Role Of Banks In International Trade In Nigeria

Project and Seminar Topics with material for Banking and Finance

Role Of Banks In International Trade In Nigeria


Abstract


This project work has critically highlighted the compact of the Role of Banks International Trade in Nigeria, the problems affecting the Role in Banks in international trade in Nigeria have been identified and how they can be controlled is also includes in the study and ways to solve them are inductive in the study.

This study also examines the lapses and recommends some viable points (s) that can also contribute to the image of the industry.


Chapter One


Introduction

This project writ – up, “The role of Banks in international Trade”, is written to provide a guide sufficiently instructive in scope to meet the need for Banks, Economist in International Trade.

Among the important topics examined are if there are various relationship, role that exist between banks and international trade in Nigeria, nature of international economics, international trade, difference between international trade and internal trade, problems facing international trade in the banks sector.


1.1 Background of the Study.

Nigeria before and even since the British Colonialist of our country has been engaged in international trade. But it was obviously spelt out during the British Colonialist that was in the 15th century termed legitimate trade.

This was until 1960 during which Nigeria got its independence. This means that, Nigeria was no longer controlled solely by the dictates of the British Government Ever since then legitimate trade to the Nigerian was changed to international trade of which Banks has a major role to play in it.

Nigeria since the oil boom in the early 70’s has been enjoying Nigeria and across the country. Diversifying its economy.

Apart fro international trade, and as a result of climatic factors, Nigeria needs international trade to diversify, accelerate its economic development in the country.

International trade ensures export expansion and import contraction coupled with the fact that it stimulates foreign exchange earnings, international recognition and the provision of employment opportunities for the teeming population.

International trade is synonymous with the production of goods and services for the benefit of trade across the country. Thus we have the banking institution, the food processing export/import trade and the sugar, tobacco export/import trade and that of petroleum export trade is not left behind. Therefore, international trade or external trade is a trade between two or more countries.

Example. Trade between Nigeria and USA as well as Ghana, India, Britain, Japan etc. trade between two countries is called bilateral trade, while trade between many countries is called multilateral trade.

International trade does not mean the exchange of goods and services within a country. The exchange of goods and services among the people of the same country is called home or internal trade. Example, all trading activities which take place within Nigeria in a home or international trade.

External trade is established for the purpose of stabilizing nation’s economy standard if living.

External trade has been proved beyond doubts as very important for a nation’s survival therefore it is peevant that we explicably manifest how the role of banks can be employed for the development of these trade. In doing this, we will limit our study to short and long term scale institutions which are very important to the economy.

Short term scale institutions ad defined by the central bank credit guidelines is, any service enterprise whose annual business turnover does not exceed N500,000.00 (five hundred thousand naira).

There is no definition for long term scale institutions as these did not attract the direct emphasis of the CBN.

The role of banks in international trade development of Nigeria, could be seen through the various services which these banks provide for the sustenance of international trade in the country.

These services include the provision of capital for these exporter/importers in the business inform of loans, such as short term loans, medium and long term loans, which the traders could use to finance their business goals.

The banks also provide overdraft facilities, which are necessary to finance the working capital of the business.

An overdraft could be defined as an arrangement whereby the banks allow their customers to over-draw his account up to a credit position at the end of the period, while short term loans refer to loans granted for periods between one to five years. Then medium and long term loans are granted for periods between five to ten years, even ten years respectively.

Apart from granting loans and over drafts facilities, there are still other roles which banks could play in international trade development in Nigeria. These roles include professional advice, opening of documentary letters of credit (L/CS), bills for collection and negotiation/open account and bills of exchange, foreign exchange example travelers cheques and foreign currencies, information on trade and exchange restrictions, collection and transfer of funds status enquires, etc. above all the determination of the actual external funds required by an export/import borrower. There are accepts of such services which help international trade growth or expansion.

