ABSTRACT
This study have been able to analyze the effects that bank credit make
on private sector investments in Nigeria. On research question one which
borders on volume of businesses/transactions in the Private Sector, the
study shows that Private investors expand their businesses through bank
facilities. This could be achieved through expansion of space/office,
purchase of large wears/stock and involvement in large scale operations.
Table 4.2 shows that 40(62%) of the respondents agree that bank credit
actually increase
the volume of businesses of Private investors. Similarly, it was
ascertained that operational efficiency can be achieved in the Private
sector through acquisition of modern equipment, optimization of
facilities and involvement in research and development. Table 4.3 shows
that majority of the respondents (42%) maintain that to a great extent,
bank credit leads to increase in operational efficiency in the private
sector. Finally, on research question three which borders on increase in
total number of private investments, it was found that growth in number
of Private Investments can be achieved through Bank Credit. Table 4.4
shows that 42 (65%) of respondents share the opinion that Bank Credit
relates positively with private sector investment in Nigeria. Based on
the conclusions reached, the researcher recommends: the Central Bank
should device a means of compelling, Banks to channel credit facilities
to the private investors on soft terms, the regulatory agencies of the
private sector should do well to sensitize investors on the benefits of
credit facilities in business growth, the government and Central Bank
should encourage the rural banking scheme as to provide credit
facilities to rural investors. Based on the findings mad, the research
conclude that: there is a significant relationship between Bank Credit
and volume of transactions/businesses of Private Investors in Nigeria,
there is a significant relationship between bank credit and operational
efficiency in Private investment in Nigeria, there is significant
relationship between bank credit and increase in total number of Private
investment in Nigeria.
TABLE OF CONTENTS
Title page i
Declaration ii
Certification iii
Dedication iv
Acknowledgment v
Table of contents vi
List of tables vii
List of figures viii
Abstract x
Chapter One: INTRODUCTION
1.1 Background of the study 1
1.2 Statement of the problem 2
1.3 Objective of the study 3
1.4 Research Questions 4
1.5 Research Hypothesis 4
1.6 Significance of the study 5
1.7 Scope and Limitation of the study 5
1.8 Definition of the Terms` 6
References 7
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction 8
2.2 Origin and Objectives of Credit in Banks 8
2.3 Bank credit in Nigeria, types interest and control 10
2.4 Factors affecting bank credit in Nigeria 13
2.5 Central bank of Nigeria (CBN) credit police guidelines 15
2.6 Management of credit administration and policy 19
2.7 Review of credit policies in Nigeria (1980-2006) 21
2.8 Challenges and prospects of private sector
investment in Nigeria 32
2.9 Credit delivery channels in Nigeria 35
2.10 Factor acting as barriers and limitations
to credit delivery 39
2.11 Investment 40
References 42
CHAPTER THREE METHOD OF STUDY
3.1 Introduction 44
3.2 Research design 44
3.3 Population of the study 44
3.4 Sample and sampling procedure 45
3.5 Data collection method 45
3.6 Questionnaire design 45
3.7 Data analysis technique 46
Reference 47
CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA
4.1 Introduction 48
4.2 Presentation of data 48
4.3 Testing of hypothesis 51
4.4 Discussion of finding 55
Reference 57
CHAPTER FIVE: DISCUSSION, CONCLUSION AND RECOMMENDATIONS
5.1 Introduction 58
5.2 Discussion of findings 58
5.3 Recommendations 59
5.4 Conclusion 60
5.5 Suggestion for further studies 60
Bibliography 61
Questionnaire 62
LISTS OF TABLES
Table 4.1: Response rate of questionnaire 48
Table 4.2: Respondents view on bank credit and
increase in volume of businesses in private sector 49
Table 4.3: Response from bank credit customers 49
Table 4.4: Response from private sector 50
Table 4.5: Test data table for hypothesis I 51
Table 4.6: X2 Computation for hypothesis I 52
Table 4.7: Test data table for hypothesis 53
Table 4.8: X2 Computation for hypothesis II 53
Table 4.9: Test data table for hypothesis III 54
Table 4.10: X2 Computation for hypothesis III 54
LIST OF FIGURE
Fig:2.1 Growth in total credit and credit to private sector 27
Fig:2.2 Banking sector lending rate (prime) 1980-2006 28
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The flexibility, adaptability and regenerative tendencies of the private
sector to propel economic development have made the sector a pivotal
focus for government industrial development efforts.
The sector is seen as the bedrock of industrialization based on its
expected impact and potential contribution towards a diversified
production base. Its accelerative effect in achieving macro-objectives
such as full employment, income distribution, development, of local
technology as well as diffusion of management skills stimulation of
indigenous entrepreneurship have been well documented in economic
development literature.
Presently, the Nigerian government, like other counterparts, world over is placing much
emphasis on the growth of private sector. There is, presently, a
renewed effort to encourage private participation in economic
activities. It is a foregone conclusion that private investors are the
bedrock of national economic development. At least they retain a
competitive advantage over public sector by dispersed local market.
