An Assessment Of Loan Management In Banking Sector (A Case Study Of Union Bank Of Nigeria Plc)

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An Assessment Of Loan Management In Banking Sector (A Case Study Of Union Bank Of Nigeria Plc)


This project work An Assessment of Loans management in banking sectors a study of Union Bank of Nigeria Plc. Kaduna Branch. The study has been done in an attempt to explore the extent the Union bank Kaduan Branch has been controlling its credit system to the Central Bank of Nigeria. Credit guidelines in the development of the National economy.

Banks have generally been credited with and enviable image of being an important sources for capital development.

This recognition is derived largely from assumed roles of most banking Institution in mobilizing various depot and channeling their towards profitable investment outlets to the extent that the size, type and level of such investments along with other complementary factors contribute to the improvements of National economy.

Some of the highlights in his project statement of the background of Union Bank Plc, statement of the general problems, objectives of the study, hypothesis, limitation and delimitations, significance, organization and definition of term.

The study includes a review of related literature on how commercial banks determine their lending powers, the CBN credit control and monetary policy over the banks. In addition the study includes types of securities and analysis of sectoral distribution of loans and advances.

The chapter three of the study terms loans and advances. However, it is hope that that the banks will pay more attention in granting loans to the productive sectors of the economy so as to make industrialization policy of the country a reality.

The researcher also has given useful recommendation that will aid and assist the development of banking system and the economy in general.

Chapter One

1.0 Introduction

1.1 Background of the Study

Generally in Nigeria, banks are usually accused by customer’s of number of short comings, which are regarded as problems and failure in banking system. These include lack of awareness by customers of the services they offer subjecting the customers to long queues unsympathetic staff in terms of courtesy and efficiency, intricals and unprogressive lending policies and procedures irregular issue of statement etc, all these result in low level of customer satisfaction.

At moment, Nigeria is fast attempting to transform into a modern industrial society whether this attempt will be achieved or not is still questionable. The urban area having now high population densihes from rural, which are supposed to be the sources of raw materials for the industries. Hence the achievement of industrial objective rest squarely on the shoulders of the banks.

Banks could help Nigeria reframe herself and produce raw materials for her mills and not solely depend on imported ones.

This could be done by diversifying the source of income from the present mono (based solely on petroleum revenue) to that of (diversified one)

The banks role in attaining the above objective ultimately, specially and efficiently is very crucial.

Having experienced the strain, intricale and procedures of obtaining banks loanable fund that researcher mind was directed to the questions as to what participates such stumbling blocks in our banking system. It is the blame on the banks, the customer and the government for not appreciating the place of credit in our society for instance, the banks by the nature of their business exercise a high degree of economic power. To them belong to the naira power which is the lubricate/accelerator of our economy. They have the prerogative in the choice of assets (businesses) they place their disposable portion of funds deposited with them by customers. Tough they know and have experienced the positive results of attempt in the effective provision and use of credit, the banks have been rather very skeptical in exercise this their power not withstanding the central bank of Nigeria issues annual directives to licensed banks allocating prescribing quantitative ceiling as well as sectorial allocation of their loans and advances to the economy through the monetary policy circulars conveying the central banks, credit guidelines.

However, it has come to be realized that these are certain problems associated with he present lending schemes which must be highlighted and solved by the customers, the banks and government in providing loanable fund so that more benefit would be taped from this usage.

Hence, the motives behind the caring out of this research study.

1.2 Statement of Problems

There is hardly any approach to obtaining bank loans/credits that is devoid of problems. This project thus sets out to identify the lending problem of bank and customer in Kaduna and its environments.

  1. High rate of interest/charge
  2. Banks lend on short term basis cannot accommodate medium and long term borrowers.
  3. High rate of defaut
  4. Difficulty in banks policy/central bank policies
  5. Lack of security to back-up the lending
  6. Customers request are not well packaged.

1.3 Objectives of this Study

Specifically, there are some factors outside management control such as the Central Bank credit guideline (rule and regulation), policies and the value of managers implementing bank policies, which influence in one way or the other on the lending decisions and outcomes for the bank. The aim and objectives of this research include:

  1. How can we reduce the high rate of interest charge bank.
  2. How can customer be educated on how to package their request correctly.
  3. How possible it is to evaluate the lending difficult policy of both bank/central bank

1.4 Research Question

  1. Ho: To what extent will judicious utilization of loan lead to effective management control.
    Hi: To what extent will judicious utilization of loan not lead to effective management control
  2. Ho: Will assessment of loan management and accountability serve as an aid to increase the capability of Nigeria banks?
    Hi: Assessment of loan management and accountability will not serve as an aid to increase the capability of Nigeria Banks?

1.5 Significance of Study

After identification of certain problems, on this research work recommendation will be made for solution, considering their specific cause and nature. Such recommendation and findings hopefully will be useful to management of banks in the countries who have similar problems to the banks studies.

