Project Abstract

Project Overview

<p> <b></b></p><p><b><b>INTRODUCTION</b></b></p><p><b><b></b></b></p><b><b><p><b>1.1. &nbsp; &nbsp;</b><b>BACKGROUND OF STUDY</b></p><p><b></b></p><b><p>Commercial<br>banks play an important role in economic development of developing countries.<br>Economic development involves investment in various sectors of the economy. The<br>banks collect savings from the people and mobilize savings for investment in<br>industrial project. The investors borrow from banks to finance the projects.</p><p>Special<br>funds are provided to the investors for the completion of projects. The bank<br>provides a guarantee for industrial loan from international agencies. The<br>foreign capital, flows to developing countries for investment in projects.</p><p>Commercial<br>banks are involved in the process of increasing the wealth of the economy,<br>particularly the capital goods needed for raising productivity. The developed<br>economies need the service of the banking system to enable the economy attain<br>economic growth, while the developing economies need the service of banking<br>system for sectorial development.</p><p>The<br>financial institutions are therefore, capable of influencing the major saving<br>propensities and opportunity. The need to achieve sustained economic growth<br>within any economy can be possible admits strong financial institution and<br>precisely within the existence of a virile banking system. Their activities<br>must be such that are tailored to work in the congruence with government<br>policies and programmes in a bid to attaining the desired macro-economic<br>objectives as a nation.</p><p>Schumpeter<br>in 1934 observed that the commercial banking system was one of the key agent in<br>the whole process of development. Generally commercial banks not only<br>facilitate but speed up the process of economic development through making more<br>funds available from resources mobilized. The study wishes to examine the role<br>of commercial bank in economic development of Nigeria by carrying out a survey<br>on selected commercial bank in Etsako west L.G.A Edo state.</p><p><b>1.2<br>THE ROLE OF COMMERCIAL BANKS IN ECONOMIC GROWTH IN NIGERIA</b></p><p><b></b></p><b><p>The<br>banking system is a catalyst and engine of growth that is responsible for being<br>a life wire to every sector of the economy. It is evident that no sector in the<br>economy can flourish or prosper without the support and services of the banking<br>sector, agricultural sector, manufacturing sector, mining or even services<br>sector can’t do without banks. Commercial banks provide and encourage savings.<br>The establishment of commercial bank especially in the rural areas makes<br>savings possible, hence economic development is accelerated.</p><p>Commercial<br>banks provide capital needed for development. Deficit spender unit obtain<br>medium and short term loans and overdraft from commercial banks to start a new<br>industry or to engage in other development efforts. They engage in trade<br>activities through making use of cheques and other financial instrument<br>possible. They encourage investment, provide direct loans to the government and<br>individuals for investment purposes. They provide managerial advices to<br>small-scale industrialists who do not engage in the service of specialist.<br>Commercial banks also render financial advice to their customers including to<br>invest in. Commercial banks create money as an instrument to the apex bank for<br>all its activities. Commercial banks help to enhance development of<br>international trade, these include acting as referees to importers, providing<br>travellers cheque to those going abroad, opening letters of credit as well as<br>providing credit for export. All these helps to promote international trade and<br>relationship between nations, they provide backup liquidity to the economy.<br>They are transmitters of monetary policy and they provide some “value added”<br>from transfering funds from savers to borrowers and providing liquidity.</p><p>The<br>current credit crisis and the transatlantic mortage financial turmoil have<br>questioned effectiveness of banks consolidation programme as a remedy for<br>financial stabilty and monetary policy in correcting the defects in the<br>financial sector for sustainable development. The consolidation of banks has<br>been the major policy instrument being adopted in correcting deficiencies in<br>the financial sector. The economic rationale for the domestic consolidation is<br>indisputable, an early view of consolidation was that it makes banking more<br>cost efficient because larger banks can eliminate excess capacity in areas like<br>data processing, personnel marketing or overlapping networks. Cost efficiency<br>also could increase if more efficient banks acquired less efficient ones.