THE IMPACT OF DEVELOPMENT BANKS IN FINANCING INDUSTRY’S IN NIGERIA
This purpose of this research is to know the impact of development bank in financing industry(s). The development banks are the premier financial institutions that should meet the funding requirement of the industry of the Nigeria economy because of the huge financial investment demanded by the industry and its, long term structure. The development banks have no doubt made an increased contribution to the industry lately, but they are yet to tap the tremendous advantages wasting away in the sector for reasons of high interest rate quoted by the bank, which are away manufacturers, and the banks preference of group short-term loans. All the chapters in this work focus on different things which makes the work to be complete. Chapter one deals about the general introduction of the topic, the impact of development bank in financing industry (s) in Nigeria. Chapter two deals about the general overview of topic. Chapter three gives a profound methodology applicable in the research work. The method data collection, instrument used in collecting them. Chapter four basically focus at the direct answer given by respondents to the question directs to the through questionnaires and interview. Finally chapter five focus on the Summary, Conclusion and Recommendation.
1.1 BACKGROUND OF THE STUDY
In Nigeria today are indeed all over the world industries are important for rapid economic development because of its importance to the growth of the economy, all levels of government in Nigeria are focusing a lot of attention in thing sector of the Nigeria economy in an attempt of improving it. Individuals, co-operative bodies, and all others saw industry as the only hope that can help inn uplifting the standard of living of the citizens so they pay more attention on it.
But unfortunately, this sector requires very huge investment in terms of manpower, research machinery and equipment, therefore, the prevision of sufficient funds to meet the requirement of the industry is a difficult task and this is where the development banks came in existence. Since individual and cooperative bodies rarely meet the financial needs, to their manufacturing concerns, they to reply mainly on banks for assistance that is for the procurement of funds. The importance attached to the development banking system in the Nigeria economy apart from its role in engineering a sound economic development base. It also plays a significant role in domestic mobilization of financial resource (capital formation) and subsequent location of available domestic resource for accelerated economy growth.
Although, the bank require very strict conditions to be met before credit can be granted to these manufacturing project, especially to smaller firms on the alternative the bank would rather grant credit to larger corporation for reasons including credit worthiness availability of tangible collateral, track record of performance and volume advantages to be achieved.
In given all these, still the impact of development in encouraging the proper management of the industry cannot be over emphasized since it’s a major contribution in affairs such as funding of such project which otherwise would have been abandoned due to lack of sufficient funds, since only plans would have been up and such plans would he dormant due to lack of sufficient fund and thereby not contributing to the economic state of the nation.
The development banks have assisted through the provision of credit through loans and advances over draft to their customer and acted as a supervision authority in the base of merger between corporations and in the accepting of mortgages on behalf of their customer.
1.2 STATEMENT OF PROBLEM
Development banks have been faced with a number of problems in the course of its operations, prominent among these are:
Unfavorable treatment of the manufacturing firms by commercial and development bank such actions by these banks tend to have adverse effect on the activities of the manufacturing firms and nations economy generally. For example, development bank concentrate essentially on the financial need of big blue chip manufacturing companies thereby neglecting the small and medium capability and survival of the small firms and also denies them the ability to contribute toward the nation’s economic survival and stability.
The high interest rate structure: These play significant role in the financial of the industry. It tender to banks putting them in a poor financial position. The resultant effect is usually inadequate find for machinery/equipment installation where there is adequate machinery there is usually a shortage of working capital, which in most cases is responsible for low capacity utilization these problems destitute the motivating form behind this study.
1.3 OBJECTIVE OF THE STUDY
Profoundly, the objectives of the research work are highlighted below;
Make some appraisals on how to argument future supply and use of development banks loans to ensure the development of industry in the economy.
To determine the aggregate performance of development banks in finance of industry(s) especially in Nigeria economy.
To identify the bank credit facilities and their uses.
Give policy makers better insight into Nigeria development banks in financial industry.
To also identify problems surrounding development banks mainly in the industry(ies).
Create adequate solutions to the poor industry(s) system due to instability to acquire loans from development banks by the bank of industry. The objective is carried with the purpose of assessing the performance and contributions of development bank in financial industry(s) projects viewed against CBN credit guidelines to the development banks.
1.4 RESEARCH QUESTION
Precisely, some questions have been formulated for easy analysis and interpretation of data. Meanwhile the questions are formulated base on the research objectives includes:
What struggles has the industry make to attract the banks loans?
Is the credit by development bank adequate for the industry to improve and arguments productivity?
