EVALUATION OF BANK LENDING PRACTICES AND CREDIT MANAGEMENT IN NIGERIA


EVALUATION OF BANK LENDING AND CREDIT MANAGEMENT IN NIGERIA ( A CASE STUDY OF FIRST BANK)  

ABSTRACT

The recapitalization of the banking sector in Nigeria since 2005 has brought about a total change in commercial bank lending behavior and credit management in Nigeria. With the growth in entrepreneurial activities in Nigeria, the demand for bank loans is at the increase. Small and medium-scale business owners are constantly looking for business credit to expand their operations and sustain their businesses. This gap between business owners demanding for bank loans and the in-ability of commercial banks to totally remedy the situation is disturbing and needs proper attention from the government.

Employees of first bank Nigeria plc, Uyo Branch were used for the study. Findings from the study are limited to First bank plc, Uyo.

Concerning methodology, data was gotten from both primary and secondary sources. Questionnaires issued to respondents constitute the primary source

TABLE OF CONTENTS

TITLE PAGE………………………………………………………………..I

DECLARATION…………………………………………………………..II

CERTIFICATION……………………………………………………….III

DEDICATION…………………………………………………………..IV

ACKNOWLEDGEMENT………………………………………………V

ABSTRACT……………………………………………………………VI

TABLE OF CONTENT……………………………………………….VII

CHAPTER ONE: INTRODUCTION

1.0 INTRODUCTION………………………………………………….1 

1.1 STATEMENT OF THE PROBLEM……………………………… .2 

1.2 OBJECTIVES OF STUDY……... …………………………..……..2 

1.3 STATEMENT OF HYPOTHESIS…………………………………3 

1.4 SIGNIFICANCE OF STUDY………………………………………3 

1.5 SCOPE OF STUDY………………………………………………..4 

1.6 DEFINITIONS OF TERMS………………………………………5 

CHAPTER TWO: REVIEW OF LITERATURE

2.0 LITERATURE REVIEW…………………………………………..7 

2.1. INTRODUCTION………………………………………………….7 

2 COMMERCIAL BANKING IN NIGERIA……………………….8 

2 CHARACTER AND TYPES OF LOANS………………………9 

2 BANKS LENDING POLICIES……………………………….10 

2.5 BANK APPROVAL TECHNIQUES………………………….13 

2.6 THE CAUSES OF BAD LOANS IN NIGERIA COMMERCIAL BANKS…………………………………………………………15 

2.7 PROCEDURES FOR LOAN MONITORING…………………17 

CHAPTER THREE:   RESEARCH METHODOLOGY 

3.0. RESEARCH METHODOLOGY………………………………….22 

3.1 RESEARCH METHODS…………………………………………..23 

3.2 DATE COLLECTION TECHNIQUE…………………………… ..23 

3.3 METHODS OF RESEARCH USED……………………………….24 

CHAPTER FOUR 

4.0 INTRODUCTION………………………………………………26 

4.1 DATA PRESENTATION & ANALYSIS……………………….27 

4.2 LENDING POLICY AND OBJECTIVE OF CASE STUDY……27 

4.3 TYPES OF CREDIT……………………………………………..30 

4.4 CREDIT STATUTORY/REGULATORY REQUIREMENTS….38 

4.5 DISCRETIONARY LENDING POWER…………………….42 

4.6 CREDIT APPROVAL PROCESS……………………………….44 

CHAPTER FIVE 

5.0 SUMMARY, CONCLUSION AND RECOMMENDATION 

5.1 SUMMARY………………………………………………………..46 

5.2 RECOMMENDATIONS………………………………………….47 

5.3 CONCLUSION……………………………………………………55 

5.4 RESEARCH/LIMITATION………………………………………56 

BIBLIOGRAPHY/REFERENCES………………………………..58 

CHAPTER ONE

1.0 INTRODUCTION 

Commercial Banks operate to mobilize deposits from the populace and 

keep. Some in trust payable on demand. Through the performance of this role, Banks act as reservoir for surplus funds and thus lend safe portion of these funds to clients that have genuine needs for them. The banks have special responsibility to ensure effective management of these funds kept in trust with them by depositors. Chester A Rude puts it that the way and manner in which funds are handled “determines whether they are laying a sound foundation or creating future problems for either the borrower, themselves or the economy” If bankers unnecessary withhold credit, the business suffer and so do the economy.

