THE ROLE OF COMMERCIAL BANKS TO THE INDUSTRIAL DEVELOPMENT SECTOR IN NIGERIA
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Abstract
In recent decades, the potential contribution of agriculture to economic growth has been a subject of much controversy among development economists. While some contend that agricultural development is a pre-condition for industrialization, others strongly disagree and argue for a different path. Taking advantage of Ordinary Least Square Method (OLD), the research carried out by means of secondary data and using independent variables: Agricultural Development, Capital Accumulation, Inflation Rate and Interest Rate re-examines the question of whether agriculture could serve as an engine of growth for the Nigerian economy
Results from the empirical analysis shows that the productivity in agricultural sector has not appreciably impacted positively on the economic growth in Nigeria
TABLE OF CONTENT
Title page
Approval page
Dedication
Acknowledgment
Abstract
Table of content
CHAPETR 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
CHAPTER ONE
INTRODUCTION
- Background of the study
Agriculture is concerned with the husbandry of crops and animals for food and other purposes. It is the foundation upon which the development of stable human communities, such as rural and urban communities has depended on in many parts of the world. The study of economic history provides us with ample evidence that an agricultural revolution is a fundamental pre-condition for economic development. The agricultural sector has the potentials to be the industrial and economic springboard from which a country’s development can take off. Indeed, more often than not, agricultural activities are usually concentrated in the less developed rural areas where there is a critical need for rural transformation, redistribution, poverty alleviation and socio-economic development.
The agricultural sector has the potentials to shape the landscape, provide environmental benefits such as conservation, guarantee sustainable management of renewable natural resources, preserve biodiversity and contribute to the viability of rural areas. Through its spheres of activities at both the macro and micro levels, the agricultural sector is strategically positioned to have a high multiplier and linkage effect on any nation’s quest for socio economic and industrial development.
The growth of the agricultural sector in Nigeria was not smooth.
Anyanwu (1967) held that during the colonial period between 1861 – 1960, attention was given to agricultural research and extension services. Among the activities that was done, the first was the establishment of a research station in Lagos by Sir Claude McDonald in 1893. Landmarks of 10.4 km was acquired by the British Cotton Growing Association (BCGA) in 1899 for experimental purposes strictly for cotton and was named Moor Plantation in Ibadan.
In 1912, the Department of Agriculture was established in each of the then Southern and Northern Nigeria, but the activities of the department were virtually suspended between 1912 and 1921 as a result of the First World War and its aftermath. The period 1929 and 1945 was a difficult one for the agricultural sector of Nigeria. This was the period of great depression when the world prices on commodities fluctuated. This affected the agricultural sector negatively because the volume of agricultural produce increased but the value did not increase proportionately.
The period 1945 – 1954 marked the period of export boom, because countries were just recovering from the Second World War and countries that needed to develop their destroyed industrial sector were many. They depended on primary product for the beginning stage of industrialization. They needed to revitalize their industrial sector by demanding primary goods. Prices of primary products rose higher again because there were speculations that there would be a Third World War due to the outbreak of the Korean War. However, after this period, there came another period of price instability. This made the reliance on agriculture and its products to fall, leading to the establishment of a market board. This board bought these products from the local farmers and sold them overseas.
In spite of all the periods, Nigeria made a great revenue from agriculture. In the pre-Independence era, the agricultural sector contributed most to the GDP of Nigeria. Helleiner (1966) said that in 1929, export production amounted to 57% of Nigeria’s revenue and in that 57%, agriculture made up about 80% of the export. On attainment of political independence in 1960, the trend was still very much the same, the Nigerian economy could reasonably be described as an agricultural economy, because agriculture served as the engine of growth of the overall economy (Ogen, 2003: 231-234), from the standpoint of occupational distribution and contribution to the GDP. Nigeria was the world’s second largest producer of cocoa, largest exporter of palm oil. Nigeria was also a leading exporter of other major commodities such as cotton, groundnut, rubber and hides and skins (Alkali, 1997: 15-16). Between 1964 – 1965, agriculture accounted for 55% of GDP and employed 70% of the adult workforce (Matton, 1981). In 1970, agricultural export crops like cocoa, groundnut, cotton, rubber, palm oil, palm kernel, etc. accounted for an average of between 65% – 75% of Nigeria foreign exchange earnings and provided the most important source of revenue for the Federal as well as State governments through export products and sale taxes (Ekundare 1973), despite the reliance of Nigerian peasant farmers on traditional tools and indigenous faming methods, these farmers produced 70% of Nigeria’s exports and 95% of its food needs (Lawal, 1997: 195).
However, the 1967 – 1970 Civil War in Nigeria coincided with the ‘Oil Boom’ era, which resulted in extensive exploration and export of petroleum and its products. This led Nigeria to neglect its strong agriculture in favour of an unhealthy dependence on oil (United States Department of State, 2005). Ever since then, Nigeria has been witnessing extreme poverty and insufficiency of basic food items. The agricultural sector contributions now account for less than 5% of Nigeria’s GDP (Olagbaju and Fashola, 1996: 263). It is against this back drop that we set out to research on the impact of agricultural development on Nigeria economic growth.
As noted earlier, the neglect of the agricultural sector and the dependence of Nigeria on a mono-cultural crude oil based economy had not augured well for the well-being of the Nigerian economy. In a bid to address this drift, the Nigerian government as from 1975 became directly involved in the commercial production of food and cash crops.
