DEPOSIT MONEY BANKS AND EXPORT TRADE FINANCING IN NIGERIA
ABSTRACT
The study empirically examines the relationship between commercial banks and export trade financing in Nigeria for the period 1985 to 2012. Using correlation coefficient and the ordinary least squared (OLS) econometric technique, the results from the empirical analysis indicate that commercial bank deposits has a strong significant effect on total export trade financing in Nigeria; exchange rate has a very significant positive relationship with total export trade financing in Nigeria; foreign exchange has a strong significant relationship with total export trade financing in Nigeria in the period under study; and commercial bank loans to export does not have any positive impact on total export trade financing in Nigeria over time.
    The study recommends among others that macroeconomic policies that would promote favourableand increased bank capital base by way of increased customers deposits, Cash Reserves, Loan Deposit Ratios that will invariable enhance their ability to continuously service the export sector of the Nigeria economy should be put in place.
CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND TO THE STUDY
    The Nigeria government in the past has implemented various economic policies and programmes in an attempt to redirect and diversify the economy from oil-based to that of non-oil based one. The reason for these policies is based on the fact that crude oil is exhaustible and oil prices at the international market are usually volatile. The volatile nature of oil prices has a multiplying effect on the overall revenue accruing to the federation account on monthly basis as well as government budget. One way to effectively diversify the Nigerian economyis to encourage agricultural production and exports to other countries of the world and thus, earn enough foreign currencies to bridge the gap in deficit financing of the government and foster rapid infrastructural development of the country. However, Ogunkola and Oyejide (2001) argue that some specific government policies to strengthening the non-oil sector of the Nigerian economy was the joining of the Economic Community of West African States (ECOWAS) and the World Trade Organization (WTO). They argue further that, despite these efforts, non-oil exports have dwindled in view of the Poor access to financial services, high cost and complicated financing.
    According to Ningi (2013), one of the ways of boosting exports is making finance available to the export sector. This can be done through provision of enough and cheap credits to the sector (Phillips 1991).For this to be possible requires maximum collaboration with the banking sector of the economy in financing the export trade in the country. Banks are important institutions that can provide finance to the non-oil export sector in Nigeria. Banks are internationally recognized financiers and guarantees payment to exporters. CBN (1992) sees bank credit as money lent out by banks as loans and advances with a future date of repayment. Venedekian and warfield (1991) sees bank credit to non-oil exports to include bank overdraft, unsecured line and financing foreign receivables. Export trade is an integral part of international trade, it has to do with selling of goods and services to other countries (World Bank, 1993). International trade depends on some factors which Beck (2001) referred to as endowment factors which determine the flows of trade among countries. Kletzer and Bardhan (1987), Beck (2002, 2003) incorporated a financial sector in to the HecsherOnlin trade model and show that financial sector development in general and banking sector in particular gives countries a comparative advantage in industries that rely on external financing. Countries with better developed financial institutions such as banks and markets should therefore, have a comparative advantage in industries that rely relatively more on external finance (Ningi, 2013).
    It therefore hope that with effective collaborative effort between the government and the banking sector of the Nigerian economy, the quests for the realization of vision 20-20-20 will not be a mirage but attainable one when the agricultural export sector of the economy is fully encourage through maximum financing from the banking sector.  
1.2    STATEMENT OF THE RESEARCH PROBLEM
    The importance of baking industry in enhancing growth through export financing within the economy has been widely discussed in the extant literature across the globe today. According to Oluitan (2012), some economists like Schumpeter (1934) identified banks’ role in facilitating exports trade financing through their intermediary role. He believed that efficient allocation of savings through identification and funding of entrepreneurs with the best chances of successfully implementing innovative products and production processes are tools to achieve this objective. Other authors such as McKinnon(1973), Shaw(1973), Fry (1988), King and Levine (1993) supported the above submission about the significance of banks to the growth of the economy. In assessing the relationship, a large number of recent empirical studies like those of De Serreset al., (2006) and Levine (2005) have relied on measures of size or structure to provide evidence of a link between the bankingsector development and export trade financing visa viceconomic growth. They used macro or sector level data such as the size of financial intermediation or of external finance relative to GDP and found that financial services has a significant positive impact on export trade financing and the growth of the economy in general.