Lending activities are prominent at all levels of our economy, which gave rise to loan management and credit administration. This credit analysis, documentation, disbursements and monitoring of loan to ensure repayment of both principal and interests on due dates becomes pertinent.

One of the goals credit extension is to achieve prompt repayment on due dates thus loan management typically involves credit appraisal and administration.

Lending carries a reasonable portion of resource exposure of commercial Banks in Nigeria. Therefore, the ability of a bank to generate much profit is largely a function of effective and efficient management of its lending portfolio. Due to its trustee status and in order to protect the depositors Nigerian banks are being guided in their operations by so many regulatory bodies in order to avert bad lending and liquidity problems. Operations and prudential guideline by the Central Bank of Nigeria are always in place.

Inspite of measures, which is aimed at protecting depositors and other public interests, the incidence of bad and doubtful debts resulting from lending activities has been on the increase in commercial Banks in Nigeria. This is as a result of negation in the primary objectives of granting credit and profit objectives of banks, hence the need for an appraisal of the present lending and credit administration techniques.

1 STATEMENT OF THE PROBLEM 

Most Commercial Banks in Nigeria are currently being threatened by huge bad debt burden. This incidence has eroded the confidence in the industry and eroded shareholder funds in most cases. Have BOFID (1993) and prudential guidelines helped in arresting these trends? The roles of regulatory framework is analysed to ascertain level of assistance to the financial system.

1.2 OBJECTIVES OF THE STUDY 

In the light of credit polices of commercial Banks vis-à-vis regulatory 

guidelines, this research work has the objectives to evaluate or appraise various techniques in the Administration of Bank lending from the point of disbursement to the point of recovery at the same time identify causes of increased level of bad debt profanation. The research has also identified reasons for bad debts provisioning and recommend appropriate strategies that may be appropriate in reducing debts write off.

The study also has objective of ascertaining credit appraisals and the effect bad debt provisions on income of Commercial Banks.

1.3 HYPOTHESIS: 

1. There is high correlation between lending and Bad debt portfolio in Nigerian Commercial Banks. 

2. The credit policies of Banks and regulatory guidelines if properly implemented can help reduce bad and doubtful portfolios in Nigeria Banks. 

1.4 SIGNIFICANCE OF STUDY 

The current spate of liquidity problem vis-à-vis distress syndrome being experienced in the Banking industry is a function of lending policies and poor credit management. This trend has given rise to colossal losses of shareholders fund and depositors had earned savings.

Therefore this research work is apparently going to be useful to top level managers who may find the recommendation and suggested strategies useful in managing credit portfolios. In similar manner, branch and credit managers will be guided on loan disbursement to ensure strict adherence to lending guidelines and economic analysis of environment.

Banks shareholders would be able to acquaint themselves on the adverse effect of bad debts hitherto covered by management of their respective Banks.

Again students of Finance will find this piece of academic work useful in their academic pursuits.

1.5 SCOPE OF STUDY 

The research work limit itself to one case-study i.e FIRST BANK PLC. The investigation was conducted at Branch level and annual reports material made available to the researcher.

The research focused on lending process before and after disbursement up till final repayments with emphasis on effects, causes and remedies of Bad Debt.

The assumption of this research include the following

(i) That all Commercial Bank grant facilities to worthy clients with high expectation of 100% repayments of principal plus interests 

(ii) That all Commercial Banks in Nigeria are governed by same operational guidelines offered and professional conduct as issued by Central Bank of Nigeria in addition to their internal policies 

The study is limited to facility with repayment tenor of between 1 – 5 years duration.

1.6 DEFINITION OF TERMS 

In order to have a common knowledge and understanding between Research work and the meaning transmitted to its targeted beneficiaries, it beholds that a clear and unambiguous definition of words often used in the study be given. Although the words may have numerous meanings, the one given herein should be regarded as those referred to their usage in this research work.

