Commercial banks lending policies in nigeria and their implications

Project Abstract

Commercial banks play a crucial role in the Nigerian economy by providing financial services to individuals, businesses, and the government. One of the key functions of commercial banks is to lend money to borrowers, which helps stimulate economic activities. However, the lending policies of commercial banks in Nigeria have significant implications for the economy. This research project aims to investigate the lending policies of commercial banks in Nigeria and their implications on the economy. The study will focus on understanding the various factors that influence the lending policies of commercial banks, such as regulatory requirements, risk management practices, and market conditions. By analyzing these factors, the research aims to provide insights into how commercial banks make lending decisions and the impact of these decisions on the economy. The implications of commercial banks' lending policies in Nigeria are multifaceted. One of the key implications is the availability of credit to borrowers. Commercial banks' lending policies determine the amount of credit available in the economy, which can have a significant impact on economic growth. Tight lending policies can restrict access to credit, leading to a slowdown in economic activities, while loose lending policies can result in excessive borrowing and financial instability. Another implication of commercial banks' lending policies is the cost of credit. The interest rates charged on loans by commercial banks affect the cost of borrowing for individuals and businesses. High-interest rates can discourage borrowing and investment, while low-interest rates can stimulate economic activities. Understanding how commercial banks set interest rates and the factors that influence these rates is crucial for policymakers and regulators. Furthermore, the quality of loans issued by commercial banks is another important implication of their lending policies. Non-performing loans can have adverse effects on the financial stability of commercial banks and the overall economy. By examining the lending practices of commercial banks, this research aims to shed light on the risk management strategies employed by banks and their effectiveness in mitigating credit risk. In conclusion, this research project on commercial banks' lending policies in Nigeria and their implications is essential for understanding the dynamics of the banking sector and its impact on the economy. By examining the factors that influence lending decisions, the availability and cost of credit, and the quality of loans issued by commercial banks, this study seeks to provide valuable insights for policymakers, regulators, and stakeholders in the Nigerian financial system.

Project Overview

<p> </p><p><strong>1.1 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</strong><strong>BACKGROUND OF THE STUDY</strong></p><p>Back credit &nbsp;and &nbsp;lending &nbsp;function &nbsp;as &nbsp;we are &nbsp;aware &nbsp;evolved &nbsp;from a &nbsp;rather &nbsp;humble &nbsp;beginning &nbsp; as a &nbsp;result &nbsp;of the discovery &nbsp;made by the gold &nbsp;smith &nbsp;some &nbsp;continues &nbsp;ago, &nbsp;though &nbsp;only &nbsp;a &nbsp;small &nbsp;proportion &nbsp;of the money &nbsp;kept with him &nbsp;for security &nbsp;purpose &nbsp;was indeed required by the &nbsp;depositors at any &nbsp;one &nbsp;time &nbsp;and that &nbsp;he could &nbsp;safely &nbsp;lend the &nbsp;rest to borrowers &nbsp;and make &nbsp;interest &nbsp;charge &nbsp;thereon. &nbsp;The banking habit that latter inherited such practice felt that only about nine(9) to ten (10) percent of the bank deposit at a give time were therefore demand by the depositors.</p><p>However the commercial banks role of pooling funds together for the more surplus economics units to the deficit units of the country’s economy is what is regarded to as their leading function banks have in recent time been described as a machine of economic growth in an economy for the fact they perform this &nbsp;resources allocation function by mobilizing and channeling resources from savings surplus economic units to savings defeit units. In this position, they help in accelerating the trend of economic activities in various sectors of the economy, there by increasing the level of utility and wants of individuals and corporate bodies.</p><p>Well, as the above function is met, they would be more involved in the development of the economy because their raw material (money) is where other sector and sub-sector of the economy rotate.</p><p>More so, commercial banks have proved and are likely to remain the dominate financing intermediaries in Nigeria for they at present account for over 520 of the resources of the financial system to the economy and seemed to be more then units or sub-sectors able in all respects to influence the course of development.</p><p>This is why, not with standing the deregulation of the economy, banking is yet regarded as one of the most controlled or regulated in Nigeria. In monetary amendment guideline circular No 21 of January, 1987 the central bank of Nigeria (CBN) quoted as this in order to enhance &nbsp;the development of financial position and achieve a realistic resource allocation, the following change effected all control on interest rates were then removed in line tooth the emphresis on deregulation of the economy the second condition without in order to server as a signed to the desired direction of interest rate changes, the minimum rediscount rate would continue to be fixed by the central bank. This has gone further to show the benefits of commercial banks in the growth of the country’s economy. This is because in spite of the deregulation in the whole economy. The banks are still kept in check always and forced to operate within the policies of the monetary authorities.</p><p><strong>1.2 &nbsp; &nbsp; STATEMENT OF THE PROBLEM</strong></p><p>In Nigeria, as in most other developing countries of the world, poor banking awareness (especially in the rural areas) and under-litches militating against economic development. This ugly trend is as a result of poor and under develop banking system which has been identified for long. Actually, failure to develop a favourable bank lending policies and implication was pointed out as a major short coming of the west African currency Board (WACB) promoting the establishment of the central bank of Nigeria in 1958.</p><p>It was in 1937 that internal autonomy was achieved another commission was set up. During this period the federal government engaged the service of another financial expert of the bank of England, Mr. J.B. Loynes, it was his recommendation that led to the establishment of the &nbsp; central bank of Nigeria by the central bank of Nigeria ordinance of 17th march, 1959.</p> <br><p></p>