<br>Consolidation is viewed as the reduction in the number of banks and other<br>deposit taking institutions with a simultaneous increase in size and<br>concentration of the consolidation entities in the sector. The driving forces<br>in bank consolidation include better risk control through the creation of<br>critical mass and economies of scale, advancement of marketing and product<br>initiative improvements in the overall credit risk and technology exploitation.<br>These drivers has lead to improved operational efficiencies and larger and<br>better capitalized institutions.</p><p><b>1.3<br>STATEMENT OF THE PROBLEM</b></p><p>Given<br>that the economic trend of the commercial banking industry, one wondered what<br>has hindered economic growth, though an important avenue for banks to boost the<br>growth of the economy through efficient and effective saving investment<br>process(financial intermediation) to stimulate investment and productive activities.</p><p>For<br>the past three decades, the Nigerian economy has not shown any favourable sign<br>of growth. For example, the real GNP growth rate figure was 2.8% in 1995 with<br>negative figures in years like 1982, 0.3% etc as depicted in the CBN periodic<br>bulletin in 1986. This shows that the Nigerian economy is not one that can<br>inspire confidence, if no drastic improvement is shown by financial<br>institutions with its economy especially in the new millenium.</p><p>1.In<br>what extent does commercial bank as a financial intermediate contribute towards<br>fund mobilization for economic growth and development of the country.</p><p>2.What<br>is the essence of commercial banks in Nigerian economy towards fund<br>mobilization for economic growth and development?</p><p>3.What<br>are the problems commercial banks encounter in their performance towards<br>mobilization of funds for economic growth and development?</p><p><b>1.4 OBJECTIVES OF THE STUDY</b></p><p>The<br>objectives of this research work are tacitly stated as follows.</p><p>-To<br>determine the contribution of commercial banks towards a positive economic<br>growth and wealth creation in Etsako west L.G.A. Edo state &nbsp; &nbsp;</p><p>-To<br>examine ways in which the commercial banks in Nigeria can be made to play<br>better roles towards fund mobilization for economic growth and development.</p><p>-To<br>analyse the constraints and short comings facing commercial banks in Nigeria<br>towards fund mobilization for economic growth and development.</p><p>-To<br>determine and test the effects of some relevant economic variable and factors<br>on the real gross domestic product (GDP) of Nigeria.</p><p><b>1.5 STATEMENT OF THE HYPOTHESIS</b></p><p>This research work<br>will be guided by the following hypothesis.</p><p>Commercial banks do<br>not contribute significantly towards fund mobilization for economic growth and<br>development of the country.</p><p>The variables of commercial<br>banks are lending deposits, real investment and interest rate etc do not have<br>any impact in the Nigerian economic sector.</p><p>The constraints on<br>the activities of the comercial bank do not affect their economic role and<br>activities.</p><p><b>1.6<br>SIGNIFICANCE OF THE STUDY</b></p><p><b></b></p><b><p>The<br>study makes clear the actual contributions and operations of commercial banks<br>in Nigeria. It will also sensitize the people of Etsako west L.G.A of Edo state<br>on the importance of commercial banks in Nigeria.</p><p>The<br>study will be important to the policy makers and the federal government in<br>order that to adapt and implement policy measures that will boost the economy<br>through the financial institution.</p><p>It<br>will also depict the negative and positive side of the activities of the<br>general public and bankers, for some correction and changes in order to boost<br>the economy.</p><p><b>1.7<br>LIMITATION OF THE STUDY</b></p><p><b></b></p><b><p>The<br>main task of the study is to give in full detail the role of commercial banks<br>in fund mobilization for industrial growth and development but due to insufficient<br>time frame for the purpose of simple and articulate analysis, the study is<br>restricted to commercial banks specifically. The study is limited to the period<br>of 1975-2008 which saw the significant role played by the financial sector in<br>the Nigerian economy.</p></b></b></b></b></b></b> <br><p></p>