PROBLEM AND SOLUTION OF BANK LENDING IN COMMERCIAL BANKS
(A STUDY OF FIRST BANK NIGERIA PLC UGHELLI)

ABSTRACT
It is well known phenomenon that some business men that have sound business acumen and entrepreneurial ability do not have the financial resources to carry on their business activities and one avenue open to them for such financial assistance is commercial banks. It is for such persons this work is meant to serve their interest and to brighten their preparedness and responsibility to a request of loan. In an attempt to appraise the difficulties that are faced by the businessmen and commercial banks in borrowing and lending of funds for the business activities, this work have been divided into five chapters. The work contains the various problems encountered by the businessmen in obtaining loans and also the various ways or methods the bank would consider before granting of such loans to customers. It is also dealt with the review of the various theories in lending conditions and policies set by Central Bank of Nigeria (C.B.N) in its monetary policies of commercial Banks. The criteria for lending by commercial banks are problem of effective lending services and finally the incidence of bad debts in bank lending. The work also examined procedure adopted in obtaining information and data and the limitation of methodology. Questionnaire and interview analysis were also carried out in which the final analyses were recorded. The study is based on the premise of finding out the necessary conditions with questionnaire and personal interview conducted on the lending activities of the banks, it was discovered that sufficient credit facilities which would as well stimulate business and entrepreneur skills are not being enjoyed by the bank customers. It was also discovered the purpose for which they are meant for. Recommendations are also made which might help to alleviate whatever problems that is there in the lending process. These recommendation were made in an attempt to minimize or totally erase the problems highlighted in the study during the whole process of lending. It is hoped that the result of the study will stimulate interest not only among business men, lending officers, researchers and student of financial management but also among policy makers in the banking industry.

TABLE OF CONTENTS
CHAPTER ONE
1.0    INTRODUCTION- -    -    -    -    -    -
1.1    Background of Study-    -    -    -    -    -
1.2    Statement of Research Problem    -    -    -    
1.3    Objective of the Study -    -    -    -    -    -
1.4    Scope of Study - -    -    -    -    -    -     
1.5    Significance of Study    -    -    -    -    
1.6    Research Methodology    -    -    -    -    -
1.8    Limitation of Study -    -    -    -    -    -
1.9    Definition of Terms -    -    -    -    -    
CHAPTER TWO
2.0    LITERATURE REVIEW -         -    -    -    -        
2.1     Preamble -     -     -     -    -    -    -    -    
2.2     Historical Development of Commercial Bank in Nigeria -        
2.3    Origin of Bank Lending    -    -    -    -    
2.4.     General Lending Policies by Central Bank of Nigeria     -    
2.5     Criteria for Lending by the Commercial Banks    -    -    
2.6     Problems of Bank Lending in Commercial Bank-    -
CHAPTER THREE -Research Methodology
3.0    Introduction -     -     -    -    -    -    
3.1    Data Collection Method     -    -    -    -    -
3.2    Sample and Sampling Techniques    -    -    -    
3.3     Description of Data Collection Instrument-    -    
3.4    Data Collection Instrument    -    -    -    -    
3.5    Selected Research Question    -    -    -
CHAPTER FOUR
4.0    Data Presentation and Analysis    -    -    -    
4.2    Questionnaire Analysis    -    -    -    -    -
CHAPTER FIVE
5.0    SUMMARY, CONCLUSION AND RECOMMENDATION    -
5.1    Summary of Findings    -    -    -    -    -
5.2    Conclusion        -    -    -    -    -    -
5.3    Recommendation    -    -    -    -    -    
References    -    -    -    -    -    -    -
Appendix     -    -    -    -    -    -    

CHAPTER ONE
1.0    INTRODUCTION
1.1     Background of the Study
A businessmen undergoes the struggle difficulties and procedures of obtaining loans and advances, the researchers are faced with the question as to what the cause of such obstacles in the banking system are: the people involved and what is to be done in order to resolve or eliminate the problem.
The causes of these problems could be traced to the bank’s customers and the government for failure to appreciate the place of credit in the Nigeria economy. Bank loans and advances form the major sources of revenue to bank, as such, they form the most significant source of profit to banks. Although the banks would want to lend money as much as possible to their customers but due to some constraints. They are usually not able to meet all the demand for credit in the economy all such obstacles which come the way of borrowing and commercial banks in borrowing process constitute problems which need to be highlighted. They will make for avoidance of deliberate falsification of data and necessary requirement backed with insufficient reason with the aim of getting credit facilities with commercial banks.
Most customers are unaware of the services, which the bank offers. In most cases, customers are being subjected to long queues while others are frustrated by unsympathetic staff in terms of courtesy and efficiency. But before loans are given there should be collateral security and other condition to be fulfilled. Due to the fact that banks transform the deposit taken into loan advancement they learn to encourage more customers to open accounts with them so as to increase their deposit with them. Invariably their loan advances available for investment by other customers and their profit. It is not all businessmen that have entrepreneurial ability that have the financial resources to carry on their business activities. Hence, there is the need to borrow money to finance their business and one avenue which is open to them for financial assistance, is the commercial banks. Lending at times, some commercial banks are unable to meet the demand for such loans and advances, which are needed by their customers.
These problems of several reported cases of frauds and mis-arrangement of funds by top official of corporate bodies. This is one of the reasons why had difficulties in operations before it was taken over by Central Bank of Nigeria, Adekanye (2006), fund is one of the most important resources in carrying on business activities especially in a capitalist system of government like that of Nigeria.
Nigeria as we are aware, is trying to transform into a modern industrial society. The achievement of this is still questionable. Bearing in mind that the achievement of industrial objectives rest equally on the shoulders of the commercial banks, the writer have therefore decided to review the bank lending policies which are essential and necessary for posturing the economic development of Delta State in particular and Nigeria in general.

