public income of Nigeria.

H1 marketable bank loan has significant effect on the net public income of Nigeria.

Significance Of The Study Success

This exploration work will be of immense help to

The Experimenter it’ll help the experimenter to know more on the benefactions of marketable banks to profitable growth of Nigeria.

Stake Holders It’ll also be of great significance to stake holders in Nigerian fiscal institutions as it’ll enrich their knowledge on the colorful benefactions of commercials banks to Nigerian Frugality.

marketable Banks This will inversely be of help to marketable banks as it’ll serve as an eye nature on their colorful benefactions to the development of Nigerian frugality.

The Country This study will be of great significance to the country Nigeria as it’ll help the policy makers to prorogate laws that will enhance the benefactions of marketable banks in Nigeria.

Compass Of The Study

This exploration focuses on the benefactions of marketable banks to profitable growth of Nigeria with particular reference to crucial gravestone bank from 2011- 2015.