CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
I got interested in the topic of this project owing to the fact that the preferred sector of the economy is being marginalized in its attempt to secure loans and advances from the Commercial Banks. The Commercial Banks with their ability to influence economic activities through the creation and distribution of money has become the major focus of monetary activities. The Central Bank of Nigeria has through the years sought ways and means of mobilizing funds for the development of the country’s economy.
Though equipped with various instrument of controlling and directing credit, the Central bank has found the method of credit guidelines most effective in directing credit to specified sectors of the economy. Thus, the government has through the Central Bank succeeded in directing the Commercial Banks sectoral distribution of loans and advances. It is not always easy to set guidelines and expect full compliance. Guidelines have always been set to achieve certain objectives and the achievement of such objectives are always dependent upon full compliance by those affected by the guidelines.
The Central Bank of Nigeria guidelines on sectoral distribution of loans and advances are aimed at developing the productive sectors of the country’s economy as well as curbing price inflation. The Commercial Banks who are expected to follow the Central Banks guidelines have their corporate objectives of making profits, the Commercial Banks have auxiliary objectives of meeting the demands of their shareholders, customers and government. Therefore, the research problem rests on whether the Commercial Banks will be able to show full compliance with the Central Banks guidelines in the light of the risk involved and the lending rate prescribed for lending to the preferred and less preferred sectors of the economy.
1.3 THE OBJECTIVES OF THE STUDY
The objectives of this research project can be stressed as follows:
a. To find out whether the Commercial Banks give out loans and advances to the preferred sectors of the Nigerian economy.
b. To find out whether the Commercial Banks give out loans and advances to the less preferred sector of the Nigerian economy.
c. To find out what makes up the preferred and less preferred sectors of the Nigerian economy.
1.4 SIGNIFICANCE OF THE STUDY
This research project will be of immense benefit to the academic world in the sense that it will stimulate future research. It will equally be of immense benefit to the federal government of Nigeria in the sense that the activities of Commercial Banks affect the economy as a whole. The study will also be of advantages to the business world and customers who wish to know why they are not given long term loan as requested by them.
