An Assessment Of The Role Of Financial Institution In The Nigerian Maritime Industry
In summary of this, the objective of this study therefore are to look at the operations of loan syndication in Nigeria. The study will also give suggestions on how the problem of loan syndication can be solved to improve the practice of loan syndication in Nigeria.
Since money is the machine that carter ports the economic growth and development in its economy, then this study has to examine the role of financial institutions in the management of loan syndication. The study delves into identifying the parties and procedure involved in a loan syndication business and its important to the economy.
Loan syndication as we will observe, helps in spreading risk of lending between different banks, it also helps in putting the management of lending on experts hands, this study was also carried out in other ascertain to what extent banks have contributed to the Nigeria economy through their provision of loan syndication to firms or contractors.
The objectives of this study therefore are to took at the operations of loan syndication in Nigeria. The study will also give suggestions on how the problem of loan syndication can be solved to improve the practice of loan syndication in Nigeria.
For an economy to develop, there must be the existence of viable investment opportunities. That is why the project also examined both development banks, agricultural banks commercial and merchant banking in the financing of large scale enterprises through loan syndication in Nigeria economy. In this study, a total of 5 (five) banks made up of commercial banks development banks, agricultural banks and merchant banks, would be used as the sample of banks that carry out loan syndication business. Also four companies that benefited from loan syndication business.
Some of the finding is that financial institutions do not give priorities to a particular sector of the company before giving syndication loans. Also there is no effective government regulation that is governing loan syndication operation in Nigeria. Customer’s view the terms of syndication loan agreement so favourable compare to the magnitude of the service rendered.
As a result of the above findings, the following recommendation is made. The customers should negotiate carefully the terms and condition of syndication loan. The financial institution should also try to improve on infrastructural facilities, improve on documentation and also reduce the consortium lending charges.
1.1 Background Of The Study
Financial institutions occupy a vital position and play a landable role in the economy of the nation. Their major purposes are proper mobilization of find as well as provision of capital for industrial development, which is aimed at enhancing economic growth and development.
In the early year of banking operation in Nigeria, banks performed their intermediary function by giving loan mainly on individual basis (i.e separately) but as the country entered the threshold of development and more investment opportunities opened up, industrialist started demanding large sums of money which is provided by bank on medium or long term basis.
However, banking is a highly regulated industry the world over with restrictive monetary and credit guideline in loan growth and reserve requirement, sectoraol allocation to priority sector of the economy, and excess liquidity mop-up through the assurance of stabiclation securities to the bank to mention a few due to these restrictions, it is difficult for a bank to meet up with the huge loan demanded of their customers. Also, it is well know that lending is not risk free, and that bank prefer to spreas their risk with others in the banking industry.
Against this background, banks come together forming what is known as “Consortium” to advance finds is called loan syndication and is sometimes called “Cosortun”. Lending it can also be define as the agreement between two or more lending institution to provide a borrower with credit facility utilizing common loan documentation.
Loan syndication is now being practiced in Nigeria starting from the 1960’s when a consortium of commercial banks and acceptance houses discounted trade bills for marketing boards under the produced bill finance scheme. Formalized loan syndication came into being during the oil boom of the 70s when there was need for adequate capital of finance the industrialization programmes. During this period, few merchant bank had been incorporated.
Loan syndication has assumed international dimension because of the need to provide adequate capital to finance the fast growing world economy. An international syndicated credit is manage and under written by one or more finance. Institution normally from a location other than the domicile of the borrower, lenders from different countries could provide the borrower with access from their countries or to move its own currency from other contracts of domicile.
1.2 Statement Of The Problem
To investigate why Loan syndication is not properly managed given priority attention by monetary authorities.
Despite it’s strategic place in financing viable projects, capable of injecting foreign currency, creating employment, and facilitating grapid economic development.
To examine critically the place of financial institutions in the management of Loan syndication in the economy.
Loan syndication is a child of circumstances arising from legal lending restrictions, risk sharing and liquidity problems. The researcher would like to know despite the constraint prevailing is it still a supplementary option for business financing.
1.3 Objectives Of The Study
For an economy to develop, there must be a supplementary source of financing viable investment projects beyond the limits of an individual financial institution, it is on this basis that we would like to define the objectives.
The research study is to include the followings:
- To identify those fundamental problems confronting Loan syndication and suggest how much problems can be solve.
