The Impact Of Loan Recovery On Commercial Banks In Nigeria (A Case Study Of Oceanic Bank Plc.)

Project and Seminar material for Banking and Finance

Project and Seminar material for Banking and Finance


This study investigated the relationship between advancing and recovery of loan in Nigeria (commercial) bank. It aimed at identifying the impact of loan recovery in Nigeria (commercials) bank. Questionnaires and personal interview were used as the method of data collection.

The methods of data analysis were the use of percentages, tables and chi-square proportion, the research findings show that banks normally give loan to its customers and as well adopt an effective strategy for recovering the loan. It further identifies that take into consideration before granting loans to its customers.

The research shows that there are some challenging problems in banker’s customer’s loan transaction. And finally pointed out the impact loan recovery to the banking operation and the economy.

Table Of Contents

Preliminary Page(s)

  • Title page
  • Certification
  • Dedication
  • Acknowledgement
  • Table of contents

Chapter One

1.0 Introduction

  • 1.1 Background of the study
  • 1.2 Statement of the problem
  • 1.3 Objective of the study
  • 1.4 Research questions
  • 1.5 Significance of the study
  • 1.6 Scope of the study
  • 1.7 Limitation of the study
  • 1.8 Definition of terms

Chapter Two

2.0 Literature Review

  • 2.1 Introduction
  • 2.2 Loan /Bank loan
  • 2.3 Classification of loan
  • 2.4 Credit analysis
  • 2.5 Principles of credit analysis
  • 2.6 Scope of credit analysis
  • 2.7 Factors considered in credit analysis
  • 2.8 Factors that influence loan policy
  • 2.9 Considerable factors in loan pricing
  • 2.10 Loan recovery in Nigerian banks

Chapter Three

3.0 Research Design and Methodology

  • 3.1 Introduction
  • 3.2 Research design
  • 3.3 Source/methods date collection
  • 3.4 Population and sample size
  • 3.5 Sample technique
  • 3.6 Validity and reliability of measuring instrument
  • 3.7 Methods of data analysis

Chapter Four

4.0 Presentation of Data

  • 4.1 Introduction
  • 4.2 Presentation of data
  • 4.3 Analysis of data
  • 4.4 Interpretation of result

Chapter Five

5.0 Summary, Conclusion and Recommendations

  • 5.1 Introduction
  • 5.2 Summary of findings
  • 5.3 Conclusion
  • 5.4 Recommendations
  • Bibliography
  • Appendix
  • Questionnaire

Chapter One

1.0 Introduction

1.1 Background Of The Study

The modern commercial banking in Nigeria data back to the early period. The colonial government experiencing decline in barter system of trade and rise in financial transaction required an institution in form of commercial bank for safety and effective transaction of fund. Because of this reason, the African banking corporation based in South Africa was invited in the year 1892 to open a branch office in Lagos. Since then, the general profile of the Nigerian commercial banks has varied in various dimensions and particularly the growth in terms of capital base has been phenomenal.

The major function of the commercial bank is to create money through loans and overdraft, this function is the distinguishing feature that separates them from their financial institutions. In accordance, their services include:

  1. Deposit acceptance
  2. Granting of loan and overdraft
  3. Investment advice
  4. Safe custody

Loan is the money that banks lend to borrowers (customers, it is the money that bank gives to customers to be repaid after a stated period of time with interest charged. Loan recovery on the other hand, is the repayment of the money borrowed by the customer with interest rate charged and as at when due.

1.2 Statement Of The Problem

Banks credit facilities required for the growth and development of the economy. Credit is the life wire of business enterprises.

The basis feature of a well functioning financial system is it ability to financial the credit needs which contributes to the economic growth of the country.

The problems of the research are:

  1. The proprietors (shareholders) of the bank are worried to identify the likely problems encountered in loan recovery activities.
  2. The proprietors (shareholders) of the bank are seeking for means to avoid bad and doubtful debts in their financial record.

1.3 Objectives Of The Study

The objectives of the study are:

  1. To ascertain the appropriate strategies that would be adopted by the bank so as to enhance effective and efficient loan recovery system.
  2. To identify the impact of loan recovery in Nigeria (Commercial) banks.

1.4 Research Questions

  1. What are the likely challenges faced by the banks in loan recovery activities?
  2. What are the problems encountered by the customers in repaying loans?

1.5 Significance Of The Study

The research work draws from the experience of the practicing banker. It is expected that the research findings would be communicated to the shareholders and as well to future researchers.
It is further believed that the research findings will:

  1. Serve as a guideline to the present and potential investor in commercial banks.
  2. Provide curious researchers and bank analysts with some index of bank loan analysis.
  3. Draw the attention of the regulating authorities to the need for a standardized policy of loan recovery in commercial banks in order to maintain its impact to the economy.

