This project studied the management of bad and doubtful debts by Nigeria commercial banks. It noted problems associated with the wide spread development of bad account by banks as being occasioned by so many changes that are unfolding as a result of the deregulation of the Nigerian Financial System. It viewed the incidences of bad debts as one of the greatest problems facing both old and new generations of banks today with adverse consequences on their profitability level.
This project traced the origin of bad accounts to a number of factors some which may be internal, external or by act of God. e.g. the death of the owner of business. It was help that an account becomes bad the very day the facility is granted. Carelessness on the part of lending officers and his inability to interpret and respond promptly to warning signals may cause an untold loss in addition collusion by lending officers with the borrowers and absence a clearly defined lending guideless by banks may be responsible for high loan default. It is even difficult to identify control once a facility has been agreed by management.
The most effective way of limiting one’s losses however is to stop paying out but trading margins are particularly important.
TABLE OF CONTENT
TABLE OF CONTENTS
1.1 Background of the Study
1.2 problems of the Study
1.3 Objective of the Study
1.4 Significance of the Study
1.5 Research of the Study
1.6 Plan of the Study
2.0 Literature Review
2.1 Meaning of Bad Debt
2.2 Management Of Bad Debt
2.3 Effects of Bad and Doubtfully Debts
2.4 Risk Analysis
3.0 Research Methodology
3.1 Historical Background of First Bank
3.2 Sample and Population of the Study
3.4 Method of Data Analysis
3.5 Validity of Instrument
3.6 Administration of Instrument
3.7 Observed Problem
3.8 Limitation of the Study
4.0 Data Presentation and Analysis
4.1 Data Presentation
4.2 Data Analysis
4.3 Test of Hypothesis
5.0 Summary, Conclusion and Recommendations
5.3 Recommendation for Improved Management of Bad Loan
1.1 BACKGROUND OF THE STUDY
Among the industrial sectors in Nigeria today banking
sector arouses the public interest most it is the most visible and of the
fastest growing section in the economy a past from the fact that the monetary
of every policy guideline document issued by the central bank of Nigeria in
January of every year regulates the activities of the entire economy the
banking sectors is responsible for carrying out most of the policy issue contained
there in the sectors is also subjected to frequent controls and reputations. In
popular jargon, the banking sectors has become one of the most critical sectors
and commanding heights of the economy with wide implications on the level and
direction of economic growth and transformation and such sensitive issues as
the rates of unemployment and inflation which directly affect the lives of
people the banking sector is without doubt of the fastest growing industries in
the country today from total of 26 in 1980 the number of commercial and
merchant banks in the country growing steadily to 40 in 1985 where it
stabilized until it increased to about 49 in 1987 beginning from 1987 and
following the introduction of structural Adjustment programme (SAP) in 1986 there
had bean a rapid growth in the number of bank increased by 15 i.e. 30% to reach
66 and additional 15 joined it in 1989 which 1998 witnessed 21 new enchants to
bring the total number of commercial and merchant bank to 102. Before the
government placed temporary ban on the opening of banks in 1991 there was not
less than 125 banks operating in the country. From
N12million and N20million
for merchant and commercial bank respectively paid up capital increased to N40million and N50million one notable implication from the development is the sudden
rise in the volume of bad doubtful account which bank are compelled to carry in
their books the increasing number of this problem loans had been on grated
challenges facing in particular the old generation of bank usually referred to
as the “Big three. The First Bank of Nigeria Plc. The Union Bank of Africa Plc
The problem posed by carrying large volume of bad loans or non-performing accounts was not fully recognized until in November 1990 when the central bank introduced the prudential guidelines in line with the general standard all over the world to make the s in the country assess themselves fully thereby determine how healthy or prudent they are in their loan credit management.
Most bankers cannot unequivocally declare that they have been introduced by problem loan. Certainly, it is a way of life in those tumultuous times of banking that virtually every one of them is faced problem or so-called work out loans.
Another important reason is to decline in the economic fortune which gripped the Nigerian economy.
1.2 PROBLEMS OF THE STUDY
With many banks in large proportion given out loans and overdraft to their customers. The bank is therefore, taking the risk some of the customers may never pay back the loans or overdraft given to them.
This is normal business risk and such bad debts are normal business or running expenses.
The researcher therefore will like to find reasonable solution to the following question.
i. What is the causes of bad debt
ii. Why provision for bad debt are made
iii. How bad debt are written off.
iv. How banks as financial institutions managing bad debts.
v. How banks estimate provision for bad debt.