In recognition of the many benefit of private sector investment to
national development, the Nigerian government had put to place a good
number of policies aimed at encouraging the sector. The concept of
private sector investments, their roles, characteristics and operational
dynamics are not focus of this study. The research however,
concentrates on examining the impacts of bank credit on the performance
of the sector within the period 1980-2007. In the past, several scholars
(Nwabueze, 1990; Partker, 1994; Harty and Partker 1991) have conducted
studies in the area of Private Sector. These studies, however,
concentrated on justifying the need for government support and
commitment to the sector. Little or nothing have been done in the area
of the place of bank credit in the sectors operations. These have left a
serious vacuum in the literature of financial and economic studies. It
is this identified gap in literature that this study seeks to cover.
1.2 STATEMENT OF THE PROBLEM
It is undisputable that the government has no moral right to go into
serious business because it lacks the necessary rudiments to run such
business. The government stated in 1996 budget that the public sector
would be seen as the provider of an enabling environment for the Private
Sector to meaningfully contribute to the overall growth of the economy
(Awujo 1996). Such categorical statement entails that total support and
encouragement should, naturally, be accorded to the sector.
It is noteworthy however that majority of the investment in the Private
Sector are in the area of small and medium scale enterprises (SMEs).
This sub-sector, no doubt, has been beclouded by Myriads of problems
over the years in the country. Though the government had in the past
established a number of specialized credit financial institution, in
addition to the use of credit guidelines by the Central Bank, the
private sector still suffer lack of credit. This is because most banks
prefer to be penalized given the uneconomic nature of most businesses.
Similarly, the private sector can only make the desired impact in an
economy if there are sustainable development in the areas of volume of
transactions/businesses, operational efficiency and increase in number
of investors. These indices can only be attained when the financial
sector of this economy provide the desired credit facilities. Where the
desired financial support is lacking, the operators in the private
sector can only operate below optimum level.
The resultant effect is stagnation in the economy and the public sector
do of have the “Muscle to shoulder the load alone. This study therefore,
looks at Bank Credit vis a vis Private Sector Investment within the
period 1980-2007.
1.3 OBJECTIVES OF THE STUDY
This study is designed to exam how bank credit affect Private Sector
investment in Nigeria. The specific objectives therefore are to:
1. Examine if Bank Credit influence the volume of transactions/businesses of private Investors in Nigeria.
2. Determine whether Bank Credit leads to operational efficiency among Private Investors in Nigeria.
3. Ascertain whether Bank Credit gives rise to increase in total number of private Investments in Nigeria.
1.4 RESEARCH QUESTIONS
This study is guided by the following questions:
1. To what extent has Bank Credit influenced the volume of transactions/businesses of Private Sector Investors in Nigeria?
2. To what extent has Bank Credit led to operational efficiency in Private Sector Investments in Nigeria?
3. To what extent has Bank Credit given rise to increased in total number of Private Investments in Nigeria?
1.5 RESEARCH HYPOTHESES
This study is conducted under the following assumptions:
H01: There is no significant relationship between Bank Credit and volume
of transactions/businesses of Private Investors in Nigeria.
H02: There is no significant relationship between Bank Credit and
operational efficiency in Private Investments in Nigeria between Bank
Credit and increase in total number of private Investments in Nigeria.
H03: There is no significant relationship between Bank Credit and increase in total number of private investments in Nigeria.
1.6 SIGNIFICANT OF THE STUDY
The result of this study will be of immense benefit to existing and
prospective Private Investors in the economy. They will realize the
advantages derivable from bank credit. They will also realize the
mechanism of bank lending with a view to making optimum use of
facilities available. Similarly, the banking sector will also benefit
from the result of this study. They will realize how the sector can help
also find this study as an invaluable material.
Finally, this study will add to the existing bulk of knowledge on bank
credit and private sector investment. It will form the basis for further
studies in this direction.
1.7 SCOPE AND LIMITATION OF THE STUDY
In a study of this magnitude so many variable come to play. However, the
researcher concentrated on volume of businesses, operational efficiency
and increase in total number of Private Sector Investments. The
research questions and hypotheses focus on this direction.
The geographical scope of this study is Port Harcourt metropolis. This
is because the city has a good concentration of Private Investors who
are in a better position to supply the relevant data.
Proximity to the researchers base is another factor considered in the
choice Port Harcourt. The associated constraints of this study include
lack of literature materials insufficient fund and short time period
required to complete the study.
1.8 DEFINITION OF TERMS
The following are contextual meaning of key terms used for this.
Advances: Short-term accommodation by a bank for a specific purpose with the repayment source know at the time of the advance.
Bank Credit: Short-term loan given by a bank to its customers .
Private Sector: Investments economic embark upon by private individuals in an economy.
Overdrafts: Credit facility offered by a bank to its current account
customer which allows such customers to overdraw his current account
either on the strength of financial instrument, or simply more than the
credit balance.