ANALYSIS OF INCIDENCE OF LOAN DEFAULT IN MERCHANT BANK (A CASE OF IVORY MERCHANT BANK)

ABSTRACT

 

This research studied the nature, problem and prospect of the new product developed in the banking industry from 1990-2003.

In this research work, the researcher chose four of the products and measures the extent to which they have been able to satisfy the customers. The product selected are smart card, international money transfer, educational scheme and integrated banking network transaction.

Data for this research were collected through questionnaire and interviews by bank customers and the review of existing literature on the topic using simple random procedure and the descriptive method of research. The data so collected were analysed using the simple percentage and the formulated hypothesis were tested with chi-square (x²) method.

Some of the findings are the nature of the new product can measured in terms of accessibility, speed, timeliness, simplicity and reliability.

Customers who patronize the new product are majority those who want money transfer both locally and internationally customers derived high level of satisfaction from the new products.

Inadequate infrastructural level in our banking industry and high cost of installing them contributed to the problem of the new product.

Based on the findings, the following were recommended banks should come together and establish a common data communication satellite to minimize constant problems.

A parallel organization that was supplying electricity in competition with NEPA should be allowed to evolved so that an efficient supply of electricity can be ensured.

Finally, since this study alone cannot exhaustive of this vital subject, it is recommended for further studies.

CHAPTER ONE

Introduction                                                                                      1

• Background of the study 3
• Statement of Problem 4
• Objectives of the study 5
• Research Question 6
• Research hypothesis 6
• Significance of the study 7
• Scope and limitation 8
• Definition of terms 9

Reference                                                                       11

CHAPTER TWO                  

Review of Related Literature                                                   12

• Literature Review 12
• Historical Development of Bank lending 14
• Development of Merchant Bank in Nigeria 16
• Differentiating functions of Merchant Bank 18
• Cannons of Good lending 19
• Analysis of principles of good lending 25
• Why are Banks failing 29
• Exports view and comments 30

Reference                                                                       32

CHAPTER THREE

Research design and Methodology                                          34

• Research Design 34
• Area of Study 34
• Population of study 34
• Sample and Sampling techniques 35
• Instrument for Data Collection 37
• Method of Data Presentation 38
• Method of Data Analysis 38

Reference                                                                       40

CHAPTER FOUR

Data Presentation and Analysis                                                        41

4.1     Data Presentation                                                          41

4.2     Test of Hypothesis                                                                  49

Reference                                                                       55

CHAPTER FIVE

Findings / Recommendations and Conclusions.                      56

5.1     Findings                                                                         56

5.2     Recommendations                                                                   59

5.3     Conclusion                                                                     60

Bibliography                                                                  63

CHAPTER ONE

 

INTRODUCTION

According to Paget (1998), a renowned banker he defined banks as “a corporation or person (or persons) who accepts money on current account, pays cheques on such account in demand and collects cheques for customers.”

Banks are financial institutions that are charged with the responsibility of funds intimidation. They act as a go-between the simples funds sources and deficit fund services. They equally act as “a dealer in capital or more properly a dealer in money as we defined by Gulbert (1995) in performing this function, they engage themselves with deposit acceptance and granting of loans and advances to any needy sector of the economy or individual. Investors and industrialist. The banks are not charcterable organization, hence they render these services with the motive of profit making.

The banks in performing this very important duty they are faced with myriad of problems that grows in bounds everyday in consonance with the dynamic nature of Nigerian economy and growth. Their major problem emanated from the fact that those customers to whom the banks lend money on agreed terms and condition default to repay on maturity, thereby putting a wedge on the wheel of both profit making objectives of the banks, credit expansion within the system for economic activities and continual operations of the bank. This granted into bad debts.

In the pre-independence era when few banks dominated the industry, cases of loan default and bad debt were very minimal, of course, the banks management and loan grants were carefully studied before actual disbursement by the expatriates.

Today, management of many Merchant Banks are  worried by the trend of incidence of loan defaulters and bad debt been recorded. Still decisive and obvious action have not been taken by them to at least its impact on their operations and the effect on the economy at large which is the purpose of this study to proffer effective suggestions on how to bring under control rate of bad in merchant banks and particularly Ivory Merchant Bank.

