Domestic Bank Lending and its Exisects in the Nigeria Economy

Domestic Bank Lending and its Exisects in the Nigeria Economy

Domestic bank lending bring out problems encountered by bank in lending to their customers, these statement reports the lending policy of a bank at a particular time, the bank activities and resulting profit or losses during the most recent period and the flow of resources occurring within the bank during the same period.

Furthermore, to the central bank of Nigeria this will be use to them because they have to adjust their already stipulated credit guideline central bank of Nigeria usually demands a minimum lending to earn sector but the merchant bank loan are mainly to the manufacturing sectors but they cant expand loans to these sectors because of CBN restrictive guideline before loans are given under the corporate department the purpose of the loan has to be stated, financial information has to use produced one of collateral is adequate export will be  made to increase collateral offered by borrowers.

Domestic bank lending, more especially include the commercial bank merchant banks and development banks. As regards commercial bank it was observed that their prospective borrowers must have large amount of money in his/ her account before he could borrow money from them. And all these contributed a lot towards the problems facing domestic bank lending.


 The period we witnessed in decline in the terms of economic activity in Nigeria due to the oil glut, this period witnessed declining oil revenue, choosing down of factories a show down on investment security of raw material and retrenchment. During this period, the government were involved in a lot of measures to revamp the economy and most of its policies where implemented through the domestic bank. From the economic activity decline overall, the level of domestic out put, which improved slightly in 1979, stagnated in their was a decrease in the money supply but bank credit increased that their by 1.408.3 million at 16. 6% increase compared with 1989.

In 1990, development was unsatisfactory, industrial production fill petrol production fill sharply due to the glut, but agriculture witnessed as improved by 3.4% credit by banks during this period increased by 50.8% to 10, 2685.5 million, the factor being credit expansion to the government. In 1992, there was a continuous decline in production compared to 1991 increase were minimal bank credit rose from 34.7% to 21.899.7 million, this was borne mainly by commercial banks whose loans and advance to the private sector increased to 10, 453.5 million

In 1993, economy was in severe mess. Agriculture decline because of natural disasters, this affected mainly all subsections industry plummeted pectoris closed down, crude oil out put went further down construction fill, but bank credit increased by 50% to 5.5million. In 1994, there was no significant change from the 1993 figures; the continuous decline was still there and government measures. Were basically the same? In 1995, the economy went into a depression but there was increased in GDP, which rose by 2.4% in contrast with 93/94 decline where there was a full in the increase of bank credit 4.9% compared with 10.5% lending was low at the beginning but plucked up in July to 32.7 billion.

With the economy talking its particular trend there. Came a cry for diversification of the economy which is heartily dependent on oil, the only why this could be solved was through loans by banks to the right sectors of the economy, the CBN and its regulations through her bank policies saw the need for the scope and nature of the bank policies for large urban banks, and changed considerably, social and economic changes outside of banking also accurate during the period. This is the goal and operational policies of this system and its related institutional structure was questioned on the grounds of her computability with the solution to a number of critical social and environmental problems. Especially in the rural areas, because of these changes it becomes apparent that more than a routine revision of the banks and to make their lending policy computably with social and environmental program banking in the northern of the Nigeria development machines, if the duly punctured the machines would eventually break down. Other that acting as banker to other banks in from of monetary policy circular now established us bankers generally orders subject to revered review yearly some recent ones being the placement of   ceiling in the aggregate credit facilities that commercial bank can grant to the their customers, the regulations of the percentage of the total credit facilities to economy, interest churges

And commission by banks and indignation lending, because of this, I believe there became a need for a money of CBN policy guidelines to different banks as will as banks internal lending policy and effects on the economy during the 1990< 95 period.


The objectives of this paper are:

  1. To apprise domestic bank lending polices in Nigeria during 1990- 95 period
  2. To fined the effects of loans grunted during this period in the Nigeria
  3. To examine the lending policies of various banks such as commercial, merchant and development banks and evaluate their effects on economy through some key project.
  4. To look at major problems encountered by banks in loan recovery and the best ways of avoiding them and also suggest recommendation for the improvement of the bank lending.


This study will be of important to the banking institution, which includes among other commercial banks, development banks and merchant bank that will from this book now known how to make possible amendments in their lending policy.   The merchant banks will from this work learn to adjust their lending policies that is shifting from embarking only on short financing to at least medium term financing to enable their borrowers utilized their loan adequately. With the help of this books banks will also be able to identify these sectors of the economy that needs adequate of the financing more than other sectors so that they will direct their loans towards their sectors. This will in no small way help to improve the economy.

Furthermore, so the central bank of Nigeria this will be use to them because they will have to adjust their already stipulated credit guideline which they have made for these banks so that these banks will be in the position of making loan available to the proper sectors of the economy without  violation of the central banks credit guidelines.


  1. CBN- central bank of Nigeria
  2. CCB- co- operative and commerce bank
  3. NIDB- Nigeria industrial development bank
  4. IMB- international merchant bank
  5. SFEM- second tier exchange market
  6. Banks – commercial merchant and development banks
  7. GDP- gross domestic product.


This research work has not been easy at all. Many obstacles were met in the course of the research. The main problem among them was time constraints. This is mainly because the research project has to be complete at the time course work. The research was carried out during lectures in the course work. Another major obstacle was finance.

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