FINANCIAL ECONOMIC DEVELOPMENT IN NIGERIA: THE ROLE OF NIGERIA BANKS. A RESEARCH PROJECT MATERIAL ON BANKING AND FINANCE

FINANCIAL ECONOMIC DEVELOPMENT IN NIGERIA: THE ROLE OF NIGERIA BANKS. A RESEARCH PROJECT MATERIAL ON BANKING AND FINANCE

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

To attain long-term sustainable economic development would largely depend on the ability to raise the rate of accumulation of physical and human capital (Adelakun, 2011), to use the resulting production assets of the efficiently, and to ensured access of the whole population to these assets (Birdsall and Dondono, 1997). Financial institution or intermediaries supports large scale ment investment process by mobilizing household and foreign saving for investby firms: ensuring that these funds are allocated to the most productive use and spreading risk and providing liquidity so that firms within the economy can operate the new capacity efficiently. Financing economic development in country like Nigeria would involve the establishment and expansion of financial institution, investment and market that would support this investment and development growth process.

It is known that the role of financial intermediaries ranging from pension funds to stock market has been to transfer household savings into enterprise investments and allocate funds, and to price and spread risk.

Financial economic development literally starts with the banking sector and depends on the diffusion of money which the banking sector provides.

As nations become lightly develop, the share of the banking system in the assets of the financial sector is in the decline, while that of power and more specialized financial institutions are of lower value than the financial asset by all other financial institutions whereas the reverse is true in economically under developed nations.

In discussing the role of financial intermediaries in financing economic development, two major school of thought would be looked at.

The first school of thought asserts that financial sector plays a limited role in achieving economic development, (Robison, 1952: Hucat 1988).

This school of thought consider that when the economy developed, the financial sector grows within it. Robison (1952) asserts that “where enterprises lead financial follows” and according to Lucas (1988) economist “badly over stress” the role of financial sectors in financing economic development.

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FINANCIAL ECONOMIC DEVELOPMENT IN NIGERIA: THE ROLE OF NIGERIA BANKS. A RESEARCH PROJECT MATERIAL ON BANKING AND FINANCE