Financial analysts all over the world agree that bad debt and loan default cannot be completely eliminated in banking industry but a constant check can be kept over every factor capable of generating this ugly experience to most financial and non-financial institutions that engaged in funds intermediation directly or indirectly.

It is note worthy to state here that some merchant banks in Nigeria apparently faced by an increasingly hostile business environment are applying to the Central Bank of Nigeria to convert to commercial banks had applied to C.B.N. as at end of October, 1993.

Incidence of loan default in merchant banking, a very important sub-sector leaves nobody any comfort, hence the researcher’s interest in searching the immediate and remote causes of bad debts and how to remedy the ugly experience so that the public confidence could be restored to the financial sector.

 

1.1     BACKGROUND OF THE STUDY

While reading through journals, weekly financial and business papers, on the rate of increase in number of distress and liquidating banks, the researcher was pulled into imaging that would become of the financial system in the future if dotting is deliberately done to rescue the situation. We are ignorant of the abysmal value of currency” Naria” in the past few years up to date, would you reason out that we cannot build the Nigeria of our dream if this is coupled with constant bank liquidation and failure.

Bank lending by way of loans, over draft, financing capital intensive projects by way of loan syndication, trade credit finance all over the world. The process of financial intermediation is assuming complex dimension. As they try the live up to expectation in this regard they (banks) are confronted with unacceptable pill of loan defaults. When granted loans are dues for payment and without it been actually paid, such loans are regarded as being defaulted, hence analysis of the incidence of loan default in Merchant banking.

 

1.2     STATEMENT OF THE PROBLEM

There is no doubt the difficulties confronting the banking industry today in Nigeria. Every bank is striking to at least keep pace with others. In their daily dealings as conduct pipe for money, whereby they aggregated funds and disaggregate them it the investing public, they are met with hitches of defaults on the part of loans and advances beneficiaries to meet their obligations have serious consequence on the lending banker.

Therefore the banks are expected to do something very urgently to address the problems so as to forestall it lending them to distress. The failure to refund money borrowed by customers have big adverse effect on banking operations. Such call for study and investigation, so that the solution could be proffered.

 

1.3     OBJECTIVE OF THE STUDY

• To identity the causes of loan default
• To identify the level of incidence of loan default and bad debt.
• To determine the extent of monitoring by merchant banks of projects for which they extended loans.
• To identify the effects of loan of default in merchant banks.
• To make recommendations can how loan default and bad debt will be minimized or eliminated.

 

1.4     RESEARCH QUESTIONS

• What are the measures adopted by the bank in preventing loan default occurrence?
• What is the level of incidence of loan default to your bank?
• How has your been able to monitor its advances granted to customers?
• What do think are the causes of loan default?

 

1.5     RESEARCH HYPOTHESIS

After thoroughly research, it lies on the research to make the following hypothesis.

Ho:    Incidence of loan default in merchant banks is not high.

Hi:     Incidence of loan default in merchant banks is high.

Ho:    Loan supervision and monitoring are not major solution to loan default in merchant bank.

Hi:     Loan supervision and monitoring are major solution to loan default in merchant bank.

Ho:    Loan default does not lead to bank failure in merchant bank.

Hi:     Loan default leads to bank failure in merchant bank.

 

1.6     SIGNIFICANCE OF THE STUDY

Based on guiding and recommendations that would be offered at the end of the study, Ivory merchant bank will use it to reassess their credit analysis, loan disbursement and recovery formular. It will also guide the treasury manager on liquidation management to eliminate the bank running into financial distress.

It is important to state here that the research findings will be immense help to other financial intermediaries in their daily dealings with both savings fund borrowing public.

Implementations of the researcher’s recommendation will restore also confidence of the public on the banking industry.

 

 

1.7     SCOPE/LIMITATION OF STUDY

The study is to be based on the contributory impact or incidence of loan default on both expansion and operation of Ivory merchant bank in Nigeria limited. The scope therefore precludes other innovations and products of the bank, such as corporate finance ceasing and investment advisory services, merchant bank loan syndication process. Investigation would be limited to the office of Ivory merchant bank alone.

It is important  therefore that further researches should be extended to merchant bankers corporate and investment advisory services to determine their (merchant bankers) role in accelerating industrialization and economic development growth of Nigerian economy.

