This research work is determine, “The effect of credit management on
profitability of Bank in Nigeria using First Bank of Nigeria plc as a case
study. It is also examine the performance of banks based on its ability to
generate income through the provision of various credit management service to
customers. The project employed the use of questionnaire to sources of data
which is administered to the banks staff as well as personnel interview and
observation while the collected data was analyzed through the use of regression
analysis in the testing of hypothesis. The result shows that credit management
reduces the level of fraudulent practices in banks and boost its profitability.
Finally, it is clear in the finding that a lot still need to be done in the area
of innovation and regulatory requirement to enhance its better performance
before banks can reap the benefit of credit management service.
TABLE OF CONTENT
Title Page i
Table of Contents iv-vii
Introduction 1-21.1 Background of the Study 21.2 Statement of the Study 2
of the Study 2
1.5 Objectives of
the Study 3
1.7 Limitation of
the Study 3-4
1.8 Definition of
the Terms 4
2.0 Literature Review 5
historical perspective from which the same or related problems. 6
theoretical perspective from which the same or related
problems have been studied previously. 6-7
generalization resulting from the identification of the
problem and theoretical implication of its evolution. 8
methodology most appropriate for its further study 8
2.5 First bank of
Nigeria plc profile. 8-9
of research methodology 10
3.3 Sources of
data collection 10
3.4 Method of
data collection 10-11
3.5 Method of
data presentation. 11
3.6 Report of
3.8 Sample Size 11-12
4.0 Data Analysis
and Presentation. 13
4.1 Report of
4.2 Analysis of
respondent of Bio-Data 13-15
4.4 Continuation 17-19
Conclusion and Recommendation 20
5.1 Summary 20
5.2 Conclusion 20-21
Appendix I 23
Appendix II 24-25
1.1 BACKGROUND OF STUDY
It has become
necessary to take a cursory look at the concept of debts, its ramification and
problems associated with management.
issue of problem associated with loans advance management prompts the this
central bank of Nigeria (CBN) to reduce the guidelines in a circular entitled
“prudential guidelines for licensed Banks” the main purpose of this, is to
ensure that the financial guideline ensure conformity with stand to facilitate
comparison across banks. The true financial position of bank is often obscured
by the accounting period involving its assets and liabilities. The prudential
guidelines focus o the assets side of banks balance sheet i.e. loans and
the past, bank different scientifically on the condition under which loan is
classified recoverable, doubtful or lost.
such conditions were inherently judgment and there were high potentials for
substantial under provision implying that many banks could appear healthier
than they really are.
saving deposit in the commercial banking system represented 85.3% and 8.3%.
such saving deposit in the financial system in this period respectively
consequently, it is obvious from forgoing, that commercial banks occupy a
strategic position in the economy and are able to influence the course of event
in the economy. However, numerous complaints have been made against them by the
general public (especially their customers) and the monetary authority as
regard their inability to meet the demand for credit by their non-challant attitude
in respect of the various monetary policies and their non- fulfillment of the
credit guidelines on the hand.
techniques employed by banks in this intermediary function should provide them
with perfect knowledge of the out comes of lending such that funds will be
allocated to investment in which the profitability of full payment is certain.
Virtually all lending decisions are made under creditors on uncertainty, the
credit and uncertainty associated with lending decision.
statement implies that if credits are to be money deposit banks should be based
less in quantitative data and more on principles too subjective to provide
sound and unbiased judgment.
Furthermore, the banks depend
heavily on historical information as a basis for decision making.
aware of the inadequate of his decision base, the bank lending has often sought
solace in tangible and marketable assets as security is an insurance. The
increasing trend of provisions for doubtful in most money-deposit banks is a
major source of concern not to management but also top the shareholders who are
becoming more aware of the dangers posed ,by these credits. Credit destroy part
of the dangers posed by these credit. Credit destroy part of the earning assets
of banks such as loans and advances which have been described as the liquidity
and solvency which generate two major problem, that is profitability and
liquidity, has to earn sufficient income to meet its operating costs and to
have adequate return on to its investments.