- To ascertain the effect of Loan syndication in the economic development.
- To highlight the potential s of Loan syndication in the economy
- To recommend that syndicated loan is not deferent from other loan. Rather it is subject to conditionalities, attracts higher interest rate, subject to default, and time lapses in packaging as a result of bureaucracy involved by consortium banks.
1.4 Research Questions
- Are there any fundamental problems confronting Loan syndication and suggest how much problems can be solve?
- Is there any effect of Loan syndication in the economic development?
- Is there any the potential of loan syndication in the economy?
1.5 Significance Of The Study
This study is expected to provide useful information on Loan syndication to the following. The students by the use of this project make researchers and source information on the rule of financial institution in the management of Loan syndication.
Financial institution via this project will learn how to keep to their Loan syndication agreements, it will also encourage the financial institutions to give financial accommodation through Loan syndication because it is more beneficial to them financial institution will also learn how to reduce the time frame in packaging a syndicated loan.
The borrower, with the aid of this projects will know the appropriate procedures involved in obtaining loan through syndication. Since Loan syndication contributes immensely to the development of our economy both the government and the targeted audience will benefit from the project. The government with the help of this project know more about the benefit of Loan syndication in our economy.
1.6 Limitation Of The Study
There is no study undertaken by a researcher that is perfect. The imperfection of any research is always due to some factors negatively affecting a researcher in the course of carrying out research. Therefore, time constraint has shown no mercy to the researcher. The limited time has to be shared among many alternative uses, which includes reading, attending lectures and writing of this research.
Summary, Conclusion And Recommendations
This chapter presents the summary, conclusion and recommendations for further studies.
The research study was conducted to ascertain the developmental roles of financial institutions in maritime industry in Nigeria. Financial institution here is the function of effort and competence performance of the staff. It involves supervisions, it also guides the individual workers to improved development of skills and capabilities, it further emphasizes that financial process serve both development and evaluation.
But the primary emphasis is on individual development and performance, in other words, the success and failure of maritime or any financial institution lies in the hand of a manager. Here, a manager’s job is to achieved result through people, by so doing, he motivate his men to work in such a way that will permit the achievement of a predetermined result.
Based on the findings of this study, and subsequent recommendations, it is concluded that maritime activities have a key role to play in the alleviation of poverty and creating wealth because they constitute an important source of income and employment for many people in maritime nations of the developing world, including Nigeria, in the form of supply of seagoing personnel, labour for ship recycling, ship owning and operating, ship building and repairs, as well as port services, among others. Therefore, if maritime transport or maritime related activities are threatened or become terribly in-secured, it can have serious impact on the nation’s economic growth.
The survival of the maritime industry in any country depends to a considerable extent on the level of aggregate demand for shipping services and the country’s shipping lines market share. The later depends on the operational efficiency of the lines and the former on how well the Country is performing. Using the trend in the total number of vessels and the cargo throughput of Nigerian Ports, there is an observable growth in the demand for shipping services in Nigeria. Besides, the nature of the Nigerian economy, which is import dependent, and oil economy which boosts her export cargo, indicates that the maritime industry will continue to be relevant to the nation’s economy, which would in turn require that modern infrastructures as well as adequate maritime security are provided.
In addition, the maritime industry in Nigeria, to a large degree, plays important roles in civilization, development in the acquisition and construction of vessels, types of cargoes, enhancement of navigational waterway, application of exciting technology to the efficient extraction of oil and gas from the offshore fields as well as construction of efficient ports for cargo handling such as Lekki and Badagry deep sea ports that are under construction.
Based on the findings f this study, the researcher made the following recommendations;
- Financial institution should partner to promote training in maritime transport technology and offer employment opportunities in the economy.
- Maritime industy should ensure periodic review and update of the shipping and port policies, and must allow adequate time or warning before effecting maritime laws or changes
- Staff evaluation should be based on the field that the employees or staff are conversant with.
- In financial institution, the staff fairness should be watchword.
- The overall supervision performance process should be formalized and made as objective as possible for Nigerians.
- That the First City Monument Bank should have trained supervisors so as to avoid some common organizational problem.
- Thorough investigations should be carried out either by managers or supervisors so as to avoid fraud in the financial institution or organization.
- Finally, the employees or staff should be motivated, promoted as when due to encourage them to work harder.
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