AN EVALUATION OF LOAN SYNDICATION AS AN INSTRUMENT OF PROJECT FINANCING IN NIGERIA (A CASE STUDY OF ACCESS BANK PLC)
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AN EVALUATION OF LOAN
SYNDICATION AS AN INSTRUMENT OF PROJECT FINANCING IN NIGERIA
(A CASE STUDY OF
ACCESS BANK PLC)
ABSTRACT
In business transaction, granting of
loan syndication is quit universal. It is an acceptable method financing
in Nigeria transaction and activities. This research work high light into An
Evaluation of Loan Syndication as an instrument of project financing in Nigeria
(A Case study of Access Bank plc). The cause of writing this project
study, granting of loan syndication from CBN to others banks and customer is a
practice that cannot be avoided as long as business is concerning, to some
sensitive sector of the economy like banking industry, granting of loans
constitute their major earning, that means the larger the loan, the fatter, the
interest receivable to the same time poor assessment and analysis of findings
can be devastating. The risk not withstanding, granting loans enhance
economic growth and development in any nation. Provides the lubricant for
continuity of transaction availability cash. In a bid to achieve a
meaning research study work this research will review of related literature and
recommendation an evaluation of loan syndication as an instrument of project
financing in Nigeria oral interview will also be conducted with management of
the bank. Other supplementary instruments are data collected from
journals magazines, questionnaire and existing text books. All these data
collected will be analyzed critically and description with the and of table in
research work.
PROPOSAL
The relative insufficient fund for
capital investment is a common factor in every economy especially in emerging
economics of the world. In developing countries like Nigeria, the law
level of capital investment is clearly shown in high unemployment rates, low
productivity and corresponding how standard of living for the greater majority
of the population.
One of the solution
they have come up with is loan syndication which is aimed spreading risk, the
major reasons is that banks is the syndicate shared the risk on investment,
projects. Syndicate may also arise because an additional syndicate has
been defined as an association of finance or industrialists or banking
consortion formed to carryout some industrial project (Orji, 1996).
Loan syndication
could be defined as the “AA and process whereby a group of finance institutions
are raised to provide credit facility to a borrower under common agreement term
and single loan document relation (Obalam 1990).
According to
Onwughara (1998). The first syndicate loan could be treated to the banker
of the middle ages often distribute financing risk among several houses to support
project flow.
Loan syndication is
needed when:
a. A borrower
wants to raise a relatively large amount.
b. When a
borrower does not wants to deal with a large number lenders.
c. When
the amounts involved exceeds the exposure of the lenders.
TABLE OF CONTENTS
CHAPTER
ONE
INTRODUCTION
1.1
Background of the study
1.2
Statement of the Problem
1.3
Objective of the
study
1.4
Research Questions
1.5
Research
Hypothesis
1.6
Significance of the study
1.7
Scope, Limitation and Delimitation of the study
1.8
Definition of Terms
1.9
Reference
CHAPTER
TWO
Review
of related literature
Theoretical Review
Meaning of Syndicated Loan
2.1
The Procedures for Syndicating a Loan
2.2
Marketing the Loan and Syndication Meeting
2.4.1
Review of Empirical Literature Impact of Loan Syndication in the Economic
Evaluation on Syndication Loan
Financing
2.3
Summary of Literature Review
2.4
Reference
CHAPTER
THREE
RESEARCH
DESIGN AND METHODOLOGY
3.1
Research Design
3.2
Area of the study
3.3
Population of the Study
3.4
Sample Size and Sample Techniques
3.5
Instrument for Data Collection
3.6
Method of Data Presentation
3.7
Method of Data Analysis
3.8
References
CHAPTER
FOUR
Data
Presentation, and Analysis
4.1
Presentation, Analysis,
4.2
Test of Hypothesis
CHAPTER
FIVE
Summary of Findings, Conclusions and
Recommendations
5.1 Summary
of
Findings
5.2
Conclusion
5.3
Recommendations
Bibliography
Appendix
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE
STUDY
The relative insufficiency funds for capital is a common factor in every
economy especially in come up economics of the world. In developing countries
like Nigeria the low level of capital investment is clear shown high
unemployment rates, low productivity and corresponding low standard of living
for the greater majority of the population.
Finding a solution to this problem of providing funds for capital investment
has a major pre-occupation of financial institutions in Nigeria. Beyond the
traditional term loan, share offers, bonds and so on, business organization and
financial institutions alike have seek way of approach equipment for a task,
try to overcome the problem insufficient fund for capital investment.
