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You are here: Home / RECENT PROJECTS / EDUCATION PROJECT TOPICS AND MATERIALS / AN EXAMINATION OF DEBT DEFAULT IN COMMERCIAL BANKS IN NIGERIA. A CASE STUDY OF UNITED BANK FOR AFRICA UBA BENIN CITY

AN EXAMINATION OF DEBT DEFAULT IN COMMERCIAL BANKS IN NIGERIA. A CASE STUDY OF UNITED BANK FOR AFRICA UBA BENIN CITY

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CHAPTER ONE

INTRODUCTION

In Nigeria, as in most other developing countries, the financial system consists of number of institution which include the central bank, commercial bank, federal saving, merchant and mortgage banks as well as the community banks, the stock exchange securities commission. These commercial banks carry out their day to day activities they mobilizes funds (savings), these savings are a pool of funds on which the banks on the one hand pay interest to the owners of such funds and then lend these savings or funds to investors in the form of loan, credit, overdraft and advance for the development purposes, these pay back with interest of every lending. The loans and advances constitutes the most important components of a banks asset port-folio and this is why it is in the interest of every lending institution to make sure that it does not acquire any bad or doubtful debts, even though allowances are usually made for it. The cash flow problem which are currently experienced by many businesses under the economic recession have severally reduced by the ability to service bank debts. (according to Nigeria economist 1988:24). Most clients fails to pay in interest and as a result the interest plus the principals accrues, thus making the possibility of repayment remote. There is no banking institution in the country, including the United Band for Africa (UBA) as a case study that is no threatened by the effect of debt defaults on their banking activity (Endeavor 1990.28). In the recent times, debt default has been one of the main set backs experienced by commercial banks in Nigeria and for these reason the provision for bad debts have been so enormous that they attract attention from both general public and the government.

Thus, debt default causes great concern to Nigeria banks. In the cause of their lending policies banks give loan and advances to customers who for one reason or the other re viable to pay back in such away, the bank are costly unwilling to go into litigations which are costly and time wastage so they write o such monies as bad and doubtful debts. Bad debt are simply loans, which have proven difficult or impossible to recover. The most surprising things is the length of time it takes before the banks cry out for action, this is an indication of how tolerant the system is to fraudulent borrowing. If its existence were not at stake, it can be argued that this sudden attention is the examination of bad debt default on commercial bank in Nigerian might never have arisen. Thus, this research is therefore centred on United Bank for Africa in relation to the examination of debt default on its banking activities.

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AN EXAMINATION OF DEBT DEFAULT IN COMMERCIAL BANKS IN NIGERIA. A CASE STUDY OF UNITED BANK FOR AFRICA UBA BENIN CITY
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