1.2 STATEMENT OF THE PROBLEM
problem for this study is to appraise the landing and credit management
policies of a typical money-depot bank (the first bank of Nigeria plc) with a
view to examine the inadequacies in the system and to suggest policy
recommendation that would go a long way in bringing about an efficient and
optimal lending pattern in the Nigeria economy.
experience may arise in respect of lapses on the part of the banks credit
officers. For instance there may be excesses over approved facility,
unformatted facilities and expired facilities not renewed on time. In each of
these cases the customers may easily deny even owning the bank all or part of
1.3 JUSTIFICATION OF THE
major justification of the study is that, an aggregate industry figures must be
employed while the trends in the individual banks and the actual figure may
vary widely from this, giving a different pattern of information and perhaps
influence there from.
data employed are secondary. It is important to keep in mind that
constituencies are usually associated been obtained form sources considered
must reliable in the present circumstances. The fact is that bank activities
are influenced by social and political development in economy may not present
the accurate position of the study.
1.4 RESEARCH QUESTION
This study is designed to test
the following hypothesis
Ho: There is no need for
banking sector to operate with a standard credit policy.
Hi: There is need for
banking sector to operate with a standard credit policy
Ho: In first bank plc,
there is no available system for appraising of loan request before they are
Hi: In first bank plc,
there is available system for appraising of loan request before they are
Ho: Financial statement
is not important in analyzing reports.
Hi: Financial statement
is important in analyzing reports.
1.5 OBJECTIVE OF THE STUDY
The main purpose of this study is
to examine the effects of loans and advances management on profitability of
In this research, the research
presents a set of procedure on how data for the study was collected, the
sources of data use in the presentation of data and statistical tools used for
these analysis of the data.
Description of research methodology
Research in finance is based on
findings out solution to financial problems, the business entity relies on
research to find answer to specific problems.
The research instruments to be
used in obtaining information from the population have to be stated
Using regression analysis to calculate
N = Number of paired observation
X = Independent variables (credit)
Y = Dependent variables (profit)
E = Summation
regression (r) = n∑ x y - ∑ x ∑y
n∑ x2 – (∑ x)2 (n ∑y2 - ∑y)2
1.7 LIMITATION OF
Time Constraint: During the course of written this
research work, the respondent that justify the question took a lot of time
before making an effect on the questionnaire paper.
time for the research works is so short to go on extra mile for move data.
Inadequate Data: This research work will be limited
to the volume of information acquired through materials like national dailies,
periodic journals, text books speeches, internet materials and write-ups on
Lack of Adequate Finance: During the course of
writing this research, there is lack of finance to travel from one place to
another place for the collection of more data for the research work.
Unco-operate Attitude of Respondents: As it is
unduly know that banks are often busy, so questionnaire administration were not
answered very well because majority of the staff were occupied with the
customers. This constraints might be regard as the non-response during peak
1.8 DEFINITION OF
These are terms that can be found in this research
Asset: An asset can be anything owned by a business
organization or individuals which has commercial or exchange value Olakanmi K.O
Vault: This is the banks strong room where money
and valuable materials are kept. RALP K.O (1980)
Fiduciary Issue: Issue of banks notes by the banks
which are not having gold banking
Currency: This includes both paper money and
metallic money coins. This term is generally used for money. Femi
Bank: The bank and the financial institution Decree
of 1991 (BOFID) section b1 defined bank any person receiving deposit on current
accounts or other similar accounting paying or collecting of cheques drawn or
paid in by customers.
Provision of Finance: Such other business as the
governor of the central bank may resonate.
First bank Nigeria plc: This can be said to be
bank established with the aim of maximizing profits.
Financial institutions that engage in financial
intermediator that is, process of mobilizing deposit from the surplus sector
and lending it to deficit sector and lending sector for investment.