It is also hoped that such recommendations will be of use to potential borrowers from the bank, banking and accountancy student in the higher school of learning, and to the numerous private management consultancy firms throughout Nigeria.

1.6 Scope of the Study

The scope of the study is on commercial banks in Nigeria or banking sector as a whole but using Union Bank Nigeria Plc Kaduna as a case study.

1.7 Historical Background of the Case Study

Union Bank of Nigeria Plc was established in 1917 as a colonial bank will its first branch in Lagos. In 1925, Barclays bank acquired the colonial bank which resulted in the change of the bank’s name to Barclays Bank (Dominion, colonial and overseas). Following the enactment of the companies act 1968 and legal requirement for all foreign subsidiaries to be incorporated locally, Barclays bank remained un-changed until 1971 when 8.33% of the banks share were offered to Nigeria’s in the same year, the bank was listed on the Nigerian Stock Exchange. As a result of the Nigeria enterprise promotion act of 1972, the Federal Government of Nigeria acquired 51% of the bank’s share, which left Barclays bank plc. London with only 40%. By the enactment of the 1972 and 1977 Nigeria enterprises promotion act, Barclays bank International disposed its shareholding to Nigeria in 1979 to reflect the new ownership structure and in compliance with the company and alied matter act of 1990, it assumed the name union Bank of Nigeria Plc.

In line with the Central Bank of Nigerian banking sector consolidation policy, Union Bank of Nigeria Plc. Acquired the former universal trust bank Plc. And broad bank ltd. And absorbed it erstwhile subsidiaries Union Merchant bank ltd. The bank also increased its shareholders funds through a public offer/rights issue in the last quarter of 2005. with these development Union Bank remains one of the most capitalized developments Union Bank in Nigeria. It has a shareholder fund of N102,542 billion and operates through 368 net work of branches that are well spread across the country, all of which are line, real time subsidiaries.

  1. Union homes saving and loans plc
  2. Union trustees limited
  3. Union assurance company limited
  4. Union bank UK Plc
  5. Banquet Intenational Benin, cotonou
  6. UTL communications services limited
  7. UBN property company limited
  8. Union capital markets limited
  9.  Union registration limited
  10. Associated Companies
  11. Consolidated discount Ltd
  12. HFc banks Ghana limited
  13. Unique venture capital management co Ltd

Union bank group operates in Interlocking organizational structure whereby some board members of Union of Nigeria Plc act as external director in the subsidiaries and over sight and participation in the decision making process of these companies, thereby safeguarding the banks investments.

Today, Bank in a leading regional bank in sub-sahara Africa in terms of its diverse investments across the globe. A glance at the bank’s financial summary reveals its solidity. As at 31st march 2007, the banks gross earnings was N88.095 billion, profit before tax was N17,393 billion, total asset, was 699.24 billion shareholders fund was N102,245 billion.

The bank’s management is headed by Dr. B. B. Ebong as the group managing director/chief executive others are:

  1. Ado Abdullahi executive director (operation, up-country south).
  2. Dr. K. S. Adeyemi executive Director (information technology/services).
  3. S.I. Ayniuem executive director (Risk management and control)
  4. E.U. Emeruem executive Director (Lagos operations)
  5. A. E. Esangbedo executive directors (operations up country north)
  6. WCO Mbeh executive director (Corporate resources)
  7. A. I.N Obigwe Executive Director Co-operate and International Banking.

1.8 Definition of Terms

The author considers it necessary to define the following terms as applied within the context of this project.

Asset portfolio:

Arrangement of bank assets on order of its liquidity and profitability.


These are monies lent by a bank generally in the form of an overdraft on a current account and also by means of a loan or personal loan.

Affidavit form:

This is a written statement used as a legal proof.

Bank credit:

Credit created by a bank increasing the size of the account of a depositor e.g. when making an advance.

Branch banking:

The typical commercial bank in most countries is a very large institution with a large number of branches.


Commission on turn over or cost of transaction, this is normally charged on the total of debt turn over of current account.


Certificate of occupancy

Cash ratio:

This is the ratio of cash to demand deposit usually calculated on percentage.

Clean lending:

Loan and advance granted without any security.

Collateral security:

Properties perhaps in the firming deeds to a house or stock and shares deposited with a creditors to guarantee that a loan will be repaid.

Demand deposit:

This is the total amount of money deposited with the bank.

Deed of release:

This is the document usually signed by customers when any property held by bank is returned.

Equitable mortgage:

Property pledged to the bank as security without legal backing.


One who makes or gives a guarantee or security for loan.

Liquidity preference:

This refers to the degree at which invaluable prefer that funds to be near cash. They many prefer to hold saving in a completely liquid form that is as cash.

Lieu Distain:

This is a document issued by the bank to an insurance company declaring their interest in a customer share.


It is the lending of money borrower one of the credit services rendered to account holder by banks.

Monetary policy:

This refers to the use of certain monetary controls by the government.

Moratonum period:

A period when loan yield no return


This involves letting the customers to draw money in excess of the draw money excess of the balance in the customers account.