Some of the “words” are defined as follows.

i) LENDING: A process by which a Bank customer is founds for specified purpose and specified period of time with a promise to repay the amount borrowed and applicable interest. 

ii) CREDIT: This involves giving (receiving) goods or purchasing power now in return for a promise to receive or re-pay the goods or purchasing power later. It is the sale of goods, services or money claims in the present in exchange for promise to pay (usually money) in the future. It includes a power to to repay both principal and interest instalmentally or in lump – sum in the future. BAD AND DOUBTFUL DEBT. This may be defined as a loan or debt, which has become irrecoverable at date of maturity. A loan may be termed bad or doubtful on event of borrowers failure to repay the loans in accordance with terms and conditions of the agreement. 

iii) ANTICIPATORY DEFAULT: On the other hand recognizes the happening of certain events which are ipso factor conclusive evidence of default whether or not the loan or the interest has fallen due” 

(Banking digest and Finance Vol. 5). 

iv) FINANCIAL INTERMEDIATION: This is defined as financial transactions, which bring savings surplus units together with savings deficit units so that savings can be redistributed into their most productive uses. 

v) SECURITIES: This may be defined as something that provides safety, freedom, from danger or anxiety, something valuable for example a life insurance policy given as pledge for the repayment of a loan or fulfillment of a promise or undertaking. 

vi) COLLATERAL SECURITY: This is any security deposited by a third party to secure the indebtedness of the customer with the advantage that in the event of bankeupty or liquidation of the borrower, the value of such securities may be ignored in the proof of dividend against the fail estate. 

.

EVALUATION OF BANK LENDING PRACTICES AND CREDIT MANAGEMENT IN NIGERIA



TYPE IN YOUR TOPIC AND CLICK SEARCH.




TESTIMONIES FROM OUR CLIENTS


Please feel free to carefully review some written and captured responses from our satisfied clients.

  • "I love what you guys are doing, your material guided me well through my research. Thank you for helping me achieve academic success."

    Sampson, University of Nigeria, Nsukka.
  • "researchwap.com is God-sent! I got good grades in my seminar and project with the help of your service, thank you soooooo much."

    Cynthia, Akwa Ibom State University .
  • "Sorry, it was in my spam folder all along, I should have looked it up properly first. Please keep up the good work, your team is quite commited. Am grateful...I will certainly refer my friends too."

    Elizabeth, Obafemi Awolowo University
  • "Am happy the defense went well, thanks to your articles. I may not be able to express how grateful I am for all your assistance, but on my honour, I owe you guys a good number of referrals. Thank you once again."

    Ali Olanrewaju, Lagos State University.
  • "My Dear Researchwap, initially I never believed one can actually do honest business transactions with Nigerians online until i stumbled into your website. You have broken a new legacy of record as far as am concerned. Keep up the good work!"

    Willie Ekereobong, University of Port Harcourt.
  • "WOW, SO IT'S TRUE??!! I can't believe I got this quality work for just 3k...I thought it was scam ooo. I wouldn't mind if it goes for over 5k, its worth it. Thank you!"

    Theressa, Igbinedion University.
  • "I did not see my project topic on your website so I decided to call your customer care number, the attention I got was epic! I got help from the beginning to the end of my project in just 3 days, they even taught me how to defend my project and I got a 'B' at the end. Thank you so much researchwap.com, infact, I owe my graduating well today to you guys...."

    Joseph, Abia state Polytechnic.
  • "My friend told me about ResearchWap website, I doubted her until I saw her receive her full project in less than 15 miniutes, I tried mine too and got it same, right now, am telling everyone in my school about researchwap.com, no one has to suffer any more writing their project. Thank you for making life easy for me and my fellow students... Keep up the good work"

    Christiana, Landmark University .
  • "I wish I knew you guys when I wrote my first degree project, it took so much time and effort then. Now, with just a click of a button, I got my complete project in less than 15 minutes. You guys are too amazing!."

    Musa, Federal University of Technology Minna
  • "I was scared at first when I saw your website but I decided to risk my last 3k and surprisingly I got my complete project in my email box instantly. This is so nice!!!."

    Ali Obafemi, Ibrahim Badamasi Babangida University, Niger State.
  • To contribute to our success story, send us a feedback or please kindly call 2348037664978.
    Then your comment and contact will be published here also with your consent.

    Thank you for choosing researchwap.com.