The Role Of Commercial Bank In Export Promotion In Nigeria

Project and Seminar material for Banking and Finance

Project and Seminar material for Banking and Finance


Abstract


The establishment of commercial banks is not legislatively or decree compelled but should be seen as a measure to persude the institution to take the advantage of exploiting and utilizing economic and social facilities.

This study is aimed at identifying the role of commercial banks in export promotion in Nigeria, highlighting the various roles that commercial banks left contributed towards Nigeria match for growth and development in export promotion.

This study focused attention on the general operations of the commercial bank its historical structure and back ground for effective and accurate assessment of the commercial banks.

The study further reviewed the objective and role of commercial banks to export promotion and appraised its performance and also expose its problems and make recommendation. Materials for the study were sources purely from secondary data.


Preface


The Nigeria economy is presently in a great distress and dilemma. The economy was plunged into this agonizing guang mainly due to over reliance on one export commodity oil. Suddenly, the price of crude oil dropped in the international market. This reflected sharply in the level of adverse balance of payment problems.

The major concern of this study is to reveal how commercial banks can help in promoting exports and stimulating economic growth. The federal Government has taken liberal measures to streamline the structure of the commercial banking activities.

A discount window for financing exports have been established by the federal minister of finance, export credit guarantee and insurance scheme is being designed by the federal ministry of finance to stimulate export financing. In particular, the federal ministry of finance has been made an autonomous institution while commercial banks are now allowed to take equity interest in small-scale enterprises.


Table Of Contents


Preliminary Page(s)

  • Title Page
  • Approval Page
  • Dedication
  • Acknowledgement
  • Abstract
  • Table Of Contents

Chapter One

1.0 Introduction

  • 1.1 Background of the Study
  • 1.2 Statement of the problem
  • 1.3 Objectives of the Study
  • 1.4 Research Questions
  • 1.5 Scope of the study
  • 1.6 Significance of the Study
  • 1.7 Limitation of the study
  • 1.8 Definition of Terms

Chapter Two

2.0 Literature Review

  • 2.1 Introduction
  • 2.1.1 Concept of Export trade
  • 2.1.2 Reasons for export and import trade
  • 2.2 Advantages of increased value over import
  • 2.2.1 Roles of export in economic developments strategic importance of non oil export in Nigeria.
  • 2.3 The concept of Export finance
  • 2.4 Sources of export finance
  • 2.5 Commercial bank (First and union banks role and functions)
  • 2.6 The role commercial banks in exports promotion and development ( First and Union bank)
  • 2.7 Pr-requisite for export financing
  • 2.8 Risks in Export Financing
  • 2.9 Methods of Export Financing
  • 2.10 Government activities in exports promotion and financing of non oil product
  • 2.11 Challenges of Export promotion in Nigeria
  • 2.12 Prospects of export development in Nigeria
  • 2.13 A review of export financing of first bank and Union bank and First bank of Nigeria ( 2006-2012).

Chapter Three

3.0 Research Design and Methodology

  • 3.1 Introduction
  • 3.2 Research design
  • 3.3 Sources and method of data collection
  • 3.4 Population of the study
  • 3.5 Sample techniques
  • 3.6 Validity and reliability of measuring Instrument
  • 3.7 Method of Data analysis

Chapter Four

4.0 Presentation and Analysis of Data

  • 4.1 Introduction
  • 4.2 Analysis of Data
  • 4.3 Interpretation of Results

Chapter Five

5.0 Summary, Conclusion and Recommendation

  • 5.1 Introduction
  • 5.2 Summary of Findings
  • 5.3 Conclusion
  • 5.4 Recommendation
  • Bibliography
  • Appendix
  • Questionnaires

Chapter One


1.0 Introduction

1.1 Background Of The Study

The development role of exporting can be appreciated from the fact role of exporting foreign exchange increase firms sale or profit , lowers production cost, creates employment, earns international recognition, enhances reputation and improves living standard of both exporting and importing firms or nations’ co-operation 2009.

The importance of export to a nation’s economics development and growth cannot be over emphasized, export is a catalyst necessary for the overall development of an economy labour start 2005.

The primary objective of export promotion and hence financing in any economy activities. If follows, therefore that export policies should be directed to the sector in which the impact of an increase in export demand will be both desirable and large. It is a source of foreign exchange earning since trade transaction among nations are settled in foreign exchange.

Furthermore, a will development export sector will provide employment opportunity of the people with the attendance reduction in social cost of unemployment earning from export will reduce the strains on the balance of payment position and even improve it. A rewarding export drive can turn under developing economy into a prosperous economy. Export help in increasing the level of aggregate economic activities through its multiples effects on the level of national income (Usman and Salam I, 2008).