Pledged property:

This is delivery of goods or document, of little goods by the customers to the Bank as security.

Standing order:

An authority given by a customer to his banker to transfer, e.g. a fixed amount from his current account to his loan account.

Secured loan:

Loan granted with proper security.

Chapter Five

5.0 Summary of Finding, Conclusion and Recommendation

The study started by examine the problems and possible prospects on commercial banking brief background of Commercial Bank lending and role of Central bank of Nigeria (CBN) in regulating lending in the sub banking sector. Also highlighted is the statement of the problems and the objectives of the study signification of the study, hypothesis, and the limitation and delimitation of the study.

5.1 Sumary

  1. Chapter one the took was introduced with emphasis on significance of the study, scope of the study as well as statement of problems.
  2. In chapter two various literature on banking lending were received to get expert opinion on the topic as well as receiving previous research work on same topic.
  3. Chapter three deals with research methodology, here the researcher presented various research techniques through which the research work was carried out
  4. In chapter four the response gotten from the questionnaire administered were presented and analysed.
  5. Finally, in chapter five the researcher hope to present this findings as well as suggest/offer useful recommendation.

5.2 Conclusion

From the analysis of the questionnaire and interview carried out and the findings so far, the researcher draw, the following conclusion.

  1. There is too much interference from the top management in the process of lending, thereby forcing managers in some cases to throw away procedure and ethics and grant credit facilitates to wrong people which turn out to be bad debt.
  2. The customers had faced numerous problems ranging from self ignorance to other originating from bank staff themselves.
  3. Specifically some of the problems include those of demand for collateral securities which are outside the reach of customer; discourtesy of ban staff discriminatory lending high incidence of payment of credit granted high interest rtes of lending charged. The diversion of loan, granted to other users than the purpose in which they were meant for.
  4. Other problems highlighted includes those of the effect of sectoral allocation ceiling given by the government and that of non-accessibility of bank staff.
  5. The bank problems effect the general mobility of cash in the economy, and that goes long way to effect the economy of Nigeria of large.

Distress: Is the current word in the Nigeria dictionary of bank failure which has left may deposition not only bankrupt but have many to early death as a result of the lost of their whole saving.

Also such problem affects, the profitability of the banks as a lot of credits collected are not paid back that includes both the principal and the interest. The being the case, the researchers hypothesis have been confirmed beyond doubt.

5.3 Limitation of the Study

The researcher has tried within his best to do justice to this research topic, meanwhile there are some limitation encountered part of which of:

  1. Time available for the research work is inadequate as to get a more value opinion of bank customers/public
  2. The opinion expressed in this research work is limited to person humy within Kaduna metropolise and it is possible to get a different opinion/more defaulted opinion if the research work was to go outside the state moreso, due to the fact most of the information obtained was through personal interview, it was not easy copying with the troubles associated with principles of secrecy and confidentiality. Other constraints of this study include time as well financial constraints.

5.4 Recommendations

In the light of the finding made in this research work the following recommendations are made by the researchers.

  1. The bank should provide more information to their customer particularly on the changes on the interest rate of lending and the procedures of obtaining bank credit and good use of such loan by investing wisely, rather than adding more cars and value as the case may be Bank officials should organized seminars lecture and other similar forum for customer’s orientation purpose.
  2. Banking journals and peridocial rich in relevant information on banking services and lending procedures should be produce and given to customer free to change
  3. Changes in banking policies should be made available to customers either through handbills, or any other means.
  4. Banks should embark on good staff training programme in order to ensure their personnel are aware of the lending procedures, his legal implication and the perfection of security period to any good lending this will also enable staff to know the legal implication of whatever action they are takes and the various alternatives available in attempting to solve a problem. This also is hope to make the staff more aware and exposed.
  5. To overcome the problem of lack of cash to lend when these might be viewable projects meeting all necessary condition for granting bank credits the reach wish to made the following recommendations.
  6. Measure aimed at fast development of banking habits should be devices, for examples computerization of banking operations, and services that meet the current development in the world. This will help in attracting deposits from both individual and corporate bodies.

Among such measure could be the following

  1. Banks should involved government to embark on vigorous campaign of the possible benefits of banks patronage in terms of interest enable and other benefits.
  2. Development fund realized at various functions, such as ceremonies, and funds generated from co-operative societies, negligees and charitable organizations and schools should be MANDATORILY deposited at any nearer to such funds. Some for these go to government funds and should be deposited and paid through banks.
  3. Cumbersome demands on prospective customer and borrower should be relaxed by banks to enable easier procedures for opening of accounts and obtaining of credits facilities by customers.
  4. Bank should pursue the Central bank of Nigeria (CBN) prudential guidelines and period regular checks on customers accounts, this will help to signal accounts that are performing below standard and bad and doubtful debts.
  5. Every system should be encouraged by the banks to monitor where credits are granted to customer, repayment period and interest chargable, so as to know when such credit ought to have settled and if not identify the customer, problem and stops taken to avoid loses.

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