CHAPTER ONE
INTRODUCTION
1.1 Background of Study
Commercial banks like other business Institution is a joint stock company. It’s activities began in West Africa in 1892. Banks are regarded as agents to the level of growth and development of an economy of a nation.
The joint stock banks otherwise referred to as commercial banks are dealer in money and credits, holding themselves out to receive deposits from the public which are repayable on demand by uses of cheque. Commercial banks also give advances as well as performing other services to their customers.
Commercial banks are in the business of providing banking services to individuals, government, small business and large organizations. It also offers job opportunities to the people more than any other financial services industry. Jobs in banking can be exciting and offer excellent opportunities to learn about business interact with people and build up a clientele.
In the most basic terms commercial banks take deposits from individual and institutional customers, which they then use to extend credit to other customers. They make money by earning more in interest from borrower than they pay in interest to those whose deposits they accept. They are different from investment banks and brokerage in that those kinds of institutions focus on under writing, selling and trading corporate and municipal securities.
The deposits the public deposit in the bank supports economic activities through business loans, mortgages, auto loans and home repair loans. Commercial banks also provide loans in the form of credit card charges and render local services including safe deposits, notary and merchant banking.
Historically, commercial banks have concentrated on commercial or business lending and on investing in securities. They foster growth and development while meeting the challenging demands of today’s business environment.
Commercial banks, which dominate this industry, offer a full range of services for individuals, businesses and governments. Commercial bank come in a wide range of sizes from large global banks to regional and community banks.
Commercial bank is a type of bank that provides services, such as accepting deposits, giving business loans and basic investment products.
Commercial bank can also refer to a bank that mostly deals with deposits and loans from corporations or large business, as opposed to individual members of the public (retail banking).
Commercial banks play an important role in economic growth and development of developing countries like Nigeria. Economic development involves investment in various sectors of the economy. The banks collect savings from the people and mobilize savings for investment in industrial project. The investors borrow from banks to finance the projects.
Special funds are provided to the investors for the completion of projects. The bank provides a guarantee for industrial loan from international agencies. The foreign capital, flows to developing countries (Nigeria) for investment in projects.
Commercial banks are involved in the process of increasing the wealth of the economy, particularly the capital goods needed for raising productivity. The developed economies needed the service of the banking system to enable the economy attain economic development, while the developing (Nigeria) economies need the service of banking system for sectorial development.
The financial institution (Commercial Banks), are therefore, capable of influencing the major saving propensities and opportunity. The need to achieve sustained economic growth and development within any economy can be possible admits strong financial institution and precisely within the existence of a virile banking system. Their activities must be such that are tailored to work in the congruence with government policies and programmes in a bid to attaining the desired macro-economic objectives as a nation.
Schumpeter in 1934 observed that the commercial banking system was one of the key agents in the whole process of development. Generally commercial banks not only facilitate but speed up the process of economic growth and development through making more funds available from resources mobilized.
According to Beyo Lawa (1974:6s) “The objective for the establishment of commercial banks are: firstly to reduce excessive profits and secondly to increase the flow of capital in the socially desirable project”.
The presence of commercial banks in Nigeria will not only help to safeguard the properties and income of Nigerians but it will also facilitate the development of all areas in Nigeria and the effect on the economy in general.
Commercial banks like other business institution are a joint stock company. Banks are regarded as agents to the level of development of an economy of a nation.
1.2 Statement of the Problem
For the past three decades, the Nigeria economy has not shown any favourable sign of development. This shows that the Nigeria economy is not one that can inspire confidence if no drastic improvement is shown by financial institutions.
Based on this the following problems have been noted hence the reason for this study.
Commercial banks hardly contribute much to community development of the rural areas. Efforts in this direction has met with many problems and hence probably limited their rapid expansion programme and economic development. This may be traced to the attitudes of the rural communities towards the banking system in general. It has been noticed that villagers still choose to hid their financial savings in tins, cups and over wood boxes hung over their neck.