However, sustained development export sector can only be achieved through adequate funding and provision of capital. The impressive role of commercial banks is therefore brought into fore. Commercial banks access large deposit savings makes tem significance in financing export sector. In most developed and developing countries government export policies are directed at making sure export sectors are adequately financed in order that more foreign earning will be enjoyed.

The tribalism is that export financing holds the act in economic development a growth of any nation an has accentuated the importance of this business portfolio especially in the financing sector. Indeed much available financing of export by the appropriate institutional such a/s the commercial banks will have great impact on the commercial banks will have great impact on the economy of the economy of the country.

Over the years, the CBN has made effort through its policies to stimulate the growth of the export sector especially the non oil export. The commercial banks have been the arrow heart to achieving this.

This is because commercial banks occupy a strategic position in the financial system of may country. CBN ( 2008) report shows that in 2005 commercial banks credit to export sector receive a credit of N127, 273.6 and N97,787.3 million in 2007 and 2008 respectively.


1.2 Statement Of The Problem

Nigeria has over the years received earnings from the export sector however. The continued unimpressive performance of the non- oil sector and the vulnerability of the external sector. Thus dictate the urgent need for as re-appraisal of the thrust and contents of the development policies and commitments of commercial banks to financing this sector, the adversity of the fluctuation in oil prices has in no small measure skilled the development efforts of various governments.

This has made the Nigerian economy to swing from the boom oil era, as exemplified by the bought economy of the period with massive infrastructural development and the Udoji award followed by the world oil market since only led to the neglect of the non oil export productive base.

The need to correct the existing structural/ distortions and put the economic on the sustainable growth is therefore compelling, even as commercial banks in Nigeria are expected to change from their bureaucratic bottle neck and conversation action in financing the no oil sector.

The question of the expected role of the banks to develop both the oil and non oil export sector comes to bear. This calls for new thought and initiative in essence of this project study.


1.3 Objectives Of The Study

The objective of the study is as follows:

  1. To examine profile of the export sector in Nigeria.
  2. To examine the role of commercial in export financing.
  3. To evaluate the impact to commercial banks credit on the growth of export sector.
  4. To highlight various ways of financing options available to the export sector.
  5. To investigate the extent of the contribution of the export sector to the Nigerian economy.
  6. The identify the factors that is responsible for the under-development of the export sector.

1.4 Research Questions

The research questions to examined in this study are as follows:

  1. What is the structure of the Nigeria’s export sector since 2011.
  2. What efforts have the commercial banks made in financing the export sector in Nigeria?
  3. What efforts has the government made to revamp the on oil export in Nigeria?
  4. What impact does export sector gave to the economic growth of Nigeria?
  5. What factors are responsible for the underdevelopment of the export sector?

1.5 Scope Of The Study

The study will attempt to test the following hypothesis in its quest to successful conclusion.

  1. There is no significant relationship between bank funding and the growth of the export sector.
  2. There is no significant relationship between exports earnings and Nigeria foreign reserves.

1.6 Significance Of The Study

The significance of the study is as follows:

  1. It would provide an economic assessment of the performance on Nigerian’s export sector in relation to the gross domestic products.
  2. The study will identify role of commercial banks hence played in the development of the export. This will assist government draft more effective policies.
  3. Successful conclusion of the study will enable the government and apex bank authorities formulate policies that will enhance the activities of commercial banks in financing the export sector.
  4. An attempt will also be made to enlightened the government on the need to diversify the economy and ensure the development of the non oil sector export.
  5. It is also contribute to existing literatures on export financing by commercial banks.

1.7 Limitation Of The Study

The study was limited due to certain factors such as:

  1. Lack of finances to adequately carry out the research.
  2. Lack of sufficient time to enrich investigation into the subject matter.
  3. The distance of first bank and Union bank is far from my institution.
  4. During research work, I noticed that some staff refused to give me accurate information.

1.8 Definition Of Terms

Capital:

Money or property owned on used in business by a sole proprietor or corporation to produce wealth.

Commercial Banks:

an organization offering services which specify in accepting all forms of deposits for on ward tending to borrowers.

Export:

sending goods to another country for sale.

Economy:

The operation of the country’s industry of agricultural trade and money supply, which together determine the state of the economic life that observed.

Economic Growth:

Is used in relation to capital formulation G.D.P contribution to the productive capacity of the economy.

Fund:

A sum of money for a special purpose.

Finance:

Money to support an enterprise.

Money:

A medium of exchange that function as the unit of account and a store of value.

Import:

Goals and services purchased from another country.

Document Credit:

Undertaking to pay a specified amount to a named party upon fulfillment of state condition.

Service:

Any activity or benefit that one party can offer to another that intangible or tangible and does not result in the transfer of ownership of any physical object.

Balanced Of Payment:

The account out a country’s transaction with outside world.

Market:

The arena in which buyers and sellers meet to exchange items of value.

International Trade:

Transaction between country and other.