1.2    Statement of Research Problems
It is very difficult to find any process of obtaining bank loan and advances that are not problem prone. This project therefore, help in the identification of the lending problems of banks and customers, taking First Bank of Nigeria Plc, Market Road, Ughelli as a case study.
The study therefore should be able to provide answers to the following questions:
(a)     What are the problems?
(b)     Are the problems encountered as a result of non- availability of loan able fund?
(c)     Are the causes of the problems as a result of customers’ lack of awareness of services, which the banks provide?
(d)     Is it as a result of the attitude of bank workers towards their customers?
(e)     Could the problems be attributed to the lending policies of the banks?
(f)     How are commercial banks implementing the policy guideline issued by the Central Bank of Nigeria in their lending functions?
(g)     How is First Bank of Nigeria PLC; recovering the loan granted their customers or how is the ability of the borrowers to pay back loans granted them.
(h)     What steps have been taken by First Bank of Nigeria PLc in the past 3 -5 years to control its bad debts?
(i)     What then is to be done in order to reduce the problem to their barest minimum or totally eliminate them?

1.3     Objective of the Study
Banks are business establishment, which safeguards money and basically provide loans. Taking into consideration the intricacies and procedures of bank lending, it become imperative for this study to be carried out so as:
(a)     To highlight certain problems associated with the present lending schemes thereby enabling benefit to be derived from their usage.
(b)     To identify the criteria for bank lending and bring into focus the problems associated with the loan and advances granted by commercial banks to their customers.
(c)     To suggest best possible methods of increasing bank lending to customers and efficiency of recovering the loan in commercial banks.
(d)     To examine the action which commercial banks take in order to check the incidence of bad debts.
(e)     To see if the policy guideline set up by the Central Bank of Nigeria for the commercial banks to follow in their lending functions are used effectively.

1.4     Scope of the Study
This study will focus on lending recovering policies of Nigeria commercial banks, First Bank of Nigeria Plc to be specific and to look at the problem inherent with bank lending in Nigeria. From the broad perspective, it is necessary to identify the boundaries of the study. There are various issues involved in the study of the finance house lending policies. These include the general lending policies in the economy by the Central Bank of Nigeria, the role of bank lending in the economy. The types of securities acceptable for bank lending, the causes of liquidity problems in the commercial bank and it will also border slightly on the incidence of bad debt in the bank lending.
The study does not deal with other function of commercial banks, such as acceptance and safekeeping of deposit, advising customers on insurance matters, management of customers’ investment buying and selling of stocks and shares, providing travelers with foreign exchange facilities, acting as executors and trustees of wills, providing business status report etc.
It does not also deal with issues in respect of trade barriers, inflation, fraud and forgeries in commercial banks and debt conversion. The collection of data is limited to the information from the establishment under review, other related document evidence and library facilities.

1.5    Significance of Study
The significance of this study is derived from the basic importance of lending as the most important function of commercial banks. And through this function, the federal government of Nigeria recorded success in most of her programmes such as SAP, NDE, DFFRI, commercialization and privatization policies etc. The significance of the study lies on the following facts.
In the present level of Nigeria’s commercial growth most of the commercial activities need huge sum of money to finance their continuity and growth. Most of the proprietors of these commercial ventures who may have the necessary managerial skill, business acumen and energy to run the business may not have got the necessary finance to sustain the perpetuity and growth of these ventures.
To obtain the necessary finance, the business is faced with the problem of obtaining debt capital obtained from these lending institution help in bolstering his investment.

1.6    Research Methodology
The research method of collection of data will embrace both descriptive and historical analysis. The secondary method is data collection, which will mostly be used for research work.
The secondary data used will include books written by authors of high repute, annual report and journals of first Bank of Nigeria PLC, Newspapers, News letters, Magazines, Lecture Notes, Academic Journal and also lectures attended which were delivered by some intellectuals in the banking field also assisted in this work. Although personal knowledge will also come in but basically related textbooks will be consulted, that is library research will be consulted where and when necessary. Data collected from this source will be carefully analyzed and interpreted using appropriate statistical technique and percentages.