There are some factors that can hinder the effective performance of commercial banks in the economic growth and development of Nigeria. Factors like unemployment, poor infrastructure, level of technology and poor mobilization of fund can hinder the effective performance of commercial banks.
In conclusion, the establishment of commercial bank will make the public to realize the great importance of commercial bank but if more of these banks were not established by the government, most people wouldn’t have opportunity to enjoy the services rendered by the commercial bank and social problems such as unemployment will not be solved.
1.3 Objectives of the Study
The objective of this study is aimed at achieving the following objectives;
1. To investigate the role of commercial banks in the economic growth and development in Nigeria
2. To proffer ways in which the commercial banks in Nigeria can assist in fund mobilization for economic growth and development.
3. To give a general overview of the relationship between commercial banks fund mobilization and economic growth and development.
1.4 Statement of Hypothesis
The following hypothesis shall be tested in order to achieve the objective of the study;
1. Commercial bank plays a significant role in economic growth and development of Nigeria.
2. Commercial banks do assists the general public in fund mobilization
1.5 Significance of the Study
The study makes clear the actual contributions and operations of commercial banks in Nigeria and the roles it play in sensitizing the society on the importance of commercial banks.
The study will be important to the policy makers and the federal government in order to adopt and implement policy measures that will boost the economy through the financial institutions.
This research study is of paramount importance to researchers, business men, students of economics and related disciplines, the present and future economist, the industrialist and commercial institutions such as markets, government and the nation in general.
Furthermore, it will also make the government and some individuals to solve some of the problems that can hinder the role of commercial banks in the economic growth and development of Nigeria.
This study will also help other researchers who will like to write on this area in the years to come.
1.6 Scope and Limitation of Study
The main task of the study is to give in full detail the role of commercial banks in fund mobilization for industrial development but due to insufficient time frame for the simple and articulate analysis, the study is restricted to commercial banks specifically. The study is limited to the period of 2002-2012 by the finance sector (commercial banks) in the Nigeria economy.
INTRODUCTION
1.1 Background of Study
Commercial banks like other business Institution is a joint stock company. It’s activities began in West Africa in 1892. Banks are regarded as agents to the level of growth and development of an economy of a nation.
The joint stock banks otherwise referred to as commercial banks are dealer in money and credits, holding themselves out to receive deposits from the public which are repayable on demand by uses of cheque. Commercial banks also give advances as well as performing other services to their customers.
Commercial banks are in the business of providing banking services to individuals, government, small business and large organizations. It also offers job opportunities to the people more than any other financial services industry. Jobs in banking can be exciting and offer excellent opportunities to learn about business interact with people and build up a clientele.
In the most basic terms commercial banks take deposits from individual and institutional customers, which they then use to extend credit to other customers. They make money by earning more in interest from borrower than they pay in interest to those whose deposits they accept. They are different from investment banks and brokerage in that those kinds of institutions focus on under writing, selling and trading corporate and municipal securities.
The deposits the public deposit in the bank supports economic activities through business loans, mortgages, auto loans and home repair loans. Commercial banks also provide loans in the form of credit card charges and render local services including safe deposits, notary and merchant banking.
Historically, commercial banks have concentrated on commercial or business lending and on investing in securities. They foster growth and development while meeting the challenging demands of today’s business environment.
Commercial banks, which dominate this industry, offer a full range of services for individuals, businesses and governments. Commercial bank come in a wide range of sizes from large global banks to regional and community banks.
Commercial bank is a type of bank that provides services, such as accepting deposits, giving business loans and basic investment products.
Commercial bank can also refer to a bank that mostly deals with deposits and loans from corporations or large business, as opposed to individual members of the public (retail banking).
Commercial banks play an important role in economic growth and development of developing countries like Nigeria. Economic development involves investment in various sectors of the economy. The banks collect savings from the people and mobilize savings for investment in industrial project. The investors borrow from banks to finance the projects.
