THE IMPACT OF BANKING SECTOR CREDIT (LOAN) TO THE NIGERIAN INDUSTRIAL SECTOR DEVELOPMENT
CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND OF THE STUDY
Recently, most industries in the country (Nigeria) have been existing in the firm of small industries (cottage industries) i.e household limit carrying out industries activities in the traditional method without paid employment. It is to this end (that small and medium industries are the corner stone of any nation’s industrial and economic well being). That successive government came with the policy of encouraging the development and growth of industries. The small and the medium scale industries were not accorded significant importance in Nigeria until 1975 when the government realized that its industrialization strategy of import.
Substitution only resulted in the setting up of large industries: it was not until the hurd national development plan of 1975 to 1980 that the programme for the small and medium scale industries were explicitly spelled out; “the creation of employment opportunities, migration of rural-urban migration, mobilization of local resources and a more even distribution of industrial enterprises in different part of the country.
Despite all effort by the three (3) tiers of government to enhance the development of industrialization historical survey indicates that there have been inadequate credit facilities. This has been a major impediment in the development to small and medium scale industries in Nigeria. For this reason, many of them are either proprietary or partnership and so cannot obtain loan  from the capital market.
As a result of this, they are either starved of funds or at best obtain fund on extremely unfavourable terms from other sources like money lenders, thrift societies etc. the problem of finance hinders them from operating profitably in a competitive and  depressed economy.
In other to overcome this problem, the federal and state government set up industrial credit schemes and gave guidelines to commercial banks to increase their lending to these categories of enterprises.
Blatantly, the pass military and civilians administration made effort toward the development of small and medium scale industries, notably among them was the pass military administration of General Babangida’s regime with introduction of the structural adjustment programme (SAP). The introduction of SAP in 1986 gave birth to the various government organs and general conditions which encourage the development of industries even in the rural areas. Some of this organs involves the better life for rural women programme, national directorate of employment (NDE), the export promotion council and also the Nigeria economic  reconstruction  fund (NERFUN) whether these organs are really achieving the derived result or not is above the scope of study.
The establishment of the Nigerian banks for commerce and industry (NBCI 1974), Nigeria industrial development bank (NIDB) and various industrial development centers all over the country by pass government shows the desire of the nation toward industrialization.  The transformation of the  economy of  a depressed nation such as ours. From her present  agrarian position to position of production and industrial productivity can only be bought about by indigenous industries.
Inegbenebor (1991) state that the desire of most developing countries including Nigeria is to have a self reliance and self sustain growth. Nigeria is blessed with abundant mineral resources and vividly harnessed and managed, she will compete with other industrialized nations of the world.
With these above, assistance the question will now be why is there shortage of credit (finance)? The explanations one can offer at the point is that the institution responsible for the finance (in this case, banking sector) are still underdeveloped. This shortage of underdeveloped of the credit system is caused by lack of trust attributed to default in meeting financial obligations as at when due by the users of the funds.
Other problem facing the industrial sector in Nigeria beside the financial dilemma includes:
Imperfect knowledge of existing market
Tariffs policy
Inadequate technical and economical counseling or unavailability of qualified personal.
Lack of common service facilities
All the above mentioned problems have brought about unemployment, lack of social amenities etc and hence, a retarded economic growth.
Against the backdrop, this study will involve the following:
Government policies on interest and credit facilities guidelines
Operates of NERFUND to fund out the adequacy of fund provided by it.
Other compelling reasons such as foreign competitions, inflation, poor infrastructural or lack of raw materials inhibiting the realization of governments schemes for industries
1.2    STATEMENT OF THE RESEARCH PROBLEM
The Nigeria industries are confronted with a myriad a 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 it’s operations has loan able short term deposits which are very liquid. Thus, for banks to tend on long term basis creates deposits, which gap as the owners of such deposits can call for their money at shot notices. To solve this problem, commercial bank adopt a careful strategy or strategic approach in extending medium to long term this in itself constitutes a hard condition for  promoters or investors.
