The Impact Of Commercial Banking On Manufacturing Sector In Nigeria

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The Impact Of Commercial Banking On Manufacturing Sector In Nigeria


Abstract


The term commercial bank is the type of financial institution or intermediary and the bank that lends money, provide transaction and saving, accepts deposit on behalf of their customers. The study is being carried out to investigate impact of commercial banking on manufacturing sector in Nigeria taken Skye Bank of Nigeria Plc, as a case of study. it examines the credit facilities rendered by commercial bank to manufacturing industries, it also highlight the problem hindering commercial bank on manufacturing sector with suggested possible solution. Sample survey design has been used for the research work in order to gain insight into a situation that is not very clear and that has been seriously investigated. Therefore, questionnaire as a research instrument for primary data collection and review of related literature were been used to collect both primary and secondary data respectively. Finding in this work shows that commercial bank lending to manufacturing sector has not been encouraging over the years until 1987, when the CBN started to impose sanction on commercial banks. This study recommend that capital base of commercial bank should be increased which will lead to increase rate of performance placed on manufacturing industries and government should constitute law enforcement agent to monitor the activities of manufacturing industry to ensure that money obtained from commercial bank are been used judiciously. In conclusion, commercial bank is playing a vital role on manufacturing sector in Nigeria and economy as a whole.


Chapter One


Introduction

1.1 Background of the Study

The growth of economy and development of banking have often appeared inseparable until l7 century, there had existed on modern banking institution anywhere, and there had on modern developed economy. Before 1892, Nigeria was evidently underdeveloped economically, even in 1975, however, despite the growth in the number of banks Nigeria is still developing it is true that the number of bank should not be the only or even the major aspect of banking development have been taken account, it would still not be correct to imply mono casual relationship between the development of commercial bank and the growth of a modern economy.

So many factors determine the level and the rate of development of an economy .the natural resources endowment, labour supply and capital Are economy blessed with precious minerals, valuable agricultural crops and a suitable land water mix, is in a better position to develop than another economy with out these, other things being equal. In the same manner a country that does not have adequate supply of requisite manpower is at advantages. this is why most countries put a premium on manpower development, the justification for this phases has been succinctly put by Harbinsan, in-deed if a country is unable to develop its human resources, it cant build anything also, where there is modern political system, a sense of national unity or a prosperous modern economy we need not to add anything also.

Capital is another critical factor required in the process of development .the term of capital however requires some elucidation. At times, the term capital is used to refer to man made physical facilities that aid further production of good and services, machineries and equipment are such facilities, otherwise called real capital they are produced to serve he needs of further production and not serve the needs of immediate consumption such good imply the existence of some surplus over and above the requirements for consumption purpose.

Financial capital commutes also an ideal of surplus the saving that that result from society income that have not been spent on procuring good for consumption go make up the financial capital . Financial capital is required to procure the real capital it is the concern for the provision of financial capital market the development of a capital market a desideration in an economy commercial banks happen to be a subset of these institution that makes up the capital market


1.2 Statement of the Problem

The problems in line with the impact of commercial bank on manufacturing sector are as follows point

  1. The need to increase supply capital which was based on the level of guarantee.
  2. The bulk of the product of subsistence level and therefore usually generate small surplus out of which little saving for investment could be made
  3. The inability of small and medium scale industries in obtaining loan as a result of requirement
  4. The scale of expansion and the adoption of innovation to increase capital requirement.

1.3 Objective of the Study

The overall objective is to know the role of commercial bank in manufacturing sector in Nigeria. However, the specific purposes are as follows

  1. To know the effects of modern banking credit facilities on manufacturing industries.
  2. To assess the roles of government fiscal policy in manufacturing bank over the period.
  3. To highlight the problems hindering commercial bank of manufacturing and suggest possible solution.

1.4 Research Hypotheses

Hypotheses one
  • Ho: Modern banking credit facilities do not have effect on manufacturing industries.
  • Hi: Modern banking credit facilities have effect on manufacturing industries.
Hypotheses two
  • Ho: Commercial banking has no effect on the manufacturing sector in Nigeria
  • Hi: Commercial banking has an effect on the manufacturing sector in Nigeria

1.5 Significance of the Study

The study will be important to the banking industry and manufacturing sector for the benefit of the nation economy in the following areas:

  1. It will offer recommendation on way of achieving and enhance productivity in the banking industry by provision of credit to both small, medium and large scale farmer and industries.
  2. It will enable the manufacturing sector to performing well in their productivity for the benefit of a nation by provision of technical and necessary advise through the commercial bank.
  3. Also, it will be a useful addition to the literature on proper planning in the manufacturing industry.

1.6 Scope and Limitation of the Study

This study is primarily concerned with the impact of commercial banking on manufacturing sector. The study focuses on the role of commercial bank on manufacturing sector and management, trained staff and senior staff members of Skye Bank Plc. as respondents. The researcher encountered some constraints, which limited the scope of the study. These constraints include but are not limited to the following.

a) Availability of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study

b) Time:

The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.


1.7 Definition of Terms

The following are the terms used in this project work:

Commercial Bank:

Ibitoye T.A and O.A Ajayi (2001) Is a type of financial institution and intermediary. It is a bank that lends money and provides transaction, savings, money market account and that accepts the deposit on behalf of their customer.

Loan:

Donald P. (2007) An arrangement in which a lender gives money or property to a borrower and the borrower agrees to return the property or repay the money usually along with interest at some future points in time.

Finance:

Mercy Maranga (2009) Is the study of how investors allocate their asserts over a time under condition of certainty and uncertainty.

Interest:

Somoye (2010). It is a free paid by a borrower of assets to the owner as a form of compensation for the uses assets.


1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concerned with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  • Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study

Chapter Five


Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to have a critical analysis of the impact of commercial banking on manufacturing sector in Nigeria.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations are made, which in the opinion of the researcher will be of benefit in addressing the challenges of the manufacturing sector in Nigeria.


5.2 Summary

This study aimed at having a critical analysis of the impact of commercial banking on manufacturing sector in Nigeria. were raised. These objectives include: To know the effects of modern banking credit facilities on manufacturing industries, to assess the roles of government fiscal policy in manufacturing bank over the period, to highlight the problems hindering commercial bank of manufacturing and suggest possible solution.


5.3 Conclusion

Based on the above findings pertaining to the objectives of the study the following conclusions are drawn.
The study found a positive and significant effect of commercial bank credit on the manufacturing sector output in Nigeria. Specifically, the study found out that, inflation rate and interest rate (cost of capital) negatively affects manufacturing sector output. While loans and advances and money supply positively affects manufacturing sector output.


5.4 Recommendation

The following recommendations are pointed out for consideration my decision makers:

  1. The Central Bank of Nigeria should implement regulation to stop banks from centring loans and advances to a particular sector which is, oil and gas to improve credit flow to other strategic sectors, especially agriculture and industries to increase their contributions to gross domestic product of Nigeria.
  2. The Central Bank of Nigeria should through monetary policy complement fiscal policies of the government to reduce the level of inflation in country, having regard to its negative effect on index of industrial production.

The following recommendations are pointed out for consideration by decision makers:

  1. The Central Bank of Nigeria should implement regulation to stop banks from centring loans and advances to a particular sector which is, oil and gas to improve credit flow to other strategic sectors, especially agriculture and industries to increase their contributions to gross domestic product of Nigeria.
  2. The Central Bank of Nigeria should through monetary policy complement fiscal policies of the government to reduce the level of inflation in country, having regard to its negative effect on index of industrial production.

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