Special funds are provided to the investors for the completion of projects. The bank provides a guarantee for industrial loan from international agencies. The foreign capital, flows to developing countries (Nigeria) for investment in projects.
Commercial banks are involved in the process of increasing the wealth of the economy, particularly the capital goods needed for raising productivity. The developed economies needed the service of the banking system to enable the economy attain economic development, while the developing (Nigeria) economies need the service of banking system for sectorial development.
The financial institution (Commercial Banks), are therefore, capable of influencing the major saving propensities and opportunity. The need to achieve sustained economic growth and development within any economy can be possible admits strong financial institution and precisely within the existence of a virile banking system. Their activities must be such that are tailored to work in the congruence with government policies and programmes in a bid to attaining the desired macro-economic objectives as a nation.
Schumpeter in 1934 observed that the commercial banking system was one of the key agents in the whole process of development. Generally commercial banks not only facilitate but speed up the process of economic growth and development through making more funds available from resources mobilized.
According to Beyo Lawa (1974:6s) “The objective for the establishment of commercial banks are: firstly to reduce excessive profits and secondly to increase the flow of capital in the socially desirable project”.
The presence of commercial banks in Nigeria will not only help to safeguard the properties and income of Nigerians but it will also facilitate the development of all areas in Nigeria and the effect on the economy in general.
Commercial banks like other business institution are a joint stock company. Banks are regarded as agents to the level of development of an economy of a nation.
1.2 Statement of the Problem
For the past three decades, the Nigeria economy has not shown any favourable sign of development. This shows that the Nigeria economy is not one that can inspire confidence if no drastic improvement is shown by financial institutions.
Based on this the following problems have been noted hence the reason for this study.
Commercial banks hardly contribute much to community development of the rural areas. Efforts in this direction has met with many problems and hence probably limited their rapid expansion programme and economic development. This may be traced to the attitudes of the rural communities towards the banking system in general. It has been noticed that villagers still choose to hid their financial savings in tins, cups and over wood boxes hung over their neck.
There are some factors that can hinder the effective performance of commercial banks in the economic growth and development of Nigeria. Factors like unemployment, poor infrastructure, level of technology and poor mobilization of fund can hinder the effective performance of commercial banks.
In conclusion, the establishment of commercial bank will make the public to realize the great importance of commercial bank but if more of these banks were not established by the government, most people wouldn’t have opportunity to enjoy the services rendered by the commercial bank and social problems such as unemployment will not be solved.
1.3 Objectives of the Study
The objective of this study is aimed at achieving the following objectives;
1. To investigate the role of commercial banks in the economic growth and development in Nigeria
2. To proffer ways in which the commercial banks in Nigeria can assist in fund mobilization for economic growth and development.
3. To give a general overview of the relationship between commercial banks fund mobilization and economic growth and development.
1.4 Statement of Hypothesis
The following hypothesis shall be tested in order to achieve the objective of the study;
1. Commercial bank plays a significant role in economic growth and development of Nigeria.
2. Commercial banks do assists the general public in fund mobilization
1.5 Significance of the Study
The study makes clear the actual contributions and operations of commercial banks in Nigeria and the roles it play in sensitizing the society on the importance of commercial banks.
The study will be important to the policy makers and the federal government in order to adopt and implement policy measures that will boost the economy through the financial institutions.
This research study is of paramount importance to researchers, business men, students of economics and related disciplines, the present and future economist, the industrialist and commercial institutions such as markets, government and the nation in general.
Furthermore, it will also make the government and some individuals to solve some of the problems that can hinder the role of commercial banks in the economic growth and development of Nigeria.
This study will also help other researchers who will like to write on this area in the years to come.
1.6 Scope and Limitation of Study
The main task of the study is to give in full detail the role of commercial banks in fund mobilization for industrial development but due to insufficient time frame for the simple and articulate analysis, the study is restricted to commercial banks specifically. The study is limited to the period of 2002-2012 by the finance sector (commercial banks) in the Nigeria economy.
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