It is not for fetched that the exporters/importers of international trade suffer their own bank problems, which should be analyzed and solved to ensure international trade development. These problems such as the problem of corruption in banking parastatals, obtaining capital from and operational problems which are coursed by the dictates of the Nigeria environment and society.

The irrational problem of manpower requirement and the poor knowledge of trade across of these external traders help to compound the general problems of international development of which bank services can be gainfully employed for the purpose of solving them.

Addition to the problems is lost of trust ship among the members or cooperators of the trade 4, 1, 9, problem among members.

In all, these problems the worst is the problems of unstable political contradictions.

These problems should be totally exterminated by the government, and the society entirely to ensure the steady growth of this important sector of the business of the economy.

It has been noticed that the level of banks institutions financing has been vary poor compared with is obtained in developed nations such as America (USA), Germany but few. The central bank of Nigeria (C. B. N) should step up their moral suasion policy so as to make these banks especially the commercial banks to increase the level of their financing of exporter/importers members.

In increasing this level of their financing emphasis should be placed on medium and long term loans to enable these traders concretize their investments for better results in its outputs; though the commercial banks borrow short from their deposits, the commercial banks who also declare excess profits at the end of each year should expand a lading pattern for medium and long terms loans without adversely affecting their liquid ratios.

With the funds available from the banks, international traders should be made to judiciously invest them and with other important a sound, solid firm and concrete foundation must be laid for the international development of the country.


1.2 Statement of Problem

The Nigerian Banks plc is a pillar in the roles contributed to international trade in Nigeria. The Nigerian banks have various established institutions that enhance the growth of international trade.

Commercial banks, merchant banks, development banks, are one of the banks instrument that hold a vital role in external trade and has been branched all over Nigerian states. The contribution of the above banks to international trade has been a satisfactory type. Most importers and exporters dances to tune of these banks.

Why has these very banks so appetizing to the society and the world at large? Is the success as a result of the banks efforts in it’s operations?

Why do importers/exporters prefer it to other financing institutions?


1.3 Objectives of the Study

  1. To find out if commercial banks play any role in international trade in Nigeria.
  2. To find out if merchant banks play any role in international trade in Nigeria.
  3. To find out if development banks play any role in international trade in Nigeria.
  4. To find out if commercial banks play any role in international trade.
  5. And equally to find out if people’s bank play any role in international trade in Nigeria.

1.4 Research Question

  1. What role do commercial banks play in international trade?
  2. What role do merchant banks play in international trade?
  3. What role do development banks play in international trade?
  4. What role do community banks play in international trade?
  5. What role do people’s bank play in international trade?

1.5 Assumption of the Study

It is assumed that in this research the secondary data collected is correct and reliable.

The procedure and method used is correct and reliable.


1.6 Scope of Study

Area of coverage

  • The role of banks in international trade in Nigeria .
  • Banks method of contribution to international trade in Nigeria.
  • Why international trade in Nigeria?
  • Advantages of international trade in Nigeria.

1.7 Significance of the Study

Today, the government parastatals, banking sectors and the society are all hands on deck to enhance the international trade development and growth of Nigerians economy.

The research study will be of high benefit to banking sectors, importers/exporters and to the society in general to embark of the effectiveness of their business, which inturn will change of the society. Also the study will determine the census and problems of banks role in international trade in Nigeria and thereby should be taken as a corrective measure.

Through this investigation, therefore, the banks and the society will then know their weak points and willingly adopt measure aimed at enhancing it’s business effectiveness.

The government will be in the position to adopt the right strategies to enable the society achieve it’s business expectations or goals.


1.8 Limitation of the Study.

Limitation encountered by the research work is finance and incorporation attitude of respondent: – Some respondents were out rightly hostile and very impatience to entertain genuine requests. There was also bureaucratic bottle – neck that some official documents. However, these constraints did not destroy the ingredient of this research.