 

LIMITATION OF STUDY

The research study is an academic exercise in which the researcher had to work within time frames limit. Financial handicap hindered the printing and distribution of enough questionnaire. Moreover, distributed questionnaires were not all returned, the researchers’ analysis is therefore based on returned questionnaires.

 

1.8     DEFINITION OF TERMS

1. Loan: A bank loan may be defined as financial faculty granted by a bank which is in tender to be applied for financing of a specific purpose an it usually has a defined duration and fixed repayment programme.
2. Loan Default: This could be seen as a situation whereby customers failed to repay the loans they borrowed from the bank.
3. Incidence of Loan Default: This is the rate at which borrowers could not pay back their money occurs in Ivory Merchant Bank.
4. Merchant Bank: A merchant bank is defined by the Banking Amendment all 1979 as “any person in Nigeria, who is engaged in wholesale banking, medium and long term financing, equipment leasing debt factoring, investment management, issue an acceptance of bills and the management of this trust.
5. Ivory merchant bank: This is a branch of merchant bank formed for the purpose of lending in banking industry.
6. Bank Lending: These are basic principle a banker should observed while granting loans and advances to customers.
7. Criterion for Bank Lending: These are basic factors, which a banker should put into consideration before granting loans.
8. Finance System: Nigeria finance system is made up of banking institution and non banking institutions.

 

REFERENCES

 

John Paget, (1998), Banking Practice Vol. III Enugu: Pan

African Publisher p. 30

 

1. W. Gilbert, (1995), Principles of Bank Lending: Bon

Publisher, p. 50

 

C.B.N. (1993), Monthly Business and Economic Report, p, 70

 

Banking Amendment Act, (1979), p. 8

 

Federal Government of Nigeria, (1998) Annual Budget

Business Times Vol. 23 p.10

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THE NATURE AND CONSEQUENCES OF JUVENILE DELINQUENCY IN NIGERIA: A STUDY OF ENUGU NORTH LGA, ENUGU STATE

Foreign Transaction For Dollars Payment :
Bank Name: GTBank
Branch Location: Enugu State,Nigeria.
Account Name: Chi E-Concept Int’l
 Account Number:  0117780667. 
Swift Code: GTBINGLA 
Dollar conversion rate for Naira is 175 per dollar. 

ATM CARD:  YOU CAN ALSO MAKE PAYMENT USING YOUR ATM CARD OR ONLINE TRANSFER. PLEASE CONTACT YOUR BANK SECURITY FOR GUIDE ON HOW TO TRANSFER MONEY TO OTHER BANKS USING YOUR ATM CARD. ATM CARD OR ONLINE BANK TRANSFER IS FASTER FOR QUICK DELIVERY TO YOUR EMAIL . OUR MARKETER WILL RESPOND TO YOU ANY TIME OF THE DAY. WE SUPPORT CBN CASHLESS SOCIETY. 

OR
PAY ONLINE USING YOUR ATM CARD. IT IS SECURED AND RELIABLE.

form>DELIVERY PERIOD FOR BANK PAYMENT IS  LESS THAN 24 HOURS

CALL OUR  CUSTOMERS CARE  OKEKE CHIDI C ON :  08074466939,08063386834.

AFTER PAYMENT SEND YOUR PAYMENT DETAILS TO

08074466939 or 08063386834, YOUR PROJECT TITLE  YOU WANT US TO SEND TO YOU, AMOUNT PAID, DEPOSITOR NAME, UR EMAIL ADDRESS,PAYMENT DATE. YOU WILL RECEIVE YOUR MATERIAL IN LESS THAN 2 HOURS ONCE WILL CONFIRM YOUR PAYMENT.

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PROBLEMS OF DEBT RECOVERY IN PUBLIC ENTERPRISES

(A CASE STUDY OF NATIONAL ELECTRICAL POWER AUTHORITY (NEPA)

ABSTRACT

Debt recovery is a major problem in our public Enterprises,  most especially the National Electric power Authority (NEPA). A lot of consumers ranging from the residential to the industrial/ maximum status, owed billions of Naria belonging to the authority through the consumption of electricity supply. The product ‘electricity’ is consumed before payment, so every electricity consumer is a debtor to the authority until her or she stop using the potential.

One may ask, can NEPA ever meet the demand of the present society? What about the increasing nature of the uncorrectable and bad debts?