With the increasing cost of production and falling real income of consumers, the demand for goods and services are on the decline. This leads to stockpiles of finished goods (inventory) in their warehouses. As stated by Anao and Osaze (1990);
“In financing, the traditional small business in Africa often has to depend on a Mortgage firm of commercial bank. Survival after a few years  may lead to success with obtaining seasonal overdrafts and lines of credit from commercial banks, but no fund for permanent growth”.
Access to  foreign exchange is another impediment to industries. Most of these industries need to import machinery and they find it extremely difficult to obtain machinery and they find it extremely difficult to obtain foreign exchange  even if they have the naira cover closely related to the above. There is also the inability to secure foreign loans due to high cost of servicing the loans.
1.3    OBJECTIVES OF THE STUDY
Over the years successive government  both federal, state and local government have made policies geared towards making the country self – reliant.
Until recently, the survival and growth of small scale and medium scale enterprises have always been given the front row position, considering their immense contributions to the wellbeing of the nation’s economy. The objectives of this study will therefore include,      
To examine the activities of the major financial institution to ascertain their level of commitment.
To determine why there is a gap in their credit delivery system.
To examine whether there is any relationship between bank credit and the Nigeria industrial sector development.  
To ascertain the degree at which other economic variables affect industrial development in Nigeria.
To examine the effect of banking sector credit (loan) on the performance of the industrial sector.    
1.4    SCOPE OF THE STUDY
The study will attempt to diagnose the reasons for the slow growth rate of the Nigeria industrial sector. It will also take a critical look at the effect of banking sector credit (loans) on the overall performance or development of the Nigeria industrial sector from 1980-2005. It intends to know the possible ways through which Nigeria can become an industrialized giant.
1.5    SIGNIFICANCE OF THE STUDY
The significance of the study is derived from the basic function of lending as an all time important function of most banks. The findings of this study is believed would be of great value to the government may be in term  of policy making, the banking sector, the industrial sector, the industrial sector operates, other researchers, to student alike and the society at large.
1.6    STATEMENT OF THE PROBLEM
This issue of banking sector credit made available to industries has been a running battle between the government and banks. In the light of the above, the study will attempt to test certain hypothesis which will include;
Null hypothesis Ho: b-o; that banks lending has a positive relationship on industrial development.
Alternative hypothesis b=0; that banks lending has a positive relationship on industrial development.
Null hypothesis Ho = b-o; that the industrial sector has not benefited from development.
Alternative hypothesis Hi: b=o; that the industrial sector has benefited from development.
1.7    RESEARCH METHODOLOGY
The research will be carried out using secondary data from journals, textbooks, magazines, financial newspaper, publications, bank annual reports, CBN –journals and other such journals. On these data a regression analysis will be carried out using the ordinary least square (OLS) method.
This will enable us test our hypothesis and give the necessary interpretation and finally conclude based on our regression results.
1.8    DEFINATION OF KEYWORDS
Cottages Industry: a small business in which the work is done by people in their homes, weaving and knitting are done by people in their homes weaving and knitting are traditional cottage industries. It has to do with household units carrying out industrial activities paid employment.
Import Substitution: this implies that we substitute  most of our imports with what is available locally.
Lending rate:  the rate of interest paid on funds borrowed from a financial institution.
Lending: the granting of a credit facility for a specified period of time and terms on the understanding that the facility will be repaid.
Credit: this is the sum total of money granted by banks known as loans and advances for the use of business and individuals alike to be repaid on an agreed period and usually with interest.
Government regulation: the process of establishing or increasing productive activities such as mining and quarrying, processing, manufacturing, construction and assembly craft etc. this is legal control, directories guidelines exercise by the government through  it regulatory or supervisory authorities (CBN and NDIC) on banking activities.
 REFERENCES
Anao, A.R. (1975), “The identify of indigenous entrepreneur and solution  to his financial problems”, management in Nigeria magazine.
CBN Bullion journal
Cooper, Arnoid C. (1973), “Technical entrepreneurship: what do we know?” federal republic of Nigeria, the third national development plan 1975-1980, central planning office, federal ministry of economic development

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