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IMPACT
OF COMMERCIAL BANKS CREDIT ON NIGERIA’S EXPORT TRADE
ABSTRACT
This
study investigates the impact of commercial bank credit (loans and advances) on
the Nigerian export trade, taking into consideration the period from 1983 to
2009.
After
a thorough analysis it was discovered that export trade have earned some
substantial amount of foreign exchange for the country, especially when it
comes to oil export. This has therefore improved the Nigeria balance of payment
and the level of the Nigerian economy.
However,
non-oil export has also contributed to their own quota as part of foreign
exchange earnings, but government should make more policy to promote the growth
of non-oil export in the country especially the agricultural sector and banking
sector should also encourage them by granting greater percentage of credit
(loans and advances) to the sector, in other for them to contribute more of
foreign exchange resources and ensure slash export earnings in the
country.
TABLE OF CONTENTS
Table of Contents
Abstract
CHAPTER ONE
1.1
Introduction
1.2
Statement of Research Problem
1.3
Objectives of Study
1.4
Hypothesis of the Study
1.5
Significance of the
Study
1.6
Limitation of the
Study
1.7
Methodology of
Research
1.8
Organization of the
Study
CHAPTER TWO: LITERATURE REVIEW
2.1
Introduction
2.2
Commercial Bank Credit
2.3
Commercial Bank Instrument of Credit
2.4
Lending Principles and Policies of Commercial Banks
2.5
Factor that Affect Commercial Bank Credit to Export
2.6
The Need for International Trade
2.7
Brief Survey of Development of Export Credit in Nigeria
2.8
The Concept of Export Promotion and Economic
Growth
2.9
How Bank Credit is Going to Export
Trade
2.10
The Contribution of Banks to Nigeria Export
Trade
CHAPTER
THREE: THEORETICAL FRAMEWORK AND MODEL SPECIFICATION
3.1
Introduction
3.2 Factors that Determine the
Volume of Export Trade
3.3 Model
Specification
CHAPTER
FOUR: PRESENTATION AND INTERPRETATION OF REGRESSION RESULT
4.1 Presentation of Regression
Results
4.2 Interpretation of Table
4.3 Policy
Implication
CHAPTER
FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
5.1
Summary of Findings
5.2
Conclusion
5.3
Recommendation
Bibliography
Appendix
CHAPTER
ONE
1.1
INTRODUCTION
The
roles of commercial banks in our modern economy cannot be over emphasized,
commercial banks in Nigeria as a financial institution helps in financing the
exporting sector of the economy, by lending out short-term loans to those into
manufacturing, exporting, trading and industries.
Lack
of bank credit (loan and advances) in our economy has brought about low rate of
economic growth and diversification of most industries in Nigeria. The
availability of bank credits to those in trade determines what is produced and
how much of that product is produced. Therefore, commercial banks perform their
important role of financial assistance by rendering important services by
granting (loans and advances) to various sectors of the Nigerian economy.
Commercial banks support the economy by serving the credit needs of their
customary and providing a safe place for the cash balance. Of individual credit
activities on the export sector of the Nigerian economy, there are general
statements which guide or channel actions in decision making about the export
sector advance and investment of commercial bank.
Every
year, the Central Bank as part of their duty in controlling monetary policy,
publish credit policy guidelines for the fiscal year.
The
aspect of the guidelines that the commercial bank covered are as follows:
i.
Aggregate credit ceiling
ii.
Sectoral allocation of commercial bank activities on the export sector (loan
and advances)
iii.
Capital fund adequacy
iv.
Reserve requirement
v.
Interest rate on export sector
vi.
Commercial bank equity holding in company
The
importance of export trade to economic growth cannot be overemphasized, this
trade goes beyond the national boundaries of moving goods from a country to
another in order to earn foreign exchange. Export are the goods and services
which a country sends to other countries abroad in return for some payment made
in foreign exchange.
Over
the years, Nigeria has engaged herself in international trade (export trade),
which is very important in earnings of foreign exchange, which helps to
contribute to the growth and development of the economy. In some economy,
export trade has been found to perform as the engine of growth especially
through high productivity export, a nation can take advantage of international
division of labour and procure desired goods and services from abroad at
considerable savings in term of inputs of productivity resources, thereby
helping to increase the efficiency of export industry.