One of the solutions they have come up with is syndicated loan which is aimed
at spreading risk, the major reason is that banks in the syndicate share risk
of large investment project. Syndicate may also arise because an additional
syndicate member provides information for investment. Syndicate has been
defined as an association of financiers or industrialist or banking consortium
formed to carryout some big industrial project (Orjih, 1996).
The
spectacular growth of loan syndication as an alternative financial instrument
for project financing occurred as a response to several economic factors in
Nigeria notable among these were:
-
The national industrial policy of 1989, which is aimed
at achieving, accelerated space of industrial growth in Nigeria economy.
-
The introduction of the structural adjustment programme (SAP) in 1986
culminating in the establishment of foreign exchange market (FEM) and
depreciation in the economy. This made imported machinery and equipment very
expensive and requiring huge capital outlays which most companies or financial
institution cannot comfortably afford.
Restriction on credit expansion by
government and monetary authority to minimize inflation, central Bank of
Nigeria dose not include syndicated loan finance within the credit ceiling,
Banks are able to syndicate loan without interfering with the credit ceilings.
In addition, there are certain legal
and regulatory limitation on lending activities of Access bank such as the
statutory lending limit as provided in the banking Act of 1986 S.B (1), the
liquidity requirement etc. in other to surmount these legal and regulatory
limitations on lending activities of Access bank, loan syndication has become
an alternative credit delivery technique aimed at spreading risks and reducing
the impact of the restricting laws and regulations. What is perhaps significant
about loan syndication in the country is not rapid which have been quite
remarkable over the years.
Also study of the extends to which
project in the country employ syndicated loans as an alternative financing with
particular references. The researcher carefully appraised all aspects of loan
syndication as financing alternative in the country from the point of view of
the borrower. It was made clear in thus work that in consolidation of numerous
merit of syndicated loan financing as against its demerits. It is to be used as
a last resort but should be considered along side with equivalent alternative.
1.2
STATEMENT OF PROBLEM
There are conflicting views as to whether project should be financed by
syndicated loan or not. The opposition to the use of alternative especially in
Nigeria argued that syndicated loan is expensive and induced much administration
work. Also there is need to point out in every clear term the advantages
inherent in syndicated loan as a medium and long term financing alternative,
beside a review of the role of financial institution in financing huge projects
through syndicated loan is of paramount importance the researcher identifies
these problem and considers necessary to carryout an in depth study on them.
1.3 OBJECTIVE
OF THE STUDY
The main objective of this study is to
evaluate project financing as an alternative to loan syndication.
-
To examines the operations, advantages and disadvantages of loan syndication as
financing options.
-
To evaluate the operations, advantages and
disadvantages of project financing options.
-
The examination in general terms of various issues involved in loan
syndication.
-
The find out whether loan syndication is really a new
approach to other form of borrowing.
1.4 RESEARCH
QUESTION
-
Does government policies on syndication have any
effect on Bank lending activities?
-
Does your bank lay emphasis on any particular sector
of economy in giving out syndicated loans?
-
Who bears the greater part of the risk involved in
syndicated loan?
-
Does the introduction of SAP has an effect on
syndicated loan?
1.5 RESEARCH
HYPOTHESIS
Hi:
Syndicated loan has been employed against other alternatives as a
medium/long term financing alternative.
Ho:
Syndicated loan has not been employed against other alternative as a
medium/long term financing alternative.
Hi: Syndicated loan
effect in our national economy.
Ho:
Syndicated loan does not have any effect in our national’s economy.
Hi:
Syndicated loan has much impact in our national economy.
Ho:
Syndicated loan does not have much impact in our national economy.
1.6
SIGNIFICANCE OF THE STUDY
This research work will be of great significance to the research for the award
of Higher National Diploma (HND) in Accountancy Department it will equally be
of much significance to graduates mainly in the field of banking and others who
will like to gain more knowledge on loan syndication.
Another significance of this study is to look into ways of making it easy to
finance a capital project which requires a syndicated loan; also to encourage
financial firms to jointly finance such projects which one financial firm
cannot single headedly finance. It is hoped that after these study, it will
provide information to general public on how to employ loan syndication as an
alternative project financing. It will also help institutions to formulate
suitable policy that will guide them in financing a big project jointly with
other financing firm.
1.8 DEFINITIONS OF
TERMS
Loan Syndication: According
to Anyanwokoro Mike
(1999) defined loan
syndication as an arrangement by which different banks or financial
institutions team together to grant a large loan to a customer.
Project:-
A project is an undertaken with a view of
maximizing project
and reducing or minimizing loss.
Project Financing:
Project financing means providing the necessary funds or facility needed for
the efficient and effective implementation of a project.
Syndicate:
This means an association of financiers or
industrialists or
backing consortium formed to carryout some big industrial projects.
and finance review vol32 no1
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