In what perspective has the development bank reacted to the CBN regulations on industry(s) credits.
What factors has been affecting the banks ability (capacity) to extend loans to industry?
How far has development banks gone in educating the industry(s) on how essential the bank credits are for industry boost?
Does the credit to the industry(s) improve the nature and standard of their living?
1.5 SCOPE OF THE STUDY
This study is designed in such a way that it narrowed down merely on impact of development banks. Meanwhile there are many other banks that contributed to the growth of industry(s) in the economy so as to boost profound banks products and to maintain adequately for the industry to improve and arguments productivity.
Although reference may be made to other banks but the study is based on the development banks in the financial of industry(s). Most especially bank of industry. The analysis of this study will be predicted on the industry(s) in the economy, indicating how they are been financed by development banks in order to record high banks production and industry(s) products.
1.6 SIGNIFICANCE OF THE STUDY
This country cannot achieve growth and ability unless very significant efforts are made in the manufacturing or real sector of the economy. So one of the major factors inhibiting the take off of industry is shortages of finance considering the fact that most industry are capitals intensive. They study will be immense benefit to the following:
The entrepreneurs, who are both investors and customers of the development banks, as more funds and export advice may become available to them.
The financial manager as well as bankers who are the operator of the monetary policies as well as partners in profession with the investors.
Finally, the general public and all other institution that patronizes or may have cause to patronize the development banks in future.
1.7 LIMITATION OF THE STUDY
These were some constraints which the researcher encountered which hindered the maximum achievement from the search operation such as time, inadequate finance and lack of response from individual and organization that should make contribution by way of answering question and providing materials with reference to the topic at hand.
Moreover, the non-chalant attitudes of some staff in given relevant data and some respondent were reluctant to release the needed information sought would be purely used for academic purpose only to this extent a lot of useful information were concealed.
Finally, the data and information of the banks are willing to release are so scantly that they cannot be very helped. The banks regard information about clients as classified and are therefore unwilling to disclose such due to their confidential agreement.
1.8 DEFINITIONS OF TERMS
These are terms that are going to be frequently used in these text so it would be advisable to have background knowledge of these terms.
BANKS: According to I.E. Nwokoro, a bank is a financial housing establish for the purpose of accepting money, making payment among other foundation.
BANK OF INDUSTRY: Which is an off short of the Nigeria industrial development bank the Nigeria bank for commerce and industry and the natural economic reconstruction funds.
DEVELOPMENT BANKS: It is a bank which deals in corporate financing rather than domestic accounting (focus Nigeria, 2000) “Any person in Nigeria who is engaged in wholesale banking, medium and long-term financing, equipment leasing debt factoring investment management, issue and acceptance of bill and the management of unit trust. (The banking Amendment Act. No 8 of 1978).
FINANCE AND FINANCING: Finance is the provision of many or commodity for immediate or future consumption, while financing is on the basis of the result of this forecast and research that will be acquired.
INVESTMENT: Setting aside consumable income though channeling them into productive areas and earning returns in compensation for the decision to defer consumption e.g. buying shares among other banking amendment Decree, 1979).
INTEREST RATES: it is a rate that specified the cost to a borrower of capital and the return to the provider or lender of capital. It can be real or interest rate.
PROJECT FINANCING: the financial of a particular economic unit in which a lender is satisfied to look initially to the cash flows and earning of that economy units as the sources of fund which a loan will be rapid and to the asset of economy units as collateral for the loan (Peter Nevitt, 2002).
SMALL AND MEDIUM SALE INDUSTRIES: According to (C.N. Agu, 2005) small and medium business can be defined as a business can be defined as a business which is owned and controlled by one or few persons with direct owners influence in decision making and having a relatively low capital requirement.
BANK LENDING: Means the transfer of resources from the surplus units of the economy to the deficits units of the economy.
CREDIT POLICY: This means the norms of guidelines for the extensions of credit facilities or loan and overdraft.
COLLATERAL: This means a property pledged by borrowers as a guarantee that the loan gives to him will be paid as stipulated.
SECURITY: Is the right of interest in property which is given to a lender (creditor) by a borrower (debtor) for the purpose of providing buffer or cushion on which the lender may fall back in case the borrower defaults in prepayment.
FUNDS: This means cash that will be used to carry out any work or project.
BANK RATE: This is the rate of interest fixed by central bank in order to regulate the rate changed by banks.
THE IMPACT OF DEVELOPMENT BANKS IN FINANCING INDUSTRY’S IN NIGERIA