1.9 Definition of Terms.

(a) International Trade:

As described by the Author, Norbert M Ile in his published test “Economics of business studies” (1999, P. 278) defines an international trade or external trade as “a trade between two or more countries; it is the exchange of goods and services between two or more countries”.

(b) Banking Institution:

We can define a bank as any organization that handles people’s money. It is a dealer in debts, but indebtedness has a correlation to wealth and hence, a bank can be described as a liquefier of wealth.

(c) Role:

It is defined as “actors in a play; persons task or duty in undertaking.

(d) Foreign Exchange:

This is a process by which a country exchanges it’s goods/services to another country’s goods/services.

(e) Overdraft:

This is a system whereby a customer drawns more money then he has to his credit in a bank.

(f) Economy:

It is a system of control and management of the money goods and other resources of a society.


Chapter Five


5.1 Summary of Findings, Conclusion and Recommendation

5.1 Summary of Findings

It was found out that commercial banks played any role in international trade, it’s role is ask listed below:

Question One

Commercial banks help to promote international trade by providing such factors to international trade.

  1. Opening of documentary letters of credit.
  2. Bills for collection and negotiation.
  3. Foreign exchange eg. Travelers cheques and foreign currencies.
  4. It also transacts other foreign exchange business such as buying and selling foreign currencies.
  5. Acting as referee: Commercial Banks allow customers to obtain references from their bankers and such a bank reference is usually very useful in foreign trade.
Question Two
  1. Merchant banks equally has a contribution to international trade. This is achieved to international trade finance, this include acceptance and negotiation of documentary bills of exchange.
  2. Merchant banks also acts as agents in international trade settlements.
Question Three
  1. Development banks equally contributes its own role in international trade.
  2. It proceeds short term loans to importers/exporters.
  3. It also provides long-term loan to its customer’s importers/exporters.
  4. It acts as a reference to its importers.
  5. Equally acts as an agent of its customer’s importers/exporters.
Question Four and Five

Commercial banks and people’s are only specialized banks. Both are unit banks, an indigenous banks.
Both banks contribute very little to international trade, because of their low interest and capital in the banking institution. Both banks do not bank directly with the CBN. Their contribution to international trade are:

  1. Acting as a referee to importers/exporters
  2. Provision of short term loans to importers/exporters.

5.2 Conclusion and Recommendation:

International trade has been discovered as an important segment of the economy in fact all the governments regard international trade as a means to diversify the economy in other to ensure a balance of payments position.
It is against this background that banks in the country should made to remodel their policies for the benefit of international.

Merchant Banks activities in international trade financing include acceptance and negotiation of documentary bills of exchange.

When the bank discounts accepted documentary bills oe exchange funds are immediately made available to their customers involved in international trade.

Also, when the bank negotiates a documentary bill of exchange accepted by an importer or a foreign buyer it is in principle providing funds for both the importer and the exporter.

Generally, the merchant banks act as agents in International trade Settlement.

Answer to Question No three

To find out if development banks play any role in international trade, which equally asked the research question, “what role do development banks play in international trade”?

With the establishment of central bank of Nigeria (CBN) the need for development banking because a necessity since each economic sector needs adequate finance you meaning economic development to take place. This finance could be gotten through the mobilization of rural and urban savings, which are eventually channeled to productive sectors.

Commercial banks were encouraged to pursue the above objectives but their success was hampered by the nature of advances made to their customers. To improve on the availability of capital and increase on the supply of finance to borrowers specialized banks known as DEVELOPMENT BANKS were established.

These banks provide medium and long term loans to private and public sectors, importers and exporters.

Answer to Question No Four

To find out if commercial banks play any role in international trade, which its research question is, “what role do commercial banks play in international trade?

Commercial bank acts as an agent between its unbrella bank that covers them and its customers.

From this research, commercial bank play a very little role in international, trade because of its low capital and interest it has.

