BANKS PARTICIPATION IN THE INDUSTRIAL DEVELOPMENT OF NIGERIA (A CASE STUDY OF  UNION BANK NIG PLC)

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF STUDY

A country wealth development and advancement by its level of industrialization, a country becomes famous among other countries of the world when it has been able to attain to a remarkable degree in industrialization. In view of the above we have deemed it necessary to embark on a research project on “Banks participation in industrial development of Nigeria. This is an attempt and effort to draw the mind of every Nigeria to ask himself certain silent questions like.

1.2   STATEMENT OF PROBLEM

How far has our country advanced in industrial development

What are the things necessary for the industrial development of our country?

Why have certain financial bodies not participated fully in the exercise?

If we are able to give answer to these question and if we are able to identify the problem I encountered in the process and also to  give solutions to these problem both collectively  and individual  then, there is hope that within a short time. Our country Nigeria will be able to develop ten times more than it has done in the long past.

A developing country as Nigeria is characterized by a high degree of subsistence products   with very limited application of technology. As a result manufacturing industries are relatively low and the agro- based industries are paramount.

Industrialization should apply to all sector of an economy implying the application of science and technology to raise the worker, in other words all sectors of the economy (mining, agriculture, manufacturing, industries, commercial service should advance.

1.3   OBJECTIVE OF THE STUDY

Industrialization means the development of industries, applying science and technology in order to provide work for the growing population and raise the standard of living by increasing per capital net income and improve balance, of payment situation. Industrialization is aimed at impact restriction and increasing export.

For our country to attain any degree of industrialization, it must overcome a series of obstacles and difficulties because it has had its development plans disrupted by series of military interventions and civil war. It should be noted that there is no limit to the degree of development a country can attain if and only if its reserves are full y utilized. Whether our country is developed or not depends on the existing level of wealth and material welt are. The measure of development of any country is based on its per capital income. That is dividing net national income by the total population to get capital income.

Nigeria has high rate of population increase but has land still available for agriculture expansion. Its per capital income are as a result of its chronic under-utilization of resources rather than substantial utilization. Although Nigeria is now spending on industrial projects, the stage of industrial development is still at its lower level. Nigeria is still developing and so it is per both in income and in capital and its resources are not yet fully tapped. It is therefore most patient to state at the juncture that for nations resources to be fully utilized the aid of science and technology must be sought.  

There are three major things that requirement to achieve success  in any venture in life viz time interest and money. Behind every successful business there must be  an interest on the part of the  investor solidly backed by find, which  is very  necessary to execute any meaningful  project. For the purpose of our topic, we shall be examing the banks with regards to their values in aiding industrial development.

1.4   SIGNIFICANCE OF STUDY

First we should know that there are types and class of banks established to develop respective sector of the economy and they are commercial banks merchant banks and others.

Nigeria’s engagement in economic activities is on a subsistence basis e.g. Agriculture, poultry weaving, mining etc. these are mainly small scale and mediumsized enterprises and there re give credit guideline policy by the  central bank of Nigeria (CBN) on how to lend to the industrialists and these guidelines are not normally adhered to by these banks with some reasons.

Development of modern business and government is serious effort towards prompting industrialization in the country. It started only about three decades ago. The 1972 indegenization decree was necessary so as to direct financial institution through central bank of   Nigeria credit guideline to extend certain percentage of their total loans and advance to indigenous borrower also be extended to browers in  small scale and medium size  enterprise.  Banks have their reasons for inadequate credit to small scale and medium size enterprises as:

1. Their attitude towards risk makes restrictive in their lending policy. 

2. Many small scale enterprise have ill conceived project in which they have estimates which is often ridiculously valued. Other reason include management deficiency inadequate  staffing, detective  infrastructure as nil communication. These are defects partly on the side of the banks and also partly on the side of the industrialists

Problem arise when there are stipulation for  small scale industrial to meet certain requirement before they are granted loans  and they are

(a)   Most proprietors of small-scale business do not possess the necessary financial expertise to put together bankable propositions.

(b)   They do not  prepare cash flow projection their  do they know the dealing  with banks nor  how to interpret projected balance sheet etc.

There is also the problem of communication gap between the small scale  business and the banks. The proprietor might have good idea of their needs based on his experience but would not  know how to put it on paper. There is this  other problem   of promising to comply with  condition  of the banks on the part of the  borrower, but once the loan is approved the investor diverts it to another venture and this jeopardizes the  repayment of the loan. One of the identified problem

With credit facilities more especially the ones obtained from commercial banks to the industrialists is its short  term nature and high interest rates which will enable  the individual have enough time to recomp the funds invested e.g invectives on farm implement like tractors and harvesters etc. to recoup the money  invested on these implement will take some time because they are capital investment and need a long tension of repayment.

To remedy these problem and to encourage the full participation of bank in the industrial development every Nigeria should see to the following.

(a)   To be honest in estimating the value of their project and the appropriate application of the fund obtained.

(b)   Banks should grant medium and long term loan with fairly low interest rate  to the industrialists. They should also initiate and finance industrial project themselves.

1.5   SCOPE LIMITATION AND DELIMITATION

This project is aimed at examing how banks participate and the role they play in industrial development of Nigeria since they are  financials institution finance is one of the cares in the execution of industrial project. It  is also aimed at analyzing industrialization and aid to industrialization, 2.3    STAGE OF INDUSTRIAL DEVELOPMENT  IN NIGERIA.

 It also examines why some banks do not participate fully in the exercise the  sectors)of the economy banks support most.

In conclusion it suggest remedies and recommendation to problems.