1.1 Introduction 1

1.2 Statement of the Research Problem 3

1.3 Aim and Objectives of the Study 4

1.4 Scope and Limitations of the Study 5

1.5 Research Methodology 6

1.6 Sources of Data 6

1.7 Significance or Justification of the study 7

1.8 Organization of the Study 8


2.1 Literature Review 10

2.2 Functions of the Various Departments 14

2.3 Central Bank and Credit Creation of Commercial Banks 20

2.4 Procedures for Creating Credit Facility 22

2.5 Reason for Credit creation by the Commercial Banks 24

2.6 Credit Management in Commercial Banks 24

2.7 Step in Credit Management 25

2.8 Principle and Practice guiding Lending at Zenith Banks 25

2.9 Credit administration and Securities acceptance to 

Zenith Bank Plc 27


3.1 Brief Historical of The case Study 30

3.2 Restatement of the Research Question and Hypothesis 32

3.3 Procedure for Processing Collected Data 41

3.4 Research Methodology 43


4.1 A Brief Introduction of the Chapter 44

4.2 Presentation and Analysis of Data According 

      to the Research Question 45

4.3 Problems encountered by Zenith Bank of Nigeria Plc 

      as regard credit created 49


5.1 Findings 52

5.2 Observation 52

5.3 Summary 53

5.4 Conclusion 54





A commercial bank can be defined as an institution that accept deposits from customer and repay cash on demand. It can also be defined as financial institution that accepts deposits and other valuables from the public for safe keeping with the sole aim of making profit.

The idea of banking system was introduced in Nigeria 1892 with the establishment of an Africa banking co-operation. Another one was established in 1894 which was named British West Africa Bank. The British West Africa bank was later changed to chase merchant bank to become Standard Bank of Nigeria. In 1899, bank of 1917, Nigeria bank comes to existence but later, it was taken over bank of British West Africa in 1912. In 1917, it was the establishment of Nigeria Barclays bank.

The first indigenous bank came into existence in 1929, which was named Industrial and Commercial bank. Also, in 1931 witnessed the establishment of Nigeria Merchant Bank. Although, it was later closed down due to lack of funds, bad management coupled with large scale corruption.

Furthermore, the national bank of Nigeria was established on a sound footing but, due to greater post war activities, the bank was closed down. In addition between two survived bank which are; Africa Continental Bank (ACB) and Agbomogbe Bank which is now called Wema Bank Plc.

It was a booming era between 1957 and 1952 because eight banks were established but 1954, seven banks were closed down only Merchant bank survived. It was not long that the only surviving bank out of the seven that closed down in 1954 had its license withdrawn by the state government as a result of mismanagement, one misuse of government fund.

All banks in Nigeria were either owned by the state government or. federal government but this trend did not continue to the policy of privatization and commercialization embarked upon during Babangida’s Administration in 1989.

Commercial banks play very important roles in the allocation of fund to individuals and business organizations in the society.

One of the principal functions of commercial banks is the creation of credit facilities which is the process of distributing and disbursing of fund to potential user, at favourable terms and condition and making sure that the funds are effectively utilized to ensure the anticipation benefit to borrowing and lending banks.

Credit facilities are being enjoyed by the account holder i.e. individual and business organization respectively. It can be listed that traditional function of banks is financial intermediation i.e. their real is concerned with the monetary aspect of the economy which involve the mobilization of fund from savers scattered in the society and there are transfer as a credit to investors.

There are average business entrepreneurs who could not or were able to raise enough funds from their trade for expansion purpose or from other sources like through friends and others.

Their last result therefore, is to source for fund from the commercial bank which play little to the plight of the borrower.


The commercial banks in credit creation face some difficulties due to high level of illiteracy, which lead to many losses of funds. There is thus, a continued deterioration of the cua1ity of risk assets held by them. Commercial banks are generally the life wire and cornerstone of all economic and any nation and no economy within this present dispensation can survive without commercial bank.

The major factors that led to failure and distress of many commercial banks in Nigeria of recent is government frequent interventions. Despite the huge and various policies of the government on credit creation, the Nigeria economy seems not to have shown any meaningful development in terms of credit utilization.

The research work is there after embarked upon to address the various problems associated with credit creation in commercial banks and how those banks can reduce the incidence of bad debts and poor management of credit facilities. If this situation is not  properly addressed, the ability of the commercial banks in meeting their customers financial needs and contribute to economic growth may not be achieved.


The aims of this research are to know the purpose of creating credit by the commercial banks which include the following:

i. Increasing the purchasing power of the people.

ii. Increasing the volume of money in circulation.

iii. It enhances industrial expansions.

iv. It helps a business man in his day to day activities.

v. It helps in development of agricultural sectors.

vi. It helps in financing both foreign and home trade.


This study will be concerned with the procedure of creating credit facilities, the administration and problems encountered by commercial bank on credit creation and also with collection procedure.

Zenith Bank Plc as a case study, the bank was established in 1917 and since its establishment in 1917, the bank has stood out strongly as a resilient institution which has served as variable in the financial intermediation process in Nigeria Financial System. So, Zenith Bank was visited to collect the necessary material and interview a cross section of their customers.

The cost of writing material aid other stationeries are also one of the constraints, facing the researcher.

Another limitation was sufficient for collection of data in writing the project work and combining it with academic work. Also the, reluctance of some respondents to let out certain “secret’ about the organization is reason for limitation to case study.


Research methodology is processes of finding out a solution to a problem through a research work problems are identified and recommendations are suggested.

According to Osuala (1982) ‘Research is the process of arriving at dependable solution to problems through the planned and systematic collection analysis, and interpretation of data”.