We found that majority of the customers do not receive their bills timely and so could not settle them at the appropriate time. Due to late wills many resort to copy bills which does not represent the true position of bills consumers. We also discovered that majority of the consumers have problems of raise adjustments timely, there were also lack of cash offices, poor customers services and in-consistence power failure which does not encourage prompt payment of electricity bills consumed

CHAPTER ONE

INTRODUCTION

• : Problem identification
• : Rationale of study
• : Significance of the study
• : Background of the study
• : Definition of terms

 

 

 

CHAPTER TWO

LITERATURE REVIEW

2.1 : THEORETICAL REVIEW

2.2 : EMPIRICAL REVIEW

 

CHAPTER THREE

HYPOTHESIS, METHODOLOGY OF STUDY, SOURCES OF DATA AND LIMITATIONS OF STUDY

• Hypothesis
• Methodology
• Sources of study
• Limitations

 

CHAPTER FOUR

DATA PRESENTATION, ANALYSIS, DISCUSSION OF THE RESULT

4.1:    Data Presentation

4.2:    Analysis

4.3:    Discussion

 

CHAPTER FIVE

SUMMARY, CONCLUSION, RECOMMENDATION

5.1: Summary

5.2:    Conclusion

5.3:    Recommendation

BIBLIOGRAPHY:

APPENDIX                   A

APPENDIX                   B

 

CHAPTER ONE

 

INTRODUCTION

• PROBLEM IDENTIFICATION

Problems of Debt recovery occasioned partly by mismanagement, inefficient supervision, poor revenue amongst others cannot be minimized in our society today cannot especially as it affects the public enterprises.

According to Udeme (1996). NEPA has an outstanding debt of about N3. 5b  owed by its prospective consumers. Besides that, the Nigerian Telecommunication PLC to, has about N5billion yet to the recovered from subscribers nation wide. This is not too far from the

N 2.8b owed the Nigeria ports PLC and of course; the Nigeria National shipping line (NNSL)  which have already faced liquidation as a result of poor debt management. This, certainly have contributed to the non-performance of many public enterprises in Nigeria.

Factors are responsible for the poor debt recovery experienced in  NEPA are:

• The effect of untimely distribution of bills to customers.
• The influence of poor customer services on prompt of electricity bills.
• Effect of time rag on reconciliation of bills on customers.

 

• RATIONALE OF STUDY

The main reason of this research is to find out the problems of Debt recovery in public Enterprises in Nigeria with special reference to NEPA management that will help item overcome the problem.

• SIGNIFICANCE OF THE STUDY

A lot of money belonging to the Authority has been tied down by various consumers throughout the nation. In view of brokington (1994: 3),  we understood that the objective of sales is to make profit in return, but if the services rendered are not paid for, then the business cannot function in another circle.

Therefore, identifying the problem of debt recovery through a meaningful research will improve the revenue status and function of the industry and for the nation, a better standard of living.

• BACKGROUND OF THE STUDY

Electricity was said to have started in Lagos in 1886 when two 30-kilowatt generating units were installed to serve the city. As commercial activities increased there were several extension to almost 16 cities and communities

Oyeyele (1987.7( statis;

“Around 1944. Lagos city undertaking was operated by the public utility department. But between 1940and 1951 it then come under the Niger man government electrical undertaking.

Oyeyele further expressed that, there were other undertaking established and operated by locally constituted supply authority’s within this period.

On April Ist, 1951, an ordinance known as Electrical corporation of Niger is (E.C.N) was formed to assume control of the 16 local undertakings then in existence. In 1962, the corporation constructed a 132KVA interconnection from  I Jona to  Ibadan  power station and form Ibadan to Orile and Akure, Benin and Ughelli in the west, Afam and Oji in the East, Kaduna, Aaria and Kano in the North

According to Oyeyele the first Hydro- electrical power station was constructed by private Tin mining interest as (Kwali falls) Kaduna river with a capacity of two megawatts.

Another four megawatts was installed by the Nigeria Electricity supply corporation limited at (KURA FALLS) Benin River. A major Hydro-electric feature of about 320 megawatts at 33KV  operates from Kanji to Lagos in the West, Kaduna. In the North, Benin in the Midwest and Aba in the East

These facilities mentioned above provided a single supple network in Nigeria. But in 1970, the federal Government commissioned shawmout (Canada) under a financial by Canada international Development Agency (CIDA) to study the problems of the power supply Agency and make recommended a new Decree No 24, which created the National Electric Power Authority (NEPA).

