NIGERIAN FINANCIAL SYSTEM AS THE PRIME MOVER OF ECONOMIC ACTIVITIES

CHAPTER ONE

INTRODUCTION

Background of the Study

Every economy is made up of a multitude of economic units and agents. Here are individuals, households, different forms, firms and the central authority. To carry on with its economic activities, it needs funds. These  units engaged in production., distribution or consumption may require from other agents the service of their facilities of goods and services.

Specialization and minute elivison of labour in modern economy have led to firms specializing in different ways. Some of these firms deals with physical goods and services where as other specialize in money and credit. The later deal wholly and exclusively in financial assets in liabilities. It is the specialization that provides the link between different lowers of the financial sectors and between different hers of economy.

In an economy, financial institution perform a wide set of functions. There are monetary and non monetary financial institutions. The former ensures that there is an adequate stock of money to service the needs of the economy. Some of the type of financial institutions is the central bank and commercial banks. These institutions can increase or decrease the stock of money through their actions. But they later facilitate the transfer of money between economic units. These action of both institutions affect the level of employment. Income and prices (that is economic activities) which shows that financial system is the prime mover of economic activities.

Statement of the Problem

This study/research entitles the Nigerian financial system as the prime mover of economic activities attempts to determine the Nigerian financial system as the prime mover of economic activities as compared to others and to determine the best credit financing for small scale enterprises. This is with a view to determine the actual achievement of the bank as a financial house in terms of seize of loan, profitability of credit etc. The question here then is whether it can be safety said that small scale enterprises have benefits appreciably from finance houses (Bank) in terms of capital provision.

Generally the major problems of small and medium scale industries consist of finance organization.

A comparison of banks performance with other sources open to small scale industries will be undertaken in this research  in order to find out which of these sources of credit are most useful and important to small scale enterprises.

Another problems is lack of time, since this study is just out of many course offered by the researcher, she was not able to carry out intensive research on this study in question because her time is limited. She also lack the fund to run up and down to find suitable materials for this research.

Purpose of the Study

In view of the problem of some industrialist the objective of these studies is to evaluate the role of financial houses in financing economic activities for economic activity to be moving money must be made available to the economic units.

The Specific Objective Are:-

·         To identify the problem encountered by economic activities in obtaining finance from banks.

Financial institutions provide liquidity by making it possible to convert near money assets into manager. Such near money assets are time deposits in the banks, treasury bills, share and bonds and commercial bills etc.

·         They mobilize the collection and storage of savings.

To appraise the situation and make recommendation on how to improve on the finance houses.

·          Financial institutions highlight the extent to which the commercial banks have helped to finance on economic activities and problems hindering such.

·         To guard against risks inherent in the day – to – day activities of the economic units. Specialization in function has promoted the creation of financial institution to insure against and thereby minimize the impact of risk.

Significant Of the Study

The significance of the study is to evaluate the extent to which the economic activities have been able to obtain the assistance of financial system in capital funding of their business. The research will be important in that, it will provide data for future studies on the subject. Thus the study will be of benefit to students who will be like to research on related topic in future, it will make their work easier because already, a foundation has been laid.

Industries will benefit because the research project will reveal any problems in the relationship between banks as a financial institution and economic activities when these problems are

revealed it will and borrowers to act loans easily without many problems.

Finance houses will benefit because the actual role they play in financing of economic activities will be revealed. This gives them strength to ask federal government for loan when they have need for that.

Individuals will also gain because when banks give loans to industrialist, it will help to act that the needs to the people are provided if not fully but to an extent that a good number of people will benefit.

Scope of the Study

This topic Nigerian financial system as the prime mover of economic activities (A case study of Nigerian bank for Commerce and Industries (NBCI) Enugu) is very vast but for purpose of manageability to the financials constrained. It has therefore restricted or limited itself to some specific banks in Enugu state.

In choosing these bank, the research has invited his research in those areas of operation of these institution that enhance economic emancipation of Nigerian and used instance drawn to apply to other development financial institution. This has been so because the research assumed that all financial institutions saddled with the sole responsibility of small scale industry have the same goals and objective of enhancing small – scale industry as an economic activity.

Definition of Terms

The Nigerian Bank for commerce and Industry (NBCI) which currently plays a very active role in the promotion of small industries defines a small scale industry as one employing up to N500.00 Ezeye (1990).

In most cases, the varied definitions appear to be governed by the interest of the perceived. The purpose of the definition the stage of development in which the definition is employed.

Generally, a small business is defined as one which is owned, managed by one or two persons, influences by the family in decision making, has no undifferentiated organizational structure, market share is small and employed less than fifty (50) persons.

The National Economic Reconstruction fund (NERFUND) defined some of the economic activities e.g. small scale industries as those whose fixed assets value do not exceed N10 million. While the central bank on the other hand regards any enterprise whose annual turnover is less than (N500,000) five hundred thousand naira.

Role: for the purpose of this research role should mean and includes all part played and exhibits by financial banks.

Loans: This is the transfer of fund from one economic entity to another which must be repaid with interest over a stipulated period of time.

Credit: This word credit comes from latin words “Credo” meaning I believe. It means ability to command capital of another in return for a promise to repay as specified in the future.

Finance: This is concerned with available money and capital goods for investment in industries to boost production.

Industrialization: Can be defined as a strategy through which none industries one encouraged to sprung up.

Money: This can be define as anything which is generally acceptable in a given society or locality as a means of exchange and for settlement of debth.

Short Term Loan: A source of fund, which has a short period of maturity.

Research Hypothesis

In the process of carrying out this study, the following assumption are made:-

·         Frequently apply for loan from commercial banks

·         Frequently apply for loan from Nigerian bank for commerce and industry (NBCI)

·         An Increase in bank loan will result in an increase in industrial production

Remember, the financial system of any society is the frame work within which capital formation takes place. It is a frame work within which the saving of some members of society are made available to other members of society for production investment.

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