FINANCIAL INSTITUTION AND ECONOMIC DEVELOPMENT IN NIGERIA (A CASE STUDY OF AFRI BANK A SABA BRANCH, DELTA STATE)
Chapter one: Introduction 1
- Purpose of the study 9
- Statement of the problem 10
- Theoretical rational 11
- Significance of the study 12
- Research hypothesis/questions 13
- Scope of the study 16
- Limitation 16
- Definition of terms 18
CHAPTER TWO
2.0 Overview 22
- Problem of economic development in Nigeria. 34
- Performance assessment of CBN and other financial Institutions in Economic development 38
- Roles of financial institutions 43
- Monetary and financial institutions reform 50
- Afri bank Plc Asaba Branch (profile) 61
- Afri Bank Plc Asaba Branch 63
- Afri Bank Asaba Branch (Plc) its contribution to the economic development of Asaba. 72
3.0 Chapter three introduction 77
- Selection of population sample 77
- Instrument of data collection 78
- Source of data 79
- Sample used 80
- Location of data 81
- Statistical test used 81
- Techniques of data analysis 82
CHAPTER FOUR DATA RESEARCH ANALYSIS
- Data analysis/interpretation 84
5.0 Summary of findings conclusion 89
- Findings 96
- Conclusion 99
- Recommendations 101
Bibliography 108
PROPOSAL
This research work is set up to ascertain help extent which financial institutions will help towards economic development of Nigeria with a particular focus on Afri Bank Plc Asaba in Delta State.
The purpose of this study is to examine the role of financial institutions in economic development that is to say. Effort should be made so that financial institution can extend their services to the rural areas by establishing more branches in the rural communities to increase for mobilization and award lending to investors. This research is divided into five (5) chapters each chapter dealing in the particular aspect of the study.
Chapter one (1) deals with the introduction, the purpose, significance of the study, statement of the problems, research hypothesis definition and scope of the study in details.
Chapter two (2) will commence with the look at the literature review chapter three (3) will discuss or emphasize on the method that will be use in collecting data that is relevant for this research also a coverage and samples of the project work will be highlighted. The method of data analysis and hypothesis will conclude this chapter four (4) will show how the data collected will be presented during the course it this work. Chapter five (5) shows the summarize of all the findings, giving appropriate recommendation and conclusion based on the findings. The project work will give a clear view of the research carried out.
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
In her effort to promote sound economic development in Nigeria and in fact, better focus and greater aspiration in the well being of the citizens, the Federal Military Government under one of the former head of state General Ibrahim B. Babangida Created more states in August 1991. Incidentally, Delta State happens to be one of them.
As a new state a lot of development projects have to be embarked upon of which financial institutions play a major role in funding these projects.
The Nigeria financial institutions as an integral part of the nations financial intermediation mechanization through which the savings of house holds firms, public corporations and the private sector are made available to sorrows at income. The institutions have experienced some far reaching changes in recent times. The coverage of these changes has embraced the institutions which operate in the system and their operational modalities that is the supervisor (Central Bank of Nigeria) and regulations of the system and the set of rules guiding their actions the structure of the system as well as the interrelationships within the structure. Thus the policy framework has witnessed significant changes or general regulations and particularly the organization structure.
The principal financial institutions in the Nigeria financial institutions are as follows.
The banking financial institutions (BFI) which includes Central Bank of Nigeria (CBN) which is the apex and also serves as Bankers, bank the commercial bank, merchant banks development banks, community banks and people bank.
The non-bank financial institutions (NBF) on the other hand includes insurance companies pension funds, national provident finds, discount houses, and building societies etc. Those are also the financial markers which comprise of money and capital markets who most financial institutions operate for the purpose of accelerating financial intermediations in the economy.
The growth (or non-growth) of the financial system deserves serious analysis policy attention because the system development has important implications for the overall growth of the economy. The financial system generally plays a facilitative role which enhanced the process of economic development. Such roles includes mobilization of financial savings, the allocation of credit and the management of payments arrangements. The financial pricing and trading of risks and the monitoring of the performance of firms especially in the context of its allocation function. The financial institutions play important role in the process of economic development.
