TITLE PAGE COMMERCIAL BANK LENDING POLICY AND ITS IMPLICATION IN A DEPRESSED ECONOMY

(A STUDY OF UNITED BANK OF AFRICA (UBA) IDAH BRANCH)

A PROJECT SUMMITED TO THE DEPARTMENT OF ACCOUNTANCY , FEDERAL POLYTECHINIC IDAH

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF HIGHER NATIONAL DIPLOMA IN ACCOUNTANCY.

BY

SALIFU MONDAY REG NO: FPI/HND/ACC/11/809A

DEPARTMENT OF ACCOUNTANCY FEDERAL POLYTECHNIC, IDAH KOGI STATE

DECEMBER, 2013.
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CERTIFICATION This is to certify that, this research work carried out, has been read and approved by the undersigned, having met the requirement for the award of Higher National Diploma (HND) in accountancy. From the Department of Accountancy, Federal Polytechnic, Idah Kogi State.

MR. OMIKA MUHAMMED

(PROJECT SUPERVISOR)

.. SIGNATURE

DATE

MR. ACHIMUGU AKOWE (ACA)

(HEAD OF DEPARTMENT)

... .. SIGNATURE DATE

EXTERNAL EXAMINER

.. SIGNATURE

DATE

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DEDICATION This project is especially dedicated with profound appreciation and thanksgiving to the founder of my life, God almighty for his divine protection, favor and abundant grace to end this journey successfully.

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ACKNOWLEDGEMENT Going by the biblical injunction that says the race is not for the swift nor the battle for the strong or for the wise, but time and chances provided for them all I want to offer my profound gratitude to God Almighty for giving the right time, chance and strength for undergoing and completing this project work. I wish to acknowledge the tremendous contribution of my diligent supervisor Mr. Omika Muhammed for his constructive criticism and moral support towards the completion of this piece, you are in a million I can never forget on the surface of this earth. As a matter of fact, I dont know how to appreciate the incessant contribution of my uncle, Dr. Okpanachi J. and his family who is always beside me through thick and thin. I am exceedingly grateful for his moral and financial support. I equally place on

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record my sincere gratitude to Uncle Amedu Bala S. and his family who has always been there for me. To my lovely sisters, Mrs. John Deborah, Mrs. Ugbede Mercy, Miss Salifu Lami, Mrs. Joshua Hannah, Miss. Salifu Chenemi and my Brothers master Ojochoko Salifu, Nathaniel Salfiu, I say thank you all for your support. I also acknowledge the unquantifiable contribution of my able friends: Choko Randy, Hon. Jibrin Isah, Alfa Simeon, Attah Jacob, Philip Idachaba, Queen Ladi. I acknowledge the contribution of my able and dynamic course mate: Linus Ozioko, Tina Momoh, Ibrahim M. I say thank you all. In all, I earnestly pray to God Almighty for direction and guidance in my future endeavors as this is the DAWN of a NEW BEGGINGits well.

ABSTRACT Commercial banks have a lot of roles to play especially acting as a custodian of cash, in that; they accept deposit for safe keeping. In order not to allow this cash to lie idle in their safe, they embarked on lending activities which are guided by some laid down policies. Therefore this research work set out their implications on commercial banks, borrowers and the economy in general. This study is to assess the level at which Nigeria commercial banks comply with this policies vis--vis the central banks guideline on sectorial allocation of credit to both preferred sectors of the economy. In other words, a comprehensive study of the policy was made, finding out the implementations and implications and also suggesting ways to improving and ensuing effective lending practices in developing countries like Nigeria. The methodology employed in the study includes, both qualitative and quantitative research methods as well as the use of statistical data based on primary and secondary sources. Primary source consist basically of oral interview and use of questionnaires while secondary source consists of publications in journals, newspaper, magazine, textbook and papers presented during seminars. A comparative analysis which covers a range of ten years was undertaken to ascertain the effectiveness of the policies. The scope of this study took into consideration a sample of two major commercial banks branches operating in the country (First bank of Nigeria plc and Unity bank Nigeria plc). This is based on random but systematic selection of all elements in the representative sample. In conclusion, this work would provide some basis for drawing useful outline which will serve as a guide for future design of macroeconomic management, and strategies that will ensure effective lending practices and policies that are more relevant to the Nigeria environment.

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Title page Approval page Dedication .

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TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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.i .ii .iii .iv .v .vi

Acknowledgement Abstract . .

Table of content .

CHAPTER ONE 1.0 Introduction . . . . . . . . . . . .

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.1 .1 .4 .5 .7 .7 .9 .10

1.1 Background of the Study . 1.2 Statement of Problem 1.3 Objective of the Study 1.4 Scope of the Study .. 1.5 Significance of Study . . . . .

16 Statement of Hypothesis . 1.7 Limitation of Study .

1.8 definition of terms .

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CHAPTER TWO 2.0 Literature Review . . . . . . . . . .15 .15 .19 .23 .26 .29

2.1 Origin of Commercial Banking in Nigeria .

2.2 Facilities and lines of credit offered by commercial bank 2.3 Commercial banks lending . . . . . . .

2.4 Basic principles of Commercial Banking Lending 2.5 Canons of Lending . . . . . .

2.6 Legal Framework of Commercial Bank Lending in Nigeria. .35 2.7 Factors that determine the Nigeria Commercial . 2.8 impact of lending policies in Nigeria economy CHAPTER THREE 3.0 Research Methodology 3.1 Introduction . . . . . . . . . . . . . . . . . . . . .49 .49 .49 . . . .37 .46

3.2 Population of study.

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3.3 Methods of Data Analysis 3.4 Source of collection .

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3.5 Method of data analysis . .

CHAPTER FOUR 4.0 Data Analysis and Presentation 4.1 Data Analysis . . . . . . . . . . . . . . . . . . . . . . . .54 .54 .55 .60

4.2 Data Presentation . 4.3 Hypothesis Testing

CHAPTER FIVE 5.0 Finding, Recommendation and Conclusion 5.1 Summary of Finding 5.2 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 .70 .71 . .

5.3 Recommendation . Appendix . .

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