CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Money deposit banks are resident depository corporations and
quasi-corporations which have any liabilities in the form of deposits
payable on demand, transferable by cheque or otherwise usable for
making payments. The banking sector in Nigeria in 2010 financial year
was oligopolistic in structure as only ten banks 11.1% of the 90
operation accounted for 54.5% of total assets, 52.4% of total deposit
liabilities and 46.1% of total deposit liabilities of deposit money bank
as at 31/12/2006 amounted to #2,705 billion. Whilst aggregate credit
to the domestic economy amounted to #1,302.2 billion. In 2006,
sectoral allocation of deposit money banks credit continued to favour
the less productive sector of the economy as only 40.9% of the total
credit went to agriculture, solid minerals, exports and manufacturing
down from 46.2% in 2001. In the year 2007, the general performance of
banks was not significantly different from what happened in the
previous year.
Economic growth has been a major objective of
successive governments in Nigeria. In performing the financial
intermediation role, it has been argued that by virtue of this function
that banks generate economic growth by providing needed resources for
real investment (Shaw, 1973; Mckinnon, 1973). Economic growth is one of
the important factors that improve living standards in developing
countries. It is an indispensable requirement for economic development
among other factors. It is believed that the main factors affecting
economic growth are labour, capital and exogenously determined
technology. Subsequently the new growth theories try to incorporate
technology and human capital as endogenous factors. The role of finance
in terms of money deposit bank was well acknowledged by researchers.
The function of these banks as financial intermediation involves
channeling funds from the surplus unit to the deficit unit of the
economy, thus transforming deposits into loans or credits. The role of
money deposit bank in economic development has been recognized as
credits are obtained by the various economic agents to enable them meet
investment operating expenses. For instance, business firms obtain
credit to buy machinery and equipment, farmers obtain credit to
purchase machines such as tractors, seeds, fertilizers, and erect
various kinds of farm buildings. Government bodies obtain credits to
meet various kinds of recurrent and capital expenditures. Individuals
and families also take credit to buy and pay for goods and services
(Adeniyi, 2006). According to Ademu (2006), the provision of credit with
sufficient consideration for the sector’s volume and price system is a
way to generate self employment opportunities. This is because credit
helps to create and maintain a reasonable business size as it is used
to establish and/or expand the business to take advantage of economy of
scale. It can also be used to improve informal activity and increase
its efficiency. While highlighting the role of credit, Ademu (2006),
further explained that credit can be used to prevent economic activity
from total collapse in the event of natural disasters such as flood,
draught, disease or fire. The banking sector helps to make these credits
available by mobilizing surplus funds from savers who have no
immediate needs for such funds and thus channels 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.
1.2 STATEMENT OF THE PROBLEM
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. According to
Adekanye (1986) in making credit available, money deposit banks are
rendering a great social service because through their activities,
production is increased, capital investment are expanded and a higher
standard of living is realized. However, in Nigeria as in many other
developing countries, the ratio of bank credit to the private sector to
GDP has not increased significantly. This has made it necessary to
examine the impact of money deposit banks on the economic development
of Nigeria.
1.3 OBJECTIVES OF THE STUDY
The following are the objectives of this study:
- To examine the activities of the money deposit banks.
- To examine the impacts of money deposit banks on the economic development of Nigeria.
- To examine the relationship between money deposit banks and economic development of Nigeria.
1.4 RESEARCH QUESTIONS
- What are the activities of the money deposit banks?
- What are the impacts of money deposit banks on the economic development of Nigeria?
- What is the relationship between money deposit banks and economic development of Nigeria?
1.5 HYPOTHESIS
HO: There is no significant relationship between money deposit banks and economic development of Nigeria.
HA: There is significant relationship between money deposit banks and economic development of Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
The following are the significance of this study:
- The result of this study will educate the general public on
the relationship between money deposit banks and economic development
of Nigeria.
- This research will be a contribution to the body of literature
in the area of the effect of personality trait on student’s academic
performance, thereby constituting the empirical literature for future
research in the subject area.
1.7 SCOPE/LIMITATIONS OF THE STUDY
This study will cover the impacts of money deposit banks on the economic development of Nigeria.
LIMITATION OF STUDY
Financial constraint- Insufficient fund tends to
impede the efficiency of the researcher in sourcing for the relevant
materials, literature or information and in the process of data
collection (internet, questionnaire and interview).
Time constraint- The researcher will
simultaneously engage in this study with other academic work. This
consequently will cut down on the time devoted for the research work
REFERENCES
Adekanye F. (1986) Elements of Banking in Nigeria, Lagos: F and A publishers
Ademu, W.A. (2006) “The Informal Sector and Employment Generation
in Nigeria.” Selected papers for the 2006 annual conference of the
Nigeria Economic society in Calabar, August 22nd to 24th.
Adeniyi O.M. (2006). Bank credit and economic development in
Nigeria. A case study of deposit money banks. Jos: University of Jos
Kinnon M.C R. (1973) Money and Capital In Economic Development Washington: The brooking Institute