1.6 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 bank products and to maintain adequately for the industry to improve and augment productivity.

Although reference may be made to other banks but the study is based on the loan recovery on Nigeria commercial banks most especially, commercial banks. The analysis of this commercial bank, indicating how the are been financed by developed bank in order to record high banks production and industry(s) products.

1.7 Limitation Of The Study

This research work is to study all about loan recovery in Nigeria (commercial) bank. Bad debts in banks are discussed in details and further highlight the principles of good lending policies, influence on commercial bank lending is one of the areas of study, and finally the impact of loan recovery is also detained in the study as the target fact.

Several problems were encountered in an effort to carry out this research work and these problems include:

  1. Problems of discrete secrecy of information in Nigeria commercial banks.
  2. Problems of inadequate finance
  3. Problem of time insufficiency to carry out the work.

1.8 Definition Of Terms


Money lent on condition that is repaid either in installment or on all at once on agreed date and usually that the borrower pays the lender an agreed rate of interest.


An act of a bank giving out money to its customers.
Beneficiaries: People who borrowed money from the bank.

Bad debt:

A debt which has become unrecoverable as a result of the debtors death or inability to pay.

Debt recovery:

An act of repayment or borrower money by customers.

Capital expenditure:

This is the expenses the bank run during construction of offices or buying of equipment (expenses made on fixed assets).


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.

Bank lending:

Means the transfer of resources from the surplus units of the economy to the deficits units of the economy.

Bank rate:

This is the rate of interest fixed by central bank in order to regulate the rate changed by bank.
Funds: This means cash that will be used to carryout any work or subject.


An arrangement with a bank allowing one to take out more money than one’s account holds.


An organization offering financial services especially the safe keeping of money.


A person offering patronage to an organization or shop.


The act of getting something back.

Commercial banks:

A financial institution which relieves deposits and deals with money and credits.

Financial institutions:

There are intermediaries between the owners and users of funds.


Someone whose money is owed to.


To put money or something valuable in a bank or other places where it would be safe.


Someone who gives money to a company, business or bank in order to get profit.


Someone who own shares in a company or business.

Chapter Five

5.0 Summary, Conclusion And Recommendation

5.1 Introduction

The last chapter, which is this chapter five contains to unravel the effect of welfare packages for the employee and the role of motivation policy in reducing fraud.

5.2 Summary Of Findings

As all the methods and techniques for empirical research have been applied and with reference to the objectives of the study, as well as data presented, analyzed and interpreted, the following findings were made:

  1. As judgments were made by the ages of the respondents, both the male and female were adults and this helped to add credence to the reliability of respondents elicited.
  2. The survey further reviews that Oceanic Bank plc gives loan to its customers.
  3. Through this research study, it is possible to identify that the bank usually take certain factors into consideration before approving loan, such factor include purpose, amount, maturity period, profitability, character, performance and security.
  4. It further identify that Oceanic bank plc has an organized institutional arrangement for its loan recovery activities.
  5. We also discovered that the customers do encounters difficulties in repayment of their loan.
  6. The survey cases that the bank also encounters their own problems in its loan recovery activities.
  7. We however discovered that loan recovery has impact towards the economic growth of the nation.
  8. The research further reviews that both the level standard of the economic and the turn out number of the loan beneficiaries per annum is best to determine the impact of loan recovery.
  9. The survey identify that the problems which both the bank and its customers encountered on repayment and recovery of loans can be minimized.
  10. The survey finally identify few ways through which this problem can be minimized

5.3 Conclusion

Based on the research findings, the following conclusions are made:

  1. It is well pronounced that Oceanic bank plc does give loans to its customers
  2. Oceanic bank has a organized institutional arrangement for its loan recovery activities.
  3. The bank is a play role or impact of loan recovery toward the economic growth of the nation, which can be determined through the following:
    • Health economic level
    • Turn out number of beneficiaries annually
    • Investment rate toward the economic development
    • Operational standard of the bank

5.4 Recommendations

From the analysis of the research study has been found that impact of loan recovery on Nigeria commercial banks can have a stable environment for attracting investment in the country. There have to be strong technology able to bring information together real time and make it available of the application in a different way. In the light of the findings, researcher wishes to make the following recommendations:

  1. There have to be a great opportunity in the market for banks to position them the market for banks to position themselves correctly and expands. These will lead to expansion of bank which will imply job creation.
  2. Government should provide adequate technologies for smooth going of job.
  3. There have to be good infrastructures and conducive place for work.
  4. Customers should be attended to properly and they should be welcomed.
  5. Good appraisal of evaluation techniques should be put in place so as to reward excellence and discourage substandard performance

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