In Delta State, between 1991 and 2001 nothing much was recorded in the area of financial institutions role in the state economic development.
We can see that many countries of the work that are advanced body in economic development segan with the establishment of various financial institutions. Nigeria being one of the third world countries needs economic development because its one of the low income countries which is the characteristic of most of the developing countries in the world. And how income for person does not enhance standard of living let alone in income yielding assets. The idea of establishment many investment institutions in Nigeria is because of the set back experience by the industrialist. These hindrances can come as a result of difficulty in raising sufficient funds for project which lead to delay in taking off of to negotiated souses.
Economic development can be seen as structural and functional changes. Though absence of effective measurement of the later (economic development can be estimated by level of income and rates given on a perceptional basis to approximate, measure of efficiency and wolfram. Every nation strive after development its an objective that most commies (people) take for granted. Whereas economic progress is an essential component of development is not purely and economic more than the material and financial side of peoples lives. Development should be there fire perceived as a multi dimensional process involving the re-organizational and –e- orientation of entire economic and social system.
Dudley (1969) best posed a basic question about the meaning of development when he asserted that. The question to ask about a couple development are:
- What has been happening to poverty
- What has been happening to unemployment
- What has been happening to inequality of one or two of these Central problems has been growing worse especially if all three have. It would be strange to call the result development even if the per capital income is double. If three of these declined from high levels, then beyond doubt that there has been a period of development for the coming concerns.
(Seer 1977) emphasize that economic development could be define inters of the ration and elimination of poverty, inequality and unemployment. Within the course of a growing economy its also define as the process whereby the real income of a country ensure over a period of time. It obviously that the condition for economic development and growth is dependent on natural resources, human resources capital enterprise, technology and political stability among others.
The structural changes that has affected economic development in Nigeria recently is structural Adjustment programme (SAP) the Federal and State Government working series of programme the seminars to finance industrial and agricultural establishment in our country so as to map but economic development of those policies is Federal government man date commercial bank in credit policies to these sectors. One any ask what SAP is all about its can attempt to change the pattern of financing our projects, production and distribution of gives and services in the country with a view of minimizing our dependence on foreign nations. Its expected to correct the fundamental imbalance in the pattern of our nations dependence on the outside world for our economic needs.
There are so many factors military against Rapid development in Nigeria.
Over population, insufficient entrepreneurs, inadequate infrastructure. We can see that these are ready constructing to the hindrance of Nigeria economy development.
In Nigeria population is growing faster than it national income. And when the people are too many for both the human natural resources available in the society the development.
Also out attitude towards consuming foreign goods in Nigeria is not encouraging and thus is one of the characteristics of any under develop country. In Nigeria toady, the attitude of most Nigerian towards consuming foreign goods 15 very high. Its so high that we always regard anything that is produced in Nigeria as inferior uncle Bens to out own made Ekpomarice. So unpatriotic which results to our indiscriming consumption of foreign goods makes it different for us to obtain rapid economic development as of now.
Political instability is a problem to economic development in Nigeria. It scares away investors. Every successive military regime lends to see things income in the development plan made by the regime it overawe and regine to review to one it inherited or draw up a new one altogether.
Economic development in Nigeria is not encouraging at all. Nigeria is stick an under development nation, since it independence in 1980. Its still having the features of an underdeveloped economy eg when a country elies on foreign aids to finance its investments and other development project.
This is why development plans have seen a feature of government programmes in Nigeria so as to improve the economic conditions of the country and thus, to raise the standard of living and assure the general well being of the people especially Delta State (ASABA). However, based in the development plan that was mapped out by the governor of the state, James, Ibori emphasized that adequate loan disbursement should be granted to potential investors as soon as possible and certainly, all things being equal by the end of this tenure policies and strategies to boost and expand the proficiency in the area of finance and market stratification to take profer care of the profor care of the provision of social goods, like water, electricity supply, both in the urban and rural communities gwonet work of roads, communication and education.
Its sad to know that even though Delta State an oil state was created 13 years ago, yet Asaba her state capital is yet to be fully developed and also other urban areas are carrying for attention.
