THE LENDING CONSTRAINTS OF NIGERIAN COMMERCIAL BANKS . A RESEARCH PROJECT MATERIAL ON BANKING AND FINANCE
BACKGROUND OF THE STUDY
The history of banking and lending dates back to the barter period and the period when sold Smiths were used as acceptors of deposits from the public. Banking developed out of the Gold Smiths who developed the practice of storing people’s gold and valuables for safe keeping. At first, such establishments were simply like were house.
Depositors left gold for safekeeping and were given receipts, which they would present, to the gold Smiths for their gold or valuables after paying a little charge to the goldsmiths. At apt, the goldsmiths discovered that not all to depositors of gold come at the same time to collect them, the goldsmiths started to issue receipts, which evidenced indebtedness, and was transferable out of the gold deposited. The goldsmiths started to lend out these services this marked the origin of lending in the history of banking.
The major difference between the goldsmiths system of banking and today system of banking is that it is not the particular depositor’s money that is given him back when he calls for it but the value of what he deposited whether his own or others in our economy today. There is much development in the system of banking compared with that obtained during the time of goldsmiths.
Today we operate different types of banking: development, merchant and commercial banking with extensive duties and responsibilities. However, in the discourse, we should focus mainly on commercial banking as demanded by the topic.
Commercial banking activities started in Nigeria in 1892 with the establishment of African Banking Corporation. The first bank of Nigeria than the bank of British West Africa was set up in 1894 followed by the Barclays bank in 1917. the banks were set up to provide banking services f ort he colonial administration and British commercial interests.
Then in 1933, the national bank of Nigeria came in to score prior to 1959, when the central bank of Nigeria (CBN) in 1959 added a new chapter in the evolution of commercial banking in Nigeria. The 1969 banking decree fully established commercial banking in the country by requiring all the banks to be fully incorporated.
Industrial and commercial banks and the Nigerian merchantable bank established prior to that time had collapsed the objective of the government was partly to discourage monopoly of monetary transaction by the two established expatriate bank and to liberalize credit facilities for Nigerian, Nigerian enterprises. This is the area that really interest. Thus banks have been called upon to be liberal in their credit policy.
Nigeria commercial banks while applying their funds mainly in loans and advances encounter problems in credit advances. It is in most cases the rule rather than exception that money advanced to most indigenous customers is often regarded as “our money or my own share of the Ori Boom” while is meant not to be repaid. In the book of most of our indigenous commercial banks. There is a backlog of bad debts. It is any wonder also that while the greatest security for an advance is the personal integrity of the customer, our environmental constraints have made us to make rather indigenous contribution to the world’s banking practice by our insistence on valuable security as a necessary condition f or an advance.
The lending policy of these banks showed that loans were granted to those close to the corridors of lowers without adequate. Securities, the average Nigerian has always complained grumbled abut his inability to obtain.