AN INVESTIGATION OF THE CONTRIBUTIONS OF COMMERCIAL BANKS TO THE ECONOMIC DEVELOPMENT OF NIGERIA
- Project Research
- 1-5 Chapters
- Quantitative
- Regression
- Abstract : Available
- Table of Content: Available
- Reference Style: APA
- Recommended for : Student Researchers
- NGN 3000
BACKGROUND OF THE STUDY
Nigeria as a nation is characterized by a developing economy because the various sectors responsible for economic development are not optimally utilized, as a result of which we have not been able to fully tap the natural resources that Nigeria is endowed with as it could increase our national earnings, resulting in an increase in per capita income. We are in an opposite position, with low per capita income. A low quality of life raises the amount of insecurity, for example.
Economic growth is the first job on any government's priority list. Nigeria, like other countries throughout the world, is not exempt. Banks, particularly commercial banks, play an important role in keeping the country's growth on track. It is important to note that the banking industry, of which the commercial bank is a key example, is the basis of any economy at this juncture. In reality, no country in the world today can claim to have developed or proven development without the sufficient and timely input of commercial banks.
However, one of the biggest impediments to economic progress in today's countries is a lack of money. In this aspect, commercial banks act as intermediaries between individuals in need of finance and those ready to save and make the money accessible to investors. They are intended to offer significant loan facilities and transfer voluntary savings into productive channels to some extent. Furthermore, they are to provide technical guidance to industrialists through feasibility studies, ensuring that investments are made in the proper direction.
Furthermore, there are various agencies/sectors involved in economic development, but the commercial banks are the sector that stimulates growth and development in the Nigerian economy. Perhaps the most significant duty of commercial banks is to combine savings and surplus liquidity from millionaires or rather millions of individuals and enterprises inside the country and make them available to those who need them for various purposes.
Economic development necessitates persistent improvements in social welfare that are prevalent across society, therefore contemporary economic progress that is contained to a tiny sector within a growing culture, especially if dominated by a non-indigenous population, is not economic development. Economic development necessitates that contemporary economic progress influence a larger section of the whole population in a way that improves their well-being. It requires meeting fundamental requirements, accelerating economic growth, reducing inequality and unemployment, eliminating absolute poverty, and changing mindsets. The purpose of the rules mentioned above, which prompted the founding of commercial banks in Nigeria, is to satisfy the citizens' ambitions. The work of this research is to determine the contributions that commercial banks have made to the growth of the Nigerian economy.
1.2 STATEMENT OF PROBLEM
The role of commercial banking system as it relates to economic growth of a nation has been empirically attested for positively in the literature (Yakubu and Affoi, 2014; Aurangzeb, 2012; Olokoyo, 2011; McKinnon, 1973; Shaw, 1973; Schumpeter, 1911). This it does from the enormous and impeccable growth-inducing functions this financial sub-sector plays in the development of an economy. Moreover, this ideal channel of growth has been accepted within the Nigerian context, which has motivated series of banking reforms and laws in the banking system in order to create a competitive, resilient, vibrant and healthy commercial banking system. For instance, the establishment of the Central Bank of Nigeria in 1959 to regulate the activities of commercial banks; the indigenization policy of 1977, which paved way for Nigerians to become active participants and to halt capital flight out of the sector needed for further expansion; the financial liberalization starting from the mid80’s (during the SAP period) that brought in an explicit partial deregulation of the sector to encourage healthy competition and marketbased/oriented financial sector as well as series of other reforms like the recapitalization and consolidation strategy by the Soludo-led administration. However, in spite of these structural changes and remarkable growth observed in the commercial banking sector in terms of the number of banks in operation, bank density and their assets portfolio relative to other non-bank institutions in the financial sector in Nigeria, its performance has remained relatively unsatisfactory with respect to the growth process.
In line with this assertion, Maduka and Onwuka (2013) wrote thus, despite the growth record of banks and non-bank financial institutions in Nigeria, and financial liberalization policy, the Nigeria economic growth is sluggish. The per capita income is less than $4,000. Most of the industries are winding up and thus giving rise to unemployment. At this juncture, it might be necessary for one to ask if the financial market in Nigeria is underdeveloped to support the investment needed to boost economic growth. This may be partly due to dearth of empirical studies which will shed light on how commercial banks can contribute meaningfully to economic growth in Nigeria. In particular, to contribute to economic growth the nexus between growth and investment, quality of service, savings mobilization must be clearly understood through an empirical investigation. This is so far lacking or insufficiently explored.
1.3 OBJECTIVES OF THE STUDY
This study is primarily aimed at examining critically an assessment of contribution of commercial bank to the economic development of Nigeria. Specifically, the study aims to;·
- To explore the relationship between growth and the level of financial intermediation.
- ·Ascertain the impact of banks’ lending interest rate on growth through investment.
1.4 RESEARCH QUESTION·
- What is the relationship between growth and the level of financial intermediation?
- What is the impact of banks’ lending interest rate on growth through investment?
1.6 SIGNIFICANCE OF THE STUDY
Nevertheless, this study is significance in that it tries to analyze the assessment of commercial banking in relation to economic development. In addition, this study will contribute to the existing literature and it will serve as a reference to any researcher or organization who may be conducting research in similar or related field in the future. To the bank, particularly First Bank of Nigeria Plc, it will serve as an appraisal of their performance therefore they can make amendments where they are missing and serving as a means of encouragement where they are doing well. Furthermore, the external users include prospective shareholders the government and the general public can use these project as a way of encouragement. To the shareholders, it can encourage them to invest especially if the bank is performing well. This is because they are sure that they will not run into loss at the end of the day or their investment in stock. To the government, it shall serve as a mirror to see the effect of directives in respect of bank lending and how it affects economic development of the country. And in addition to the government decision and policy it can use the bank as a means of channeling it’s capital project through the bank. To the general public especially customers of the bank due to the sound track record, recorded by the bank in term of service delivery and the safe keeping of customer money and valuables, this study is sure of increasing the level of confidence to the bank customers.
1.7 SCOPE OF THE STUDY
This study investigates the contribution of commercial banks to economic growth in Nigeria using secondary data covering the period of 1980-2016 that were sourced from the Central Bank of Nigeria (CBN).
1.8 LIMITATION OF THE STUDY
Besides time and resources constraint the researcher encountered some problems in the cause of gathering materials and analyzing data. The bank uses unwilling to release all the necessary data for the research work, probably for the fear of competitors. This passed a little problem for the researcher. Information that is vital to this study is considered secret and as such not released. The uncooperative attitude of some respondents which led to the non-return of some questionnaires was another setback to the researcher. The time given to the researcher to complete the research work was limited couple with daily lecture’s, the time allowed for this project is too short considering the academic activities all tied up with a short period of time.
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