A
study in sub-Saharan shows that economic growth is stimulated by export trade,
the federal government in 1979, created a package of incentive for the export
sectors, these include directive to bank to streamline credit facilities to
exporters, apart from the commercial banks granting credit to exporting sectors
(oil and non-oil sector) in Nigeria, there are other institutional bodies put
to engage in financing export trade in Nigeria such as Nigeria Export-Import
Bank (NEXIM), Nigeria Export Promotion Council (NEPC), the Nigeria Export
Processing Zone Authority (NEPZA) and others.
Commercial
bank has played a very crucial role in financing the exporting sector
especially the preferred sector of the economy that is non-oil export
(agricultural and manufacturing) sectors.
1.2
STATEMENT OF RESEARCH PROBLEM
Export
trade makes significant contributions to most economies, since credit is vital
be trade, this study is designed to analyze the impact of commercial banks
credit in Nigeria. Export trade provides foreign exchange for the country.
However in recent years the performance of non-oil export (agricultural and
manufacturing) trade has decline. This was due to exploration of crude oil,
which is now Nigeria’s main source of foreign exchange.
This
research is faced with the following problems which include these questions:
1.
What impact has the contribution of Commercial banks credit have on the growth
and development of the Nigerian economy?
2.
How has bank credit aided trade in the exporting sector?
3.
Has the performance accorded the non-oil export (agricultural and
manufacturing) sector by way of directing the commercial bank to grant more
loan to them, really boosted their output.
4.
How can bank credit be utilized by the exporting sector (oil and non-oil export
trade) so as to achieve or attain desired economic development?
5.
What is the relationship between economy growth and total credits of the
commercial bank on export in Nigeria between 1983 to 2009?
1.3
OBJECTIVES OF STUDY
The
essence of commercial bank credit is to give loans and advances to help
investors or customers finance their project. Commercial bank credit stands to
bridge the gap created by low domestic savings and income. The main objective
of the study is to examine or analyze the impact of which commercial bank
credit has on the Nigerian export trade. Therefore this study is thus to
achieve the following objective.
1.
To examine and find out the impact of commercial bank credit on the Nigeria
export trade.
2.
To examine the structure and impact of the Nigeria export trade (oil and
non-oil) export sector of the economy.
1.4
HYPOTHESIS OF THE STUDY
Null Hypothesis (Ho):
The
credit made by commercial banks has no significant impacts on export trade in
Nigeria’ economy.
Alternative
Hypothesis (H2): The
credit made by commercial banks has a significant impacts on export trade in
Nigeria’ economy.
1.5
SIGNIFICANCE OF THE STUDY
This
study is relevant to the government in the sense that, it enable the government
to know the necessary policy that will enhance export.
This
study is also beneficial to the exporter because it will help them know how to
get the necessary credit to enhance their exporting activities.
Finally,
it is also relevant to the banking industry because it will enable them to know
the amount of credit to channel to the exporting sector.
1.6
LIMITATION OF THE STUDY
For
the purpose of this study on the impact of bank credit on the Nigeria export
trade. I decided to use the commercial bank as a financial agent for export
trade and the study is based on the “analysis of the impact of commercial bank
credit on the Nigeria’s export trade. And the time and duration will be limited
to 1983 – 2009. The analysis of this study will be based on information
obtained from the Central Bank of Nigeria (CBN), Federal Office of Statistics,
newspaper journals, textbooks, internet and other articles, published by some
scholars and other financial institution. Based on the statement of problems
and research purpose, the hypothesis is as follows: going by the fact that over
the year the federal government has accorded much performance to the exporting
sector of the economy that is oil and non-oil export trade by instructing
commercial banks year in year out to direct a significant percentage of their
credit to these sectors in the Nigerian economy.
1.7
METHODOLOGY OF RESEARCH
This
work will be carried out through theoretical analysis of statistical data,
econometric model using the following
i.
Single regression analysis form involving equation.
ii.
The T-test which is used to test the level of significance of correlation
coefficient.
The study is also carried out using
secondary data. The major source of secondary data to be used are journal,
financial newspaper, magazine, Federal Office of Statistics, various business
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