THE IMPACT OF BANK LOAN ON THE NIGERIAN INDUSTRIAL SECTOR DEVELOPMENT TABLE OF CONTENTS CHAPTER ONE: INTRODUCTION BACKGROUND TO THE STUDY STATEMENT OF THE RESEARCH PROBLEM RESEARCH OBJECTIVES RESEARCH HYPOTHESIS SCOPE OF THE STUDY SIGNIFICANCE OF THE STUDY LIMITATIONS OF THE STUDY REFERENCES CHAPTER TWO: LITERATURE REVIEW INTRODUCTION EMPIRICAL LITERATURE REVIEW OF BANK CREDIT CONCEPTUAL ISSUES THEORETICAL FRAMEWORK INDUSTRIAL POLICIES UNDER DEMOCRATIC GOVERNANCE IN NIGERIA FEATURES OF THE NIGERIAN INDUSTRIAL SECTOR AN OVERVIEW OF INDUSTRIAL PRODUCTION, POLICIES AND POLITICAL REGIMES IN NIGERIA, 1960-2009 NIGERIA’S INDUSTRIAL POLICY INCENTIVES REFERENCES CHAPTER THREE: METHODOLOGY INTRODUCTION RESEARCH DESIGN METHOD OF DATA COLLECTION AND SOURCES METHOD OF DATA ANALYSIS MODEL SPECIFICATION REFERENCES CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS 4.1 INTRODUCTION 4.2 PRESENTATION AND ANALYSIS OF RESULTS 4.3 CORRELATION ANALYSIS 4.4 TEST OF HYPOTHESES CHAPTER FIVE: SUMMARY, RECOMMENDATIONS AND CONCLUSION INTRODUCTION SUMMARY OF FINDINGS RECOMMENDATIONS CONCLUSION BIBLIOGRAPHY APPENDIX CHAPTER ONE INTRODUCTION BACKGROUND TO THE STUDY Finance is required for different purposes by different people, organizations, and other economic agents. To provide the needed finance, there are varieties of institutions rendering financial services. Such institutions are called financial institutions. Banks are among such institutions that render financial services. They are mainly involved in financial intermediation, which involves channeling funds from the surplus unit to the deficit unit of the economy, thus transforming bank deposits into loans or credits. The role of loan in economic development has been recognized as credits are obtained by various economic agents to enable them meet operating expenses. For instance, business firms obtain loan to buy machinery and equipment. Farmers obtain loan to purchase seeds, fertilizers, erect various kinds of farm buildings. Governmental bodies obtain loan to meet various kinds of recurrent and capital expenditures (Nwanyanwu, 2008). Furthermore, individuals and families also take loan to buy and pay for goods and services (Adeniyi, 2006). According to Ademu (2006), the provision of loan with sufficient consideration for the sector’s volume and price system is a way to generate self-employment opportunities. This is because loan helps to create and maintain a reasonable business size as it is used to establish and/or expand the business, to take advantage of economics of scale. It can also be used to improve informal activity and increase its efficiency. This is achievable through resource substitution, which is facilitated by the availability of loan. While highlighting the role of loan, Ademu (2006), further, explained that credit can be used to prevent an economic activity from total collapse in the event of natural disaster, such as flood, drought, disease, or fire. Credit can be garnered to revive such an economic activity that suffered the set back. The banking sector helps to make these credits available by mobilizing surplus funds from savers who have no immediate needs of such funds and thus channel such funds in form of credit to investors who have brilliant ideas on how to create additional wealth in the economy but lack the necessary capital to execute the ideas. It is instructive to note that the banking sector has stood out in the financial sector as of prime importance, because in many developing countries of the world, the sector is virtually the only financial means of attracting private savings on a large scale, (McKinnon, 1980 as cited by Adeniyi, 2006). The debate on the intermediary role of banks in the economic development has dominated many discussions in literature. However, there seem to be a general consensus that the role of intermediary role of banks helps in boosting economic development. Akintola (2004) identified banks’ traditional roles to include financing of agriculture, manufacturing and syndicating of credit to productive sectors of the economy. Credit of banks to the Nigerian economy has been increasing over the years. According to Central Bank of Nigeria Annual Report (2007), credit to the core private sector by the Deposit Money Banks grew by 98.7%. Outstanding credit to agriculture, solid minerals, exports and manufacturing in 2007 stood at 3.1, 10.2, 1.4 and 10.1 per cent, respectively. Credit flows to the core private sector in 2007 amounted to N2,289.2billion. Adekanye (1986) observed that in making credit available, banks are rendering a great social service, because through their actions, production is increased, capital investment are expanded and a higher standard of living is realized. In the light of this, the researcher intends to empirically investigate