1.2 STATEMENT OF THE PROBLEM
The need for entrepreneurial development as an ingredient of economic development was realized in the early 1960s (Mathur, 2008). This was considered essential as pointed by Mathur (2008) when he opined that it is necessary for motivating and assisting prospective and potential entrepreneurs to set up their own ventures to contribute in production, employment and tapping of unutilized resources. According to Nafukho (1998), “youth unemployment in Africa has reached alarming proportions”. Since most African countries gained political independence, there has been an increased population growth, rapid expansion of the education systems, high level of rural-urban migration, political conflicts and worsening economic performance (Ndegwa, 1985). These factors have led to the problem of unemployment being rampant in Africa as a whole. Studies have revealed that, although industrial backwardness is due to infrastructural bottlenecks, the real cause is non-availability of dynamic and skilled entrepreneurs who could mobilize and productively utilize the available resources. However, banks are the most important institutions among the agencies and institutions that share the responsibility of entrepreneurial development. Banks generally, according to Arora (1992) have their wide-spread branch network to reach out to all categories of customers. In a country like Nigeria, entrepreneurs require financial input alongside with non-financial inputs like scientific and technical know-how in order to cope with the changing nature and dynamics of the society.
1.3 0BJECTIVES OF THE STUDY
The overarching objective of this study is to identify the role of commercial banks to the industrial development sector in Nigeria
, but the researcher intend to address the following sub-objectives;
- To examine the extent to which banks and other financial institutions significantly help in providing loans to promote entrepreneurship development in Nigeria.
- To find out the extent to which banks and other financial institutions significantly help in providing advisory services to entrepreneurs in Nigeria.
- How banks identify potential SMEs and their entrepreneurs for lending purposes
- The extent of banks involvement with SMEs and the impact it loans have on SMEs.
1.4 RESEARCH QUESTIONS
- What is the effects of financial services of the banking sector on the growth of small and medium scale business enterprise?
- Are there challenges facing small scale business enterprise in accessing bank loan in Ebonyi State?
- What is the impact of non-financial services of the banking sector on the performance of small and medium scale business?
- What are the factors limiting the development of the banking sector in Ebonyi State?
- Does the banking sector contribute to small and medium scale enterprises in Ebonyi State?
1.5 RESEARCH HYPOTHESES
H0: There is no significant difference in the level of awareness of financial institutions by small and medium scale enterprises in Ebonyi State.
H1: There is a significant difference in the level of awareness of micro financial institutions by small and medium scale enterprises in Ebonyi State.
H0: There is no significant difference in the difficulties small and medium scale enterprises face when accessing finance from various banks.
H2: There is a significant difference in the difficulties small and medium scale enterprises face when accessing finance from various banks.
1.6 SCOPE AND LIMITATION OF THE STUDY
This study covers the role of commercial banks to the industrial development sector in Nigeria, but particularly focused on some selected banks in Ebonyi State with a view of identifying their contributions towards the development of small and medium scale enterprises in Nigeria. In the cause of the study, the researcher encounters some limitations which limited the scope of the study;
Staff Reluctance: In most cases the staffs of the selected banks in Ebonyi State often feels reluctance over providing required information required by the researcher. This result in finding information where the structured questionnaires could not point out.
Researcher’s Commitment: The researcher, being of full time student spent most of her time on other academic activities such as test, class work, assignment, examination etc which takes average focus from this study.
Inadequate Materials: Scarcity of material is also another hindrance. The researcher finds it difficult to long hands in several required material which could contribute immensely to the success of this research work.
Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
1.7 SIGNIFICANCE OF THE STUDY
A study of this nature is very imperative as it provides an average Nigerian a means to access to financial services in their localities to boost their standard of living in a sustainable manner in line with the millennium development goal of alleviating poverty in developing countries. The study will assist financials institutions to adopt the necessary measures needed to ensure the desired growth in the small and medium scale business enterprises (SMEs) industry. It is also beneficial for formulation of policies and programmes by the federal and state government as they might be looking forward to taking necessary steps to prevent the collapse or failure of small scale businesses in Nigeria and Ebonyi State in particular. Again, it will enable the entrepreneurs to have more understanding of how businesses should be financed, thus having knowledge on funding further research in this area. Finally, the study would serve as a source of reference for other researchers or members of the general public who need information in the subject. More importantly, entrepreneurs of small and medium scale enterprises may find it useful in the successful operation of their enterprises as the study will unveil some of the reasons why some small and medium scale business enterprises (SMEs) finds it hard to repay their loans.
1.8 DEFINITION OF TERMS
SMEs: the European definition of SME follows: “The category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro.”
Banking system: A banking system is a group or network of institutions that provide financial services for us. These institutions are responsible for operating a payment system, providing loans, taking deposits, and helping with investments.
Development: development is defined as the process of developing or being developed or an event constituting a new stage in a changing situation.
Business enterprise: business enterprise – the activity of providing goods and services involving financial and commercial and industrial aspects; “computers are now widely used in business” business, commercial enterprise.
Financial institutions: Financial institution or Depository institutions deposit-taking institutions that accept and manage deposits and make loans, including banks, building societies, credit unions, trust companies, and mortgage loan companies; Contractual institutions insurance companies and pension funds.
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 is 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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