1.7    Limitation of Study
This was one of the strongest factors that inhibited the researcher. Apart from the time needed for the research work the researchers had their lectures and other academic exercises to contend with.
The case study method will be adopted which will help to narrow such a topic down. The study is limited to a banking institution within our vicinity (Ughelli) in Nigeria which is First Bank of Nigeria Plc.
First Bank of Nigeria Plc, was chosen as a case study to limit the difficulties in apportioning the time which is strictly for pure academic work. This will lead to project work not being as explicit as it should be.
The researcher of this work was also faced with the problems of non- available of books; the few books in the polytechnic library are not current with modem realities. Another limiting factor that the researcher was faced with was in the area of funds. This hindered the researcher. Also extensive travelling to collect all relevant data was another factor. Finally, lack of information also limit the study some of the vital information required for this write up are regarded as top secret of the bank and cannot be released by the management. Moreover, as the public appears not to know much about the relevance of this study, bank customers were very reluctant to give out information as to the exact amount of credit facilities provided them by commercial banks. They read more meaning to it deposit, my opportunity is that, the work was an academic exercise, which they would benefit from it I got their maximum cooperation to do a better work.

1.9     Definition of Terms
It is difficult in real life to come up with an accurate and comprehensive definition of any terms that can be universally acceptable. Therefore any definition given has its limitations to the context and bearing of this work.
In this write-up a number of term will be used which without prior explanation will pose some difficulties in the understanding of what is being put across to the reader. This makes it very important for such term to be defined for better understanding and comprehension.
1.     Bank Lending: Lending can be described as being synonymous with loaning. A loan has been defined as the borrowing of a sum of money at any agreed rate of interest usually for a specified period of time by a government institution, a business firm or an individual. Thus, it is the transfer of money or funds from one who is a lender to a borrower for an agreed interest rate. Lending means providing an opportunity for a borrower to withdraw monies from a commercial bank to such an amount agreed upon by both the borrower and lender.
Securities asked for by bank before loans are given out are collateral securities which include stocks and shares, life insurance policies or a document stating that borrower can own certain goods.
2.     Lender: This is an individual or corporate body, which grants loan and advances or provide credit facilities to these who need them genuinely. The lenders are mainly financial institution, which have been established for lending purposes, others are money lenders.
3.     Borrower: A borrower is an individual who seeks credit facilities from any financial institution (Lender). There are different types of borrower and they can be classified into business and social borrowers.
(a)     Borrowing for Marriages.
(b)     Borrowing to buy valuables.
(c)    Borrowing to Build Prestigious House.
(d)     Borrowing for Burials.
Business borrowers are those who obtain loan for the business ventures, which can aid economic development.  They includes sole trader, partnership and corporate bodies.
4.     Bank: A bank is defined by the Banking Act 1969 as “place where business of banking is carried out and includes commercial banks, acceptance house, discount house and financial institutions”.
5.     Commercial Bank: A commercial bank is a banking institution which accepts demand and time deposit from business and customers, it means “any person who transacts banking business in Nigeria and whose business includes the acceptance of deposit and withdrawals by cheque”. In other words the source of bulk of its money transaction is derived from the public deposit of different kind
6.     Effective Lending: It means the quantum of lending which maximize the banks objective of liquidity and profitability and the economy objective of development.
7.     Debt: It is defined as the obligation to make future payment. It is credit facilities that are received by a borrower from a lender who may be a formal or informal financial institution against the borrower’s promise to make future payment.
8    Credit: It is a facility or extra money which a person who maintains a current account is granted over and above his personal savings by a bank. It is usually for a stated period and is supported by some form(s) of security or securities which the beneficiaries provide.
9.     Credit Limit: The credit limit means the maximum amount of credit of which the banks will extend at a point in time. It represents the maximum risk the bank will allow itself to undergo for an account holder.
10.     Central Bank: This is the apex of monetary institution charge with performing the duties of bankers’ bank, fiscal agent for the government and managing the monetary system of the country. It is also referred to a banking system in which a single bank has either a complete or a residual monopoly of note issue”.
11.     Security: It means some right or interest in property given to a creditor so that m the event of the debtor failing to pay his debt as at when due, the creditor may reimburse himself for the debt out of the property charged.
12.     Monetary Policies: It is a policy which deals with the control of money supply by the monetary authorities in order to achieve the desired economic goals. The instruments of monetary policies which central bank employ to achieve goals of economic policy depend on the stage of development of a country.  
13.     Interest Rate: This is a rate which is fixed and maintained by Central Bank for the commercial banks for the purposes of credit control. It does not fluctuate in response to every minor fluctuation in the demand to borrow money.
14.     Discount Rate: As the lender of last resort, the Central Bank of Nigeria is prepared to lend to banks by granting them short-term direct advances or rediscounting eligible bills presented by them.