IMPACT OF CREDIT FACILITIES ON THE PERFORMANCE OF COMPANIES IN NIGERIA STOCK EXCHANGE
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TABLE OF CONTENT
Title page
Approval page
Dedication
Acknowledgment
Abstract
Table of content
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the study
1.2 Statement of problem
1.3 Objective of the study
1.4 Research Hypotheses
1.5 Significance of the study
1.6 Scope and limitation of the study
1.7 Definition of terms
1.8 Organization of the study
CHAPETR TWO
2.0 LITERATURE REVIEW
CHAPETR THREE
3.0 Research methodology
3.1 sources of data collection
3.3 Population of the study
3.4 Sampling and sampling distribution
3.5 Validation of research instrument
3.6 Method of data analysis
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS AND INTERPRETATION
4.1 Introductions
4.2 Data analysis
CHAPTER FIVE
5.1 Introduction
5.2 Summary
5.3 Conclusion
5.4 Recommendation
Appendix
Abstract
This study investigated the impact of credit facilities on the performance of companies listed in the Nigeria stock exchange. Ex-post facto research design was adopted using dataset collated from the annual reports and financial statement of the selected deposit money banks. Three hypotheses were proposed and tested using Chi square and regression model. The findings reveal that credit risk management had a positive and significant impact on total loans and advances, the return on asset and return on equity of the deposit money banks. The study recommended that bank managers need to put more efforts to control the non-performing loan by critically evaluating borrowers’ ability to pay back. The regulator should strengthen its monitoring capacity in this regard.
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
Bank credit facility is the most important financial method in other countries but in Nigeria, it is not sure yet, and there are some problems with Bank Credit facility to some listed organization. So,this research is aimed to study the impact of bank credit facilities on growth of business. Businesses normally have times of financial limitation with the potential of growing. In Nigeria banks willing to provide credit, vigorously and rigorously accesses individuals or corporate bodies‟ business plan
painstakingly to be convenience before offering some sought of credit assistance. Bank credit can be sub divided into two: credit to the private sector and credit to the public sector. Empirically studies conducted (Beck et al 2005; Levine, 2002; Odedokun 1998; King and Levine1993; Boyreau-Debray, 2003) found a negative correlation between growths and bank credit debt due to the fact that Nigerian banks were mobilizing and pouring funds into the declining parts of the Nigeria power sector, and hence the system
has not been growth promoting. Demirguc-Kunt & Levine (2008) emphasized the importance of focusing on allocation of credit to the private sector as opposed to all a particular sector. As it has been asserted, the economic giants of the world developed their economies by relying on formal credit institutions through the development of their capital markets. But these formal credit institutions have on the whole failed to provide credit to the poor in the underdeveloped countries for many obvious reasons, Von Pischke (1991) The paper by Ayyaygari et al (2005), Introduced a new and unique set of cross country indicators of the contributions of listed organizations to employment in manufacturing and wealth creation. The dataset reveals a significant variation in the size and economic activity of companies listed on the Nigerian stock exchange across income groups, countries with a high level of GDP per capita have larger sectors in terms of their contribution to total employment and GDP. This has been empirically proven that credit to the public sector is weak in generating growth within the economy because they are prone to waste and politically motivated programmes which may not deliver the best result to the populace. Despite an expansion in lending to businesses by banks in Nigeria many organizations are still finding it difficult to access credit, a new report from the World Bank (2013) shows that high interest charged by banks on loans and the interest paid by banks on deposits is one key factor constraining credit access. Services and credit facilities are considered as the most important pillars of the economic development in any country to the extent that no modern economy can do its job without it. The wider the limits of the development are, the more need for sophisticated, modern banking system is (Abdullatif, 2006). The revenues of the banking system gained through the credit facilities are the core of the main revenues for any bank regardless of its other revenue sources because without it, the bank loses its main role/function, i.e., a financial intermediary in the economy. However, this sector, i.e., credit facilities, can be risky due to stumbling loans and facilities (Al-Dghaem et al., 2006). Since the core of economy is financing and investment, these two are interrelated and complete each other to the extent that their impact on the economic development cannot be overlooked. They are the practical arteries of various sectors of the economy (Mushtaha, 2011). The Palestinian Monetary Authority has worked extensively to determine and settle rules and regulations for credit policy of banks so that they are employed purposefully to develop the Palestinian economy; it has also set ratios no large numbers of depositors in the Palestinian banks. The Palestinian Monetary Authority statistics have shown that Tulkarm Governorate has the largest deposits in the banks; they also show that the working banks have reduced their credit grants to small enterprises.