Financial Institution:

An institution banking monetary value of recording in monetary transaction.

Exchange Rate:

THE Price of one’s currency in terms of another.

Interest Rate:

The amount charged for a loan usually expressed as the percentage of the some borrowed.

Foreign Exchange:

The currencies of foreign countries.

Bill Of Exchange:

An unconditional order in writing addressed by one person ( the drawer) to another and signed by the person given it, requiring the drawee to pay on demand or at fixed determined future.


Chapter Five


5.0 Summary, Conclusion And Recommendations

5.1 Introduction

This study highlight the need for viable export alternative to oil, which is a dominant export product in Nigeria and considered the immense opportunities and the benefits that exist in non- oil export and the fact that Nigerian firms have comparative potential advantages to export certain products to both developing.


5.2 Summary Of Findings

The overall importance of the export to Nigeria economy was investigated while the need or financing the sector through the commercial banks was also evaluated the study revealed that commercial banks occupy strategic position in the Nigerian financial system, because they have the major responsibility of the domestic mobilization of finance resource due to their large network of branches which is essential from capital formation and accelerated growth such savings are mobilized for investment purposes and credit creation for productive sectors in the economy.

Commercial banks are therefore expected to use their strategic positive and financing activities to develop the sector which has been the backbone of the growth of the Nigerian economy, a major source of revenue to the Nigerian government and determination of the government budget, the secondary source was used to extract data provided for the study while statistical was applied to text the hypothesis in order to correct logical conclusion on the importance of export sector and financing by commercial bank. Findings from the analysis revealed as follows:

  1. There is significant relationship between commercial banks funding and the growth of export sector.
  2. There is significant relationship between export earnings and economic growth in Nigeria.
  3. There is significant relationship between export earning and Nigerian foreign reserve.

5.3 Conclusion

The study carried out the commercial banks in financially the export sector for rapid development. Empirical survey methods was used and results show that commercial banks findings have significant impact on the growth of the export sector which was by export earnings came from oil sector which contributed over 75% of the total oil sector increases its earnings and reduce the economy’s reliance on the sector.

Further, result also that export earnings contributed immensely to the growth of the Nigerian real gross domestic product used to proxy the growth of the Nigeria economy earnings from the export sector are the main source of the Nigerian government revenue, the significant importance of the export sector cannot be overemphasized.

The significant importance is the export sector was also revealed as earnings from the sector bought about to increase in country’s foreign reserve, that is the higher the earnings from the export sector, the higher the Nigeria’s foreign reserve. it is there pertinent to conclude that the export sector remains a viable sector and source of revenue for the over all development of the Nigeria economy. Thus funding the sector through the encouragement of commercial bank will bring about increase growth and development of the sectors.


5.4 Recommendations

From the findings and conclusion made in this study the following recommendation have been made for future policy decision making :

  1. Central bank of Nigeria should reintroduce its minimum sectorial policy to export sector to increasing funding sector by commercial banks that have in the last few years reduce the funds given to the sector and their prefer extendin one above, commercial banks should be encouraged by providing incentives and some tax relief in financing the non- oil sectors through their investment and credit extension.
  2. The Nigeria export and import bank (NEXIM) should be well financed and supervised to ensure that it carried out function properly in financing small and medium scale industries whose products are meant for export purposes.
  3. The stability of the nations currency is very importance to ensure that the price of Nigeria export product is market competitive at the international market as this will increase the demand of the products from the other countries. Therefore CBM should formulate policies that will strengthen the Nigeria “Naira” and ensure its exchange rate stability.
  4. There is need to revisit the major agricultural product which once serve as source of revenue for Nigeria before the discovering of oil. These products are still in high demand at the international market and they include cocoa, rubber, groundnut, bide skin and cassava. A concentration on these agricultural products will increase its supply domestically and international as they are the major area Nigeria once had comparative advantage in international trade.
  5. Commercial banks stringent measures on its loans to borrowers, mainly farmers, small and medium scale industrialist should be relaxed; farmers need easy access credit production and more from manual among to mechanize farming.
  6. There is need to have in place strategic plans that will span about five to ten years towards reducing the importation materials for which Nigeria has abundance of local alternatives, reliance domestic input supply will substantially rg credit to buying of shares and stocks which are no productive.
  7. In most developed countries of the world, the non- oil export brings more revenue and the bed rock of any economic development is considered to be meaningful centered on non –oil export. The Nigeria government needs to pay more attention in developing the non-oil export. The Nigerian government needs to pay more attention in developing the non oil sector of the economy such as agriculture, manufacturing, mining etc. the development of this sector will have significant impact on export earnings and serve as a supplement to earning from the oil export from theeduce the rate of growth an cost of foreign input in the production process and hence lead to improvement in productivity, exportation and favourable balance of payment in the non oil export.

The Role Of Commercial Bank In Export Promotion In Nigeria


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