    Some other authors like Ijaiya (2003), Theodore (2004), Sanusi (2010a, 2010b) have argue on the contrary that access to banks financial services for non-oil exporters is one of the major problems stifling the growth of the sector in Nigeria, because of high interest rates and little disbursement in terms of the volume of credit. Even  the study of Odularu (2008), Ningi, Kurfi and Dutse (2007) submitted along this line that high cost of finance does not allow non-oil exporting industries to modernize outdated plants and machineries in Nigeria, which results in poor quality goods for exports  (Ningi, 2013).
    In view of the foregoing therefore, we deemed it necessary to empirically investigate the relationship between deposit money banks and export trade financing in Nigeria. Thus, the study seeks to provide answers to the following research questions:
1.3    RESEARCH QUESTIONS
(i)    What is the relationship between commercial bank deposit and export trade financing in Nigeria?
(ii)    Is there any significant relationship between commercial bank loans and export trade financing in Nigeria?
(iii)    What is the relationship between Foreign Exchange and export trade financing in Nigeria?
(iv)    Does exchange rate has any significant impact on export trade financing in Nigeria?
1.4        OBJECTIVES OF THE STUDY
The objectives of the study are to:
(i)    Examine the relationship between commercial bank deposit and export trade financing in Nigeria.
(ii)    Evaluate the relationship between commercial bank loans and export trade financing in Nigeria.
(iii)    Determine the relationship between Foreign Exchange and export trade financing in Nigeria.
(iv)    Ascertain whether exchange rate has any significant impact on export trade financing in Nigeria.
1.5        HYPOTHESES OF THE STUDY
    The followings are the hypotheses to be tested in the study:
(i)    There is no significant relationship between commercial bank deposit and export trade financing in Nigeria.
(ii)    There is no significant relationship between commercial bank loans and export trade financing in Nigeria.
(iii)    Foreign exchange has no significant impact on export trade financing in Nigeria.
(iv)    Exchange rate has no significant impact on export trade financing in Nigeria.
1.6    SIGNIFICANCE OF THE STUDY
    The study is significant in a number of ways as follows:
First, the outcome of study will assists the policy makers and regulators of export financing to evolve appropriate policies and reforms that will positively impact on the performance of deposit money banks in the light of globalization in Nigeria.
    Secondly, macroeconomic watchers and the interested members of public will some insight into the performance of export trade business financing in the country.
    Thirdly, investors and prospective investors will be expose to the relationship existing relationship between relevant variable used in the study with respect to exports trade financing.
    Finally, the outcome of the study will be very relevant to the researchers, academia and students of management sciences, particularly  those of banking and finance, as it will provide them relevant data and information to carry out further studies in the same area or similar areas if they so wish.
1.6        SCOPE OF THE STUDY
    The study is a Nigeria specific study, covering a period of twenty eight (28) years (1985 to 2012).It covers the aggregate banking financing activities towards exports trade in the country. Relevant data will be sourced from the Central Bank of Nigeria Statistical Bulletin.
1.8    LIMITATIONS OF THE STUDY
    The study relies heavily on secondary data. However, there are often conflicting values, for some of the variables under investigation, from different sources. Any such shortcomings in the values of the variables occasioned by the source of data used may constitute a constraint to the results of the study. Nevertheless, this constraint will be minimized by trying as much as possible to stick to data from the Central Bank of Nigeria Statistical Bulletin which is one of the most reliable sources of data in the country.
    Secondly, the measurement of variables as well as the method of data analysis might not be adequate enough or free from errors. However, efforts will be made to ensure that errors are minimized so that the results so obtained are reliable and acceptable for appropriate policy decisions.