The reason for this is not far fetched until recently the people of Delta State were operating in mono-production economy that is their main stay was on the oil sector another had an adverse affection the entire standard of living as a result of the falling price in crude oil in the world oil market. As a result of this, most banks in the state found it extremely difficult to mobilize funds through savings and deposits and also get loan beneficiaries or investors record for optimum operation.
Consequently, the unavailability of loans to investors has over then remained elusive.
This and other reasons promoted the local government as well as state to establish a specialized credit institution for development. Therefore there is no doubt that the Nigeria economic develop depend on the activities of financial institutions. This ascertain is based on the fact that capital accumulation which is the basic per-requisition for any development take off is being finance mainly by the authorities of financial intermediaries mechanism.
1.1 PURPOSE OF THE STUDY
The main purpose of this study is to examcrtically the crucial role of financial institution in the economy development of Nigeria with particular focus on Afri Bank of Nigeria Plc Asaba Delta State.
1.2 STATEMENT OF RESEARCH PROBLEM
The crucial role of the financial institution in any country development process cannot over emphasized.. the universally acknowledge positive functional relationship between the efficiency and growth of a countries financial system and those of other sectors of economy is assured a stronger dimension in the modern world environment. This is because developing countries like Nigeria must rely more than ever before in domestic savings mobilization and efficient resource allocation (loans) it would appear that banking crisis in Delta state has come with failure or threat accure of some banks and finance houses. The survival of the banking system is not a thing that government effort alone can achieve without the co-operation of the private sector and financial institution. However the government must lead the way for two reasons. (1) Firstly the vital \role of the financial system in economic development and secondly the fact that banking crisis is sometime triggered off by macro economic policies of the government. Therefore a vigorous and prosperous financial intermediaries is of the utmost importance in Delta State.
Sadly enough financial institutions has relegated to a position of insignificance. Development, manpower development workers in service training and vis-a-vis that are inlar dependent, are in lapses and even not granted. This give rise to lack of credit availability to investors, irregularity in loan disbursement of funds granted to beneficiaries to non-productive investment.
1.3 THEATRICAL RATIONALE
Oyejide (1993) was of the vie that financial system is closely involved with pooling pricing and hading of risks and the monitoring of the management and performance of firms especially in the context of its credit allocation function (page 2).
The functions of the financial system are so critical to the process of economic development that its healthy and stable growth constitution an important policy goal of macro-economic management in all market based economics.
Paul Ogwuma (1993) said that financial institution have undergone some remarkable changes over the years. The immediate functions for its establishment remains the same (page 27).
This sector (financial institution) is regarded as the most important sectors. It provides loan and grant credit facilities our local industrial of the economy. The records of financial intermediaries in the course of Nigeria development in the future. Its prospects for standard expansion of the economy. Also, financial intermediaries has been considered as one of the key sectors in the economy of developing countries like ours of Nigeria.
1.4 SIGNIFICANCE OF THE STUDY
The research have the intention of writing this project. He does not claim absorb knowledge of this subject matter rather, the researcher feels that this work will be an eye opener so others who may find this topic useful to their study. The researcher expects that this work would create an awareness on the people when its meant to serve their various purposes such as reasoning for non-disbursement of loan to potential investors by most banks. The researcher deems it necessary to have detailed studies into all important problems of rural investors who engage in short term investment. Its in the mind of the researcher to pin-point on which financial institution (intermediaries) has been hampered in various ways and his research area.
Feel that the research would help the investors and students in financial studies and business studies who any come across similar ropicin their course of academic pursuit.
1.5 RESEARCH HYPOTHESIS
In stating this hypothesis we have two (2) hypothesis as follows:
H0: Financial institutions have played important role in the
economic development Delta State
H1: Low credit Availability have not inhabit capital formation.
H0: Financial intermediaries have laid much emphasis in
collateral security before granting loan.
H0: The present lending rate make investors relutant to seek
loan.
H1: The present lending rate does not make investors reluctant to seek loan
H0: Financial institution have been efficient in the mobilization for long term investment.
H1: Financial institution have not been effective in the mobilization for long term investment.
H0: Financial institution have been able to invest significantly in development project in Delta State.