Its function to international trade are as listed below:

  1. Acts as a referee.
  2. Provision of short-term loans.
A. Acts As A Referee:

Commercial banks provide act as a referee between its customer and a bank that covers them the (Commercial bank)

B. Provision of Short Term Loans:

Commercial banks provide short-term loan to its customer, which may not be enough to the business of its customer importer/export.

Answer to Question No Five

To find out if people’s banks play any role in international trade, which it’s research question is “What role do people’s banks play in international trade”?

Just like the commercial bank, people’s banks are also one of the specialized banks with the country. It is also a unit bank and does not bank cirectly with the CBN. It rather has a solid bank that directly banks with IUCBN that cers them (people’s bank).

This research proves that people’s banks contribute little to international trade because of its low interest and capital it has.

Its contribution to international trade are as follows:

  1. Acts as a referee.
  2. Provision of short-term loan.

On this, the research therefore recommends solutions that should be taken in order to achieve effectively the role of banks in international trade.

A. Appropriate Role Needs To Be Re-Focused

There are two reasons why the role of the CBN needs to be re-focused. First, the experience of the bank in its 29 years of existence shows that it has taken on too many non-central banking factions, which has constrained the effectiveness of its performance. From now on the banks would need to concentrate on its more functions, which include the maintenance of monetary stability and the development of a sound financial system.

Second, the CBN should re – focus its attention on achieving the state of the art, technology especially in the areas of information and communication. This will assist it the effective performance of the functions notably in the areas of monetary management, debt management, and technological development in the financial system.

B. Monetary Management Should be Made Efficient and Sophisticated:

The monetary policy strategy envisaged for the CBN in the next reliance on indirect instruments of control. Open market open actions (OMO) would be the major instrument of policy. Already, the foundation has been laid for such operation. By the next century, the CBN should be able to strengthen its monetary policy instruments, in particular OMO, in more efficient and sophisticated financial environment. This will be so, given the increasing trend towards financial globalization.

C. Efficient Payments System Should be Improved:

There is need for Banks to develop effective payments mechanism, which would be less cash, dominated as well as foster the development of an efficient financial system. With more financial depending and sophistication expected in the 21 century, the traditional payments system dominated by cash would give way, first to non-paper and later to the electronic payment cashes are crucial. With appropriate supervision and regulation of the financial sector, systemic desire could be parented while systematic disease could be prevented while isolated weaknesses in system could be checked through early warning signals.

D. Foreign Exchange and Rate Management Should be Paid Attention:

It is envisaged that the enabling environment for a market determined system would continue to be improved for foreign an exchange rate management in the 21st century. The unification of the exchange rate compled with a liberalized trade and exchange regime could ultimately lead to the full convertibility of the Naira. CBN’s interventions in the foreign exchange market will thus be confirmed to the something of the amplitude of the fluctuations.

In order to complement and ease the constraint on capacity building, Banks will need to promote appropriate banking technology, especially computerization. Already the CBN has put much effort in computering its activities, however, computer networking has not gone for a. it is expected that by early 21st century, the CBN would have linked all its branches with a computer network while encouraging other institutions to so the same for their various branches (Ogwuma 1997:5.47). instruments the type of which we are witnessing in the industrial and some for eastern countries. In this regard, the domince reduced through the encouragement of cheque transitions. The later requires sustained confidence in the country’s financial system by the new politicians into the government should not district the banking operations especially in international trade except where necessary.

E. War in the Country Should be Stopped Form Occurring:

War comes to destroy and not to amend are improved every aspect of an economy a country, therefore should not be encouraged within a country.

It these recommendations are strongly adhered to by the banks, government and the society of the country, we strongly believed that the role of Banks in integrations trade will make a change and equally achieve its goal when relates to international Trade.


5.3 Suggestions for Further Research:

This research project is strictly warned not to be directly copied, produced, stored in refrend system or transmitted, in any form.

Therefore recommended some research topics for further researchers

  1. The role of non-banks in foreign trade.
  2. The role of banks in industrial development.
  3. The role of non-banks in international trade.

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