But the study of Udom revealed that there was a serious manpower problem between NDA and power purchased in bulk and sold to the public.

Also Abidun (1984). In his opinion confirmed this:

“But with the amalgamation of the two bodies to form today’s NEPA    market the beginning of its crises”

• DEFINITION OF TERMS

Definition of terms is very useful in any research work because  it helps to explain the meanings of the various technical terms implied in the study. Itence the following terms are defined.

NEPA:

According to Oyeyele (1987:7) the National Electrical power with the responsibilities and sales of electricity Power Authority is the public Enterprises charged with the responsibilities and sales of electricity supply to consumers.

ELECTRICITY:

Electricity is said to the power that is produced by various means carried usually acres that provide heat, light and cold

 

KILOWATT HOUR:

This is defined in Abbot (1980:84) as the energy supplied by a rate of working of 100watts for an hour.

CABLE:

Cable is the length of insulated single or more conductor (s)

ENTERPRISES:

Massie (1992:239) narrowed it to a public or private organisation set up for charity or profit. Normally, public enterprises are capital intensive hence the need for the government to control them.

UTILITIES:

There are essential services like NEPA, WATERBOARD, NITEL, AIRWAYS etc. The words utilities and enterprises can be interchanged. In  macsran (1967:1969:351) it was learnt that in developed countries, most of the public utilities are controlled by private investors.

 

ACCOUNT NUMBER:

Account number is the specific number given to a particular consumer for the purpose of accounting.

 

BILL:

A bill is a conditional order written by one person to another, signed by the person concerned requesting the person to whom it is given to pay a certain amount of money at a particular date.

 

AUTHORITY:

The word Authority is used to identify the power centered to NEPA as specified in Decree NO 24 of 1972. The words authority, industry and NEPA will be interchanged in this work project.

 

 

 

MAXIMUM DEMAND CONSUMERS:

There are consumers who was the higher limit of electricity supply the industry consumers are also maximum demand consumers in NEPA

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COMPLETE MATERIAL  COST  N2,500 Or $10.  FRESH  PROJECT MATERIAL  COST 50,000 NAIRA FOR UNDERGRADUATE, OTHERS 100,000 -200,000 NAIRA.

THE NATURE AND CONSEQUENCES OF JUVENILE DELINQUENCY IN NIGERIA: A STUDY OF ENUGU NORTH LGA, ENUGU STATE

Foreign Transaction For Dollars Payment :
Bank Name: GTBank
Branch Location: Enugu State,Nigeria.
Account Name: Chi E-Concept Int’l
 Account Number:  0117780667. 
Swift Code: GTBINGLA 
Dollar conversion rate for Naira is 175 per dollar. 

ATM CARD:  YOU CAN ALSO MAKE PAYMENT USING YOUR ATM CARD OR ONLINE TRANSFER. PLEASE CONTACT YOUR BANK SECURITY FOR GUIDE ON HOW TO TRANSFER MONEY TO OTHER BANKS USING YOUR ATM CARD. ATM CARD OR ONLINE BANK TRANSFER IS FASTER FOR QUICK DELIVERY TO YOUR EMAIL . OUR MARKETER WILL RESPOND TO YOU ANY TIME OF THE DAY. WE SUPPORT CBN CASHLESS SOCIETY. 

OR
PAY ONLINE USING YOUR ATM CARD. IT IS SECURED AND RELIABLE.

form>DELIVERY PERIOD FOR BANK PAYMENT IS  LESS THAN 24 HOURS

CALL OUR  CUSTOMERS CARE  OKEKE CHIDI C ON :  08074466939,08063386834.

AFTER PAYMENT SEND YOUR PAYMENT DETAILS TO

08074466939 or 08063386834, YOUR PROJECT TITLE  YOU WANT US TO SEND TO YOU, AMOUNT PAID, DEPOSITOR NAME, UR EMAIL ADDRESS,PAYMENT DATE. YOU WILL RECEIVE YOUR MATERIAL IN LESS THAN 2 HOURS ONCE WILL CONFIRM YOUR PAYMENT.

WE HAVE SECURITY IN OUR BUSINESS.   

MONEY BACK GUARANTEE