H0: Loan beneficiaries have diverted the loan for other purpose.
H0: The Bank have not provided expert financial advice in funds mgt to loan beneficiaries.
H0: The concentration of banks in urban cities have hindered customer propensities to save.
H1: The research would want to find the answer to the following research question
- Does loan credit availability to potential investors inhabits capital formation in Delta State.
- Does financial intermediaries lay much emphasis in collaterial securities before granting loans to investors?
- Does the present lending rate make investors reluctant to seek for loans
- Has financial institution been effective in the mobilization for long term investment?
- Has financial institution been able to invest significantly, in any development project in Delta State?
- Do loan beneficiaries divert the fund to other purposes not meant for the loan.
- Does you banks provide expert financial service on the management of finds by beneficiaries.
- Does the concentration of banks in urban cities hinder in the rural communities propensities to save?
1.6 SCOPE OF THE STUDY
The scope of this study would be very wide if the research should be carried out in all financial institution in Nigeria. Therefore this study is focused on Afric Bank of Nigeria Plc Asaba in Delta State. An the findings may not reflect the pichere of the whole country. These findings may not be valued for the whole financial institution in Nigeria but by and large what happens in Afric Bank can be said to apply to others.
1.7 DELIMITATION
I was faced with the following research limitations.
- Time factor- The was not enough rime carryout adequate research as a result of too many engagement eg. Assignment, quizes, registration verification and other wise.
- Resources – Resources in terms of both financial and material are limitation to the research work.
- Transport Cost- Transport fare has an important part to play as a constraint because one have to be travelling at the expense of lectures from Enugu to Delta State (Asaba).
- Inadequate facilities –lack of published work on the topic ha hindered the research to expand more on the work.
Attitude banking of staff- The selected financial institution in Delta are branches of the financial institute are so were not responding as was considered and this has affected the pre-view of this research.
Some of the staff, the attitude forward carrying out this research work is not encouraging at all. The feel reluctant to even answer simple question they you they are always busy. Where as they are not busy.
1.8 DEFINITION OF TERMS
Financial institution –Refers to these organizations that are legally established either by the government or individuals to directly or indirectly control and manager the volume of money and credits in circulation. The legality of the establishment of these organizations distinguish them from other organization that control money in an economy. Money-lenders are thrift business belong to the category. Even though they lend money to people, they are not legally authorized to perform. Therefore, any contract entered into with these people is void as initio and a nullity and hence cannot be enforce the court of law.
Financial institution could be those institutions that engage in the mobilization of funds and also chandelling these funds to potential investors (customers) to invest in the economy.
Financial institutions can be classified into.
- Banking type financial institutions and
- Non-banking type financial institutions
Banking type financial institutions. These institution control and manager the volume a money in circulation directly they are responses for the printing minty, and creation of credits or incerly. It can also be creation of credits the deposit type financial institutions Deposit in the sense that they accept money deposits from their customers which may either be individuals or other financial intermediaries. By this, the banking type financial institutions intermediate between the savings surplus units and the savings deficit units thereby increasing the volume of money in circulation through credit creation.
Types of banking type financial institutions.
- Central Bank
- Commercial Banks
- Merchant Banks
- Development Banks
- People’s Banks
- Community Bank etc.
Non- banking financial institution (NBFI) these include insurance company’s
Personal funds
Building societies
Discount Houses
ECONOMIC DEVELOPMENT
It has been define as the process whereby a countries real per capital gross national product of income increase over a sustained period of time through continuing increase in per-capital productivity.
Economic development is much more fundamental in that it, enhanced economic and social super structure the society. Its an improvement in the production techniques and in the consumption choices open to average citizen and in the citizens etc. economic development involves a reduction in income inequality, employment rate and poverty in the country.
It could also be defined as the process whereby the level of national production (that is national income) to per capital income, increase over a period of time. The main objective of economic development is to raise the standard of living and the good of the peel in an economy it involves changes inter structure of the economic that include.
- Emphasis on developing manufacturing industrial as opposed to agriculture.
- Less reliance on imported goods in preference to home- produced goods.
- Revision or abolition of the outdated land revue system that hindered to acquire.
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