The Effect Of Government Policy On Commercial Bank Lending Ability In Nigeria

THE EFFECT OF GOVERNMENT POLICY ON COMMERCIAL BANK LENDING ABILITY IN NIGERIA (A CASE STUDY OF UNION BANK)

This chapter focused on the precious research on the topic Historical background of bank lending.

2.1              PREVIOUS RESEARCH ON THE TOPIC

              There are many people who have carried out research on related or similar topic but there are other bank lending introduced in the most Nigeria commercial bank today. So, that is why this very research is necessary.

A research was carried out by Oloyede (2002) on the effect of government policy on commercial bank lending ability in union bank of Nigeria.

2.2              HISTORICAL BACKGROUND OF BANKS LENDING

The history of bank lending in Nigeria dated back to the year 19960s was dominated by a small number of foreign owned banks  into one in which public sector ownership predominated in the 1970s and 1980s and in which Nigeria private investors have played an increasingly important role since the mids 1980s.

Extentive government intervention characterized financial sector policies being inning in the 1960s and intensifying in the 1970s the objective of which was to influence resources allocation and promote indigenisation, since 1987 financial sector reforms have been implemented, elements of liberalization and measures to enhance prudential regulation and tackle bank distress.

`The concentrates on the commercial and merchant bank, which together accounted for 85 percent of the total assets of the main financial institution in Nigeria, excluding those held by the bank. First, that government controls on financial markets, public ownership of banks and the neglect of prudential regulation, had detrimental effect on the banking system, especially in term of the quality of banks loan portfolios efficacy of financial liberalization and other financial sector reforms to enhance the efficacy of intermediation in banking markets has been limited in part because of the banking industry in financial distress, some of these banks where set up by state governments but the majority were stated by Nigerian private investor. The growth of the local private banks was very rapid after 1986, particularly in the merchant banking sector by 1992 there were 66 commercial banks and 54 merchant banks in operation in Nigeria despite the growth of new entrants however the three largest banks have retained their dominance of banking market, accounting for 48 percent of the total deposits of the commercial banks 1994.

2.3              EFFECT OF LENDING ON THE COMMERCIAL BANKS

Lending business comes in the form of penalty charges or interest charges penalty from cheques, interest charges in advances. In lending  interest charges are dependent on the status of the borrower private individual pay more interest than government. The nature and value of the security provided is also considered in charging interest loans, interest are categorized according to specified guidelines conforming to monetary policies of federal government for example, advance to less preferred sector like agriculture attack less.

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