Data is information often in numerical form which has been collected for statistical purpose. In this study, the word data is used to refer to fact, figures or pieces of information pertaining to Zenith Bank of Nigeria Plc.


The basic sources of data employed in carrying out the research work are both from primary and secondary data model to achieve the objectives of the study.

(i) The Primary Data: This consists of data collected by the researcher through oral interview with the staff members of credit creation department of Zenith Bank Plc, Unity Ilorin branch. Personal interview is one of the primary data collection techniques used in research methodology.

Interview, enables direct contact between the researcher and the respondents.

(ii) The Secondary Data: This is the main source of data collected for the purpose of the study. This include the review of the amount report at Zenith Bank of Nigeria, Plc.

The secondary data shows the numbers of credit created per annual, this was collected from the credit creation department of Zenith Bank Plc, Ilorin Unity branch. It shows a general upward increase in the number of numbers of credit creation.


The significant of this study is to examine the impact of credit management. It intends to show the risk of return relationship that gives services through credit creation. This study will highlight the purpose of various types of credit which the commercial bank gives. Basically, through this study prospective credit user will understand the types of credit which commercials bank grant.

Zenith Bank of Plc, will examine with a view to provide way by which bad debts crisis can be minimized and lending structure strengthening and consequently show the macro-economic implication associated with credit creation management in commercial bank.

The recommendation of this study will be of immerse advantage to the banking industry in particular and the Nigeria economy as a whole. This study may also be referred to in the nearest future by researchers who may be willing to go into related study in which it can be used as a source in the literature review.


This simply gives the use of a clue to know how the researcher report will be arranged for easy and proper organization; the research will be segmented into five chapters as follows:

Chapter one contains the background of the study, statement of the problem, justification of the study, scope of the study, research methodology, source of data and organization of the study.

Chapter two centers on related Literature having direct bearing to the study by different authors. This will be reviewed with emphasis on theoretical background of the study and the state of knowledge and research on the topic.

Chapter three which is the methodology, focuses on the data collected and statistical tool used in analyzing the data.

Chapter four presents the result of this study based on the result, the test of hypothesis and the interpretation. It also reveals the analysis of data collected.

Chapters five contains the summary of the work and concludes this study and make recommendations for further research.



According to J. Kick Bark, the process of expansion might also occur because of improvement but a channel of communication between potential saving and potential real investment.

Capital investors while insuring the liquidity of the surplus units place deposits with banks.

This reasoning augurs well both for the Keynesian model of economics development with basis :r investment engineered growth and the pure classical micro economics developed which stress increasing voluntary saving.

Both complements each oilier in the sense that units with surplus funds provided bank deposits that could be used for credit creation through borrow red capital without waiting to save up equivalent amounts.

David D. Goachur bock of economic according to miss-contribution that bank deposit of come into existence when either a customer makes a deposit of cash at bank or a bank creates a credit(deposit) as the counterpoint to purchase of an asset(usually loan).

When a member of non-bank private sector puts cash into a bank deposit, which it may be assured in pr1 of We money supply but as the cash removes from circulation, the act in itself does not raise the total money supply. The effect is merely to swap one type of money asset for another.

The creation of money by banks occurs when they create deposit to lend customers. Basically, if an individual goes to his bank and succeed in obtaining loan, it is improper that he should be given cash directly. The usual occurrence is that the borrowers account is credited with the amount of loan. This effectively a ledge early tends to the creation of bank money.

The borrower is then able to spend the fired by drawing cheque  against the bank’s created deposit, which is virtually as good as cash, due to the accepted norms of the modern financial system.

However, the bank cannot create deposit without money as experience show that a portion of bank deposit (whether the original cash depends made by customers or the deposit created by the bank as the counter part to loan) are likely to be drawn in a cash at some stage.

There are criticisms options and ideas put forward for mode operation of commercial banks. There were many average business entrepreneurs that could not be able to reserve enough funds from their trade for expansion purpose or from other sources like through friends and others. Their last result is to get funds from commercial banks where they pay little attention to the plight of borrowers. It is also necessary to note that commercial banks favours short-term lending, so funds advances on overdraft are theory repayable on outstanding balance on a daily basis.

Commercial banks grant overdraft facilities to balance customers, large, corporate bodies and medium and small scale industries. It has been generally noted that the rate of interest charge differs from one bank to another.

This is so because the amount of money given out as loan and advance differ from one bank to another.  Examples of credit facilities include loan, advance, overdraft, commercial paper, bank acceptances, bill discount, guarantee and uses e.t.c.

Bank credit risk can be classified as:

a. Performing

b. Non-performing

Credit facilities are deemed to be performing of payment of both principal and interest when they are up to dare in accordance with the agreed repayment term.

A credit facility is deemed as non-performing when any of the following condition exists:

i. Interest of principal is due and un-paid for 90 days or more.

ii. Interest payment equal to 90 days interest or more has been capitalized, reschedule or rolled over into a new loan before a credit facility already classified as non-performing when the borrower must effect cash payment such as outstanding unpaid does not exceed 90 days.

a. Substandard: credit facility can be regarded as substandard if unpaid principal or interest remains outstanding for at least 90 days but less than 180 days and are not occurred by legal title at least of perfected realizable collateral in a collection realization.

b. Doubtful and credit facility: can be called doubtful if unpaid principal and interest remains outstanding for a least 180 days but less than 360 days and are not occurred by legal title at least asset or perfect realization collateral in a process of collection realization.

c. Cost facility: are classified as lost where in paid principal or interest remained outstanding for 360 clays or more and are not scored by legal title least asset or perfect realization collateral or realization.



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