DESIRABILITY OF SECURITIES FOR LOAN IN NIGERIAN COMMERCIAL BANK A CASE STUDY OF AFRIBANK PLC
ABSTRACT
The main aim of this research work is to establish that all things being equal the loan will be safe, properly used and repaid on
schedule. But this is gamble in the future. All things may not be equal and things may go wrong such that basis for optimism established
and expected do not materialize.
This is why the banker should not be uncovered. The purpose of the research is to evaluate the extent to which commercial banks
in Nigeria desire securities for loans in bank in Nigeria desire securities for loan in bank lending – The findings of this study will help to make
recommendation and suggestions on how best to improve the situation. In conducting this research work, references were made to works
of other authors on allied subjects. But it was discovered that the text dealt more on theoretical and academic aspect of the issue, to the
neglect of what is often experienced in dealing with most banks.
Thus relevant data were obtained from primary sources and oral interviews were conducted and research questionnaire administered
to select persons in the bank. These data were carefully evaluated, classified and summarized into tables appropriate for the statistical
testing of the postulated hypothesis. The test of hypothesis employed from the primary sources. Based on the facts that emerged from the
analyzed data, it was discovered that there is no effect of securities on Bank lending, despite the fact that lack of security cannot prevent a
bank from lending.
Recommendations made are in respect of re-introduction of deregulation in the economy by the Federal Government to improve and
to diversify bank lending in order to foster rapid economic development.
TABLE OF CONTENT
CHAPTER ONE
1.0 INTRODUCTION
1.1 Statement of Problem
1.2 Purpose of the study
1.3 Significance of the study
1.4 Statement of hypothesis
1.5 Scope of the study
1.6 Limitations of hypothesis
1.7 Definition of terms
CHAPTER TWO
2.0 REVIEW OF RELATED LITERATURE
2.1 History of Commercial Banking in Nigeria
2.2 Bank credits / facilities and the economy
2.3 Lending, a function of the commercial Bank
2.4 CBN credit policy guidelines as it affects borrower.
CHAPTER THREE
3.0 RESEARCH DESIGN AND METHODOLOGY
3.1 Sources of Data
Primary data
Secondary data
3.2 Sample and sampling procedure
3.3 Method of Investigation
CHAPTER FOUR
4.0 DATA PRESENTATION AND ANALYSIS
4.1 Data presentation and analysis
4.2 Test of Hypothesis
CHAPTER FIVE
5.0 SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION
5.1 Findings
5.2 Conclusion
5.3 Recommendation
Bibliography
Appendix
The commercial banks the change (as collateral security) on the most easily marketable securities of their client, e.g. stock of raw
materials, finished goods and credit to customers. The collateral securities may equally include fixed assets in the form of landed property
with good tithe documents and financial assets in the form of ordinary share, insurance policies.
Experiences in banking industry have shown that most bank borrowers, especially those that fall within the category of small and
medium scale entrepreneurs, do not know the purpose for which they are obtaining the loan. Therefore, they are ignorant of the fact that
the purpose of securing the loan must synchronize with the amount and types of the loan. This factor increases the banks exposure to risk
of default.
Also on the part of government, concretionary monetary policies and the stringent control through the central bank of Nigeria, make
it extremely difficult for banks to lend for the purpose of investments. This results in discretionary bank lending and slow practices in the
banking industry.
Stressing more on the above problems, the following questions need to be resolved;
i. How much does the borrower want?
ii. What is it for (purpose)?
iii. For how long does he want to borrow?
iv. What is the source of repayment?
It is these and other similar problems that this research studies is designed to resolve.
1.2 PURPOSE OF THE STUDY
During the 1960s and early 1970s most commercial banks had traditionally been favorably disposed towards the extension of short term loans. This in the main is due to the liquidity it confers on the banks coupled with the fact that by the very nature of the loan it must be
repaid within one year.
However, this preference for short-term loan by banks have long been over-taken by events hence banks have moved into long-term
lending some of these factors included here are not restricted to the following;
i. Increased lending capacity of banks: The resources of banks have witnessed an upsurge in the recent past. Since banks are
bulging with excess liquidity there is the need to seek for profitable investment outlets for their fund so as to improve their earnings.
ii. The establishment of Nigerian Deposit Insurance Corporation (NDIC):- This Corporation is established to protect depositors
by insuring depositor’s fund for a maximum of N50, 000 in the event of bank running into difficulties. Since the liquidity problems of banks
are fairly reduced by the establishment of the NDIC, banks felt that they cannot extend loans of longer maturities as a way of boosting their
earnings.
iii. Annual Policies: – Annual policies of the Federal Ministry of Finance through the central bank of Nigeria in recent years have been
to ensure that commercial banks provide needed capital to small and medium scale industries to help improve their present state. This
development resulted in the liquidity and profitability trauma in the banking industry as the ceiling on the sectoral allocation of credit
exposes banks to a higher risk of default. The study therefore sets out to ascertain the desirability of securities for loan in Nigerian’s
commercial banks and the findings will help to make recommendation for future improvement.
1.3 SIGNIFICANCE OF THE STUDY
This study will be of great help to potential borrowers. It will enable them to have an insight into existing opportunities in commercial
banks for obtaining financial assistance through loans and other financial services offered by banks. It will also help them to know the types
of loan that they will be able to collect from the commercial banks.
It will equally be of help to practicing bankers regarding identification of potential problems, which the banks have not yet
recognized. This is because in some cases, customers do not have enough time to discuss their problem with their bankers; they may not
disclose some facts, which will be a disadvantage to the bank. The study may also present on identify some problems thus creating another
avenue for further research work.
1.4 STATEMENT OF HYPOTHESIS
Although this research is a case study which entails going to banks for direct investigation. The researcher has however found it
necessary to supplement this approach with a statement of hypothesis.
The objective of this research work is to determine the degree of desirability of securities for loan by commercial banks. Therefore the
hypothesis is:
Ho: There is an effect of securities on bank lending.
Hi: There is no effect of securities on bank lending.
Ho: The securities on bank lending have not reduced the rate of fraudulent malpractice in Nigerian commercial bank.
Hi: The securities on bank lending have reduced the rate of fraudulent malpractice in Nigerian commercial bank.
1.5 DATA COLLECTION
The data for this study will be collected from primary and secondary sources. For the primary data, the specimens will e visited in
order to make use of authentic records for verification of the hypothesis already listed. The relevant data will therefore be extracted from
records of operations, annual reports and of the banks.
The secondary data for the study will be sourced from other published materials and literature such as textbooks, periodicals,
financial and business publications and newspapers.
1.6 DEFINITION OF TERMS
Some terms are defined here to enable one understand the research work more easily some of the terms are:
a. Collateral: – Any tangible assert pledged by a customer to obtain credit.
b. The bank: – Afribank Plc used as the case study.
c. Investment: – Loans, overdras and advances, which generate interest, income to the bank.
d. Project: – The research work
e. The books: – Financial books of the bank; profit and loss account, the balance sheet and auditors reports.
f. Credit: – Any form of borrowing by the public which must be repaid.
g. Monetary Authorities: – Federal ministry of finance and the central bank of Nigeria.
h. Bank Deposit: – Demand deposit, short deposit and savings deposit.
i. Loan: – Money borrowed at interest.
DESIRABILITY OF SECURITIES FOR LOAN IN NIGERIAN COMMERCIAL BANK A CASE STUDY OF AFRIBANK PLC
