Effect Of Government Policy ON Commercial Banks Lending Ability
Chapter One
Preface
This chapter deals with the aft ground of the study, statement of problems, objects of the study, exploration question, significance of the study, thesis, compass limitation of the study and description of particulars.
Background Of The Study
The banking system in Nigeria has experienced radical changes during the 35 times since independence. Banking developed from an assiduity which in 1960. was dominated by a small number of foreign possessed banks into, one in which public sector power predominated in 1970s and 1980s and in which Nigeria private investors have played an decreasingly important part since the medial 1989’s government polices had a major influence on developments in the banking assiduity. expansive government intervention characterized fiscal sector programs beginning in the 1960s and enhancing in the 1970s, the ideal of which was to impact resource allocation and promote indigenisation. Since 1987 fiscal sector reforms have been enforced, encompassing rudiments of liberalization and measure to enhance prudential regulation and attack bank torture.
The effect of government polices on the marketable bank lending in Nigeria in the period since independence all examine how banks were affected by public power and polices of fiscal suppression the reasons behind the growth of Original Private sector banks, to causes of the backing torture in the banking assiduity and the efficacity of fiscal reforms accepted. We aim to explore two affiliated issues first, that government control on fiscal requests. Public power of banks and the neglect of prudential regulation as opposed to allocative regulation had detriment goods on the banking lending, especially in terms of the quality of banks loan portfolio. effectiveness and competition second, that the efficacity of fiscal liberalization and other fiscal sector reforms to enhance the effectiveness of intermediation in banking request has been limited. In part because of the heritage ofpre-reform intervention ion banking lending, which left large sections of the banking assiduity in fiscal torture, but also because some of the reforms were erroneously sequenced and other weren’t enforced in a correspond ant manner.
On the marketable banks. Although other fiscal institution have been set up in Nigeria including development finance institution( DFIS), insurance companies and plethora of finance houses, hire purchase companies and mortgage companies, banking dominates the fiscal and trafficker banks together reckoned for 85 percent of the total asset of the surfaced during the 1980. Some of these banks were set up banks by state governments but the maturity were stated by Nigeria private investors. The tensive growth of the original private banks was veritably rapid-fire after 1986, particularly in trafficker banking sector by 1992 there were 66 marketable banks operating in Nigeria. Despite the growth of new entrants still the three largest banks have retained their dominance of banking request, counting for 48 percent of the total deposits of the marketable banks while Afric bank accounts for a farther 7 percent.
The banking assiduity has been tormented by wide spread fiscal fragility nearly half, the total number of banks in operation, were regarded as worried or potentially worried by the nonsupervisory authorities in 1995. The state government possessed utmost of the worried banks.
Statement Of The Problem
The terrain in which marketable banks operate has been the direct result of the banking sector has been subject to expansive regulation of the banking sector of the Nigerian government lending. There’s competition among banks andnon-banks fiscal institution. It’s now the survival of the fittest the central bank of Nigeria as well as direct participation by the civil government and state government during the post independence period profitable nationalism and experimental bournes were important provocation for interventionist polices. The character of these polices was that of fiscal suppression in that control depressed interest rate and cancelled coffers down from areas where private rate of return would have been maximized. The allocate control have been liberalized to some extent since 1986, although controls over lay areas remain in force. This section figure the sweats made by the Union Bank of Nigeria to impact coffers allocation in banking lending through the use of executive controls polices pertaining to public power of banks.
The denotation of banking by aboriginal banks during the social period provoked considerable resentment among Nigerian, including businessmen and politicians. The aboriginal banks were perceived as acting solely in the interest of their foreign possessors rather than in Nigerians and of the Nigerian frugality in particular they were indicted of differencing against indigenous businesses in the allocation of loans and falling to finance the experimental requirements of the country, rather concentrating on the provision of short term loan related finance to foreign companies. Accordingly government ideal following independence included securing lesser original control over the banking lending and icing advanced access to credit for indigenous businesses and precedence sector.
During the 1960s the union bank of Nigeria was given expansive powers to regulate the volume cost and direction of bank credit. These powers were used to further financial control a precedence throughout utmost of the post independence period because of inflationary pressures in the early 1990s by the allocation of stabilization securities by the Union bank of Nigeria to those banks with redundant liquidity. The consequence was a reduction in the aggregate liquidity of the banking system which contributed to a sharp rise in interest rates on after bank deposit. Inter bank rates rose to us percent the vacuity of finances on the inter bank request lowered sprucely when some banks began to overpass on their inter bank lending obligation. As the scale of the fragility in the assiduity come apparent depositors withdraw finances from banks suspected of being more secure. The difficulties involved in deposit rallying combined with the non servicing of a large share of their loan portfolios meant that the worried banks came decreasingly illegal and overblown on their accounts with the union bank of Nigeria.
The problem in the effect of lending have effectively mustered deposits for the banks, this work is aimed at chancing the night answer to the question raised.
Ideal Of The Study
The purpose of the study is to find out.
1. Effect of advancing policy on marketable bank capability to grant loan.
2. to assess the effect of government policy on affectation rate in the country.
3. still, in any way reduce affectation in the country, if financial policy will.
4. how government policy on marketable bank affect its capability to grant loan
Exploration Questions
1. How does lending policy affect the marketable bank capability to grant loan?
2. Did government policy affect affectation rate in their country?
3. How does financial policy affect affectation?
4. How does government policy on marketable bank affect its capability to grant loans?
Exploration Thesis
1. Ho Lending policy doesn’t affect the marketable bank capability to grant loan.
Hi Lending policy affect the marketable bank capability to grant loan.
2. Ho Government policy doesn’t affect affectation rate in the country.
Hi Government policy affect affectation rate in the country.
3. Ho Monetary policy has nothing to do with affectation.
Hi Monetary policy has commodity to do with affectation.
4. Ho Government policy on marketable bank doesn’t affect its
capability to grant loan.
Hi Government policy on marketable bank affect its
capability to grant loan.
Significance Of The Study
The study is significant for the fact that numerous banks has been introduced and further are listed to hit the loan government progress on its sweats.
It’s of great significance to the operation in the banking lending in that it would enable them assess the degree of the successes of their banks and be suitable to identify empty bones . It’ll also serve as the first information for new moneybags in the bank and those intending to advance some. In determining their targets in bank lending, again it’ll be salutary to pupil in banking and finance and exploration who may be interested in this area of study.
Definition Of Terms
1. MARKETABLE BANKS This is an institution set up to do banking business accepting deposit from public and make profit by advancing plutocrat out of the public.
2. LENDING The paying of plutocrat to the client by a bank with interest on the ground that similar bank has enough security to back up similar loan when the due time is progressed.
3. INTER BANK CLEARING This is an arrangement by which banks settle instrument drawn on them by their client in the clearing house, representatives of marketable bank deliver cheques drawn on other banks and admit instruments drawn on them by the bank.
4. LIQUIDITY The liquidity of an means means the ease with which it can be turned into cash with certainty a bank has to keep acceptable volume ofnon-earning means similar as, cash call plutocrat, storeroom bills and other short term growing instruments in its portfolio