1.2 STATEMENT OF THE PROBLEM
Finance is the red blood cell of every business organization as such it is paramount factor of production. Most organization has this funds in surplus while others are in deficit. The banking sector being an intermediary between the surplus and the deficit unit is very pertinent for them to effectively manage the surplus unit funds as this same funds are made available to the deficit sector in form of facilities, load credit and advances. It is vain trying to emphasis the importance of this facilities, as their importance cannot be over emphasized to the smoot operation and survival of business organizations. It is view of this that the researcher intend to investigate the impact credit facilities on the performance of companies listed on the Nigeria stock exchange as this facilities are not readily available.
1.3 OBJECTIVE OF THE STUDY
The main objective of this study is to examine the impact of credit facilities on the performance of companies listed in Nigeria stock exchange;
The specific objectives are;
- i) To examine the impact of credit facilities on the performance of listed companies
- ii) To examine if there is any significant relationship between credit facilities and organizational profitability
iii) To ascertain the impact of credit facilities on the growth and survival of companies listed on the Nigeria stock exchange
- iv) To proffer suggested solution to the identified problems
1.4 RESEARCH QUESTIONS
The following research questions were formulated by the researcher to aid the completion of the study;
- i) Does credit facilities have any impact on the performance of companies listed on the Nigeria stock exchange?
- ii) Is there any significant relationship between credit facilities and organizational profitability?
iii) Is there any impact of credit facilities on the growth and survival of companies listed on the Nigeria stock exchange?
1.5 RESEARCH HYPOTHESES
The following research hypotheses were formulated by the researcher to aid the completion of the study;
H0: There is no significant relationship between credit facilities and organizational profitability
H1: There is a significant relationship between credit facilities and organizational profitability.
H0: credit facilities do not have any impact on the growth and survival of companies listed on the Nigeria stock exchange
H2: credit facilities does have an impact on the growth and survival of companies listed on the Nigeria stock exchange
1.6 SIGNIFICANCE OF THE STUDY
Several companies and banks has been established; consequently, there were great expectations of having more and more investment activities. The pace and volume of lending at banks increased; credit facilities to the citizens were also abundant. The global crisis of the financial markets in 2008 affected all markets in the Nigeria, therefore, the pace and volume of loans in banks had retracted and slowed down. This study is deemed significant because it sheds light on:
- The pace and volume of lending in the Nigerian banks whether it is for consumption or investment.
- The amount of facilities offered by the banks.
- The attitudes and viewpoints of bank workers towards credit facilities given to customers and agents.
1.7 SCOPE AND LIMITATION OF THE STUDY
The scope of the study covers the impact of credit facilities on the performance of companies listed in the Nigeria stock exchange, but in the course of the study, there are some factors that limited the scope of the study;
AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
FINANCE: The finance available for the research work does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover.
1.8 OPERATIONAL DEFINITION OF TERMS
Credit facility
A credit facility is a type of loan made in a business or corporate finance context. It allows the borrowing business to take out money over an extended period of time rather than reapplying for a loan each time it needs money
Stock exchange
A stock exchange, securities exchange or bourse is a facility where stockbrokers and traders can buy and sell securities, such as shares of stock and bonds and other financial instruments.
Organization performance
Organizational performance comprises the actual output or results of an organization as measured against its intended outputs (or goals and objectives). According to Richard et al. (2009) organizational performance encompasses three specific areas of firm outcomes
1.9 ORGANIZATION OF THE STUDY
This research work is organized in five chapters, for easy understanding, as follows
Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlight the theoretical framework on which the study its based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and recommendations made of the study.
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