CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
The financial sector, especially the Commercial Bank is very important in the smooth functioning of the manufacturing sub-sector of the economic. Lending which may be on short or medium basis is one of the services that Commercial banks do grant loans and advances to individuals, business organizations as well as manufacturing sub-sector in order to enable them carry on investment and development activity as a means of aiding their growth in particular or contributing towards the economic growth of the country in general/ Felicia, 2011. Commercial banks plays crucial role in mobilization and financial intermediation to deficit economic unit. Consequently, these roles make them an important phenomenon in economic growth and development. In performing these roles, it must be realized that banks have the potential, scope and prospects for mobilizing financial resources and allocating them to manufacturing sector and in return increase productivity therefore, irrespective of the sources of the generation of income on the economic policy of the country commercial banks would be interested in giving out loans and advances to their customers bearing in mind the three principle guiding their operations which are profitability, liquidity and solvency (Adolphus 2011).
However, the commercial banks decision to lead out money are influence by a lot of factors such as the prevailing interest rate, the volume of deposits, the level of their domestic and foreign investment, banks liquidity ratio prestige and public recognition to mention but a few. Regardless of the fact that the manufacturing sub-sector is the life wire of economy of a country development. This study discovered that these is a high bank lending rate to the manufacturing sub-sector of the economy of which these is not positive relationship between high cost of funds and capacity utilization. It is also discovered that the firms due to high bank lending and cost of maintenance has attributed to low productivity. Okporobie (1989) observes that Nigeria manufacturing sub-sector continue to decline despite the priority given to the sector. Available data shows that performance of commercial banks against this directive has been disappointing. He also observed that without the development of manufacturing sub-sector, the nations quest for industrialization will certainly remain at stake.
1.2 STATEMENT OF THE PROBLEM
The problem of bank lending to manufacturing sub-sector may not necessary be as a result of insufficient funds at the disposal of commercial bank. It has been discovered that the sector still suffers some problems and major constraints among which are: Insufficient funds channel to the manufacturing industries in their for bank lending. Information gaps as to the range of commercial banks and scope of services available in the financial sector. High bank lending /inflated interest rate on the manufacturing sub-sector.
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