the impact of bank loan on the Nigerian industrial sector development. STATEMENT OF THE RESEARCH PROBLEM The Nigerian industries are confronted with a myriad of problems but notable among them is financial constraint caused by the sources of funds used in financing the project. An industrial project has a long maturity or gestation period and to finance such firms requires long-term sources of funds instead of short-term funds often provided by commercial banks. The banking sector, by nature of its operations has loanable short-term deposits, which are very liquid. Thus, for banks to tend on long-term basis creates a deposit loan maturity gap as the owners of such deposits can call for their money at short notices. To solve this problem, commercial banks adopt a careful strategy or strategic approach in extending medium to long-term financing which always attracts high interest rate. This in itself constitutes a hard condition for promoters or investors. Against this backdrop, the following research questions are raised: Do commercial bank loans and advances have significant impact on the industrial sector output in Nigeria? Does money supply have a significant impact on the industrial sector output in Nigeria? Does minimum Rediscounting Rate have significant impact on the industrial sector output in Nigeria? RESEARCH OBJECTIVES The research main objective is to investigate the impact of bank loan on the Nigerian industrial sector development. The specific objectives are: To examine whether commercial bank loans and advances have significant impact on the industrial sector output in Nigeria. To verify whether money supply have a significant impact on the industrial sector output in Nigeria. To find out whether minimum rediscounting rate have significant impact on the industrial sector output in Nigeria. RESEARCH HYPOTHESIS The following hypotheses have been formulated to serve as a base for this research; Commercial Bank Loans and Advances have significant impact on the industrial sector output in Nigeria. Money Supply has a significant impact on the industrial sector output in Nigeria. Minimum Rediscounting Rate has a significant impact on the industrial sector output in Nigeria. SCOPE OF THE STUDY In the light of the stated objectives, the focus of this study is on the impact of bank loan on the Nigerian industrial sector development. As such, this study is restricted to the entire quoted banks in the Nigerian Stock Exchange. Temporally or in term of time series, a period of thirty years is used i.e. 1986 to 2010 using some macroeconomic variables. SIGNIFICANCE OF THE STUDY This research work on its conclusion, together with whatever solution or findings that may arise, will prove useful to some particular group of persons or otherwise for various reasons in accordance with their varying needs. Beneficiaries Stakeholders: This study will be important and beneficial to stakeholders to know the essence of bank loan on the industrial sector. The Government: It will acquaint the government of the importance of bank loan on the industrial sector and how it should be properly managed. The public: This study will help to restore the lost confidence of the public as regard bank loan on the industrial sector development. Academic/future researcher: Both academic and other future researchers in this similar subject matter will find it a useful source of learning and research. LIMITATIONS OF THE STUDY In the course of carry out this study, the researcher encountered some constraints such as finance, time, the response rate of the respondents. Financial Constraints: Finance is largely needed to tour wider regions or locations just to gather data for processing. But this was not adequately available to sufficiently meet the purpose of this study. Access to Current Data: Also most management staff would not want to discuss relevant information about their firms. Even most government establishments did not want to disclose very current data in relation to this aspect of study. This again played a major constraint on this study. REFERENCES Nwanyanwu, O. J. (2008), An Analysis of Banks’ Credit on the Nigerian Economic Growth, Jos Journal of Economics, Vol.4, No.1. Adeniyi, O. M. (2006). Bank Credit and Economic Development in Nigeria: A Case Study of Deposit Money Banks. Jos: University of Jos. Ademu, W. A. (2006). “The Informal Sector and Employment Generation in Nigeria: The Role of Credit.” Employment Generation in Nigeria. Selected Papers for the 2006 Annual Conference of the Nigerian Economic Society, in Calabar, august 22nd to 24th. Akintola, S. (2004). “Banks Move Against Soludo” Nigerian Tribune (July 23rd), p.24 Adekanye, F. (1986). Elements of Banking in Nigeria, Lagos: F and A Publishers.
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