THE ROLE OF FINANCIAL INSTITUTION IN ENHANCING BUSINESS ACTIVITIES (A CASE STUDY OF FIRST BANK OF NIG PLC, ABUJA)

   

CHAPTER ONE

INTRODUCTION

1.2     BACKGROUND OF THE STUDY

The stand of economic development is a total sum of all the effective and efficient business activities of the country either home or abroad.

There are vital roles, which the financial institutions have to play in this development.  The survival and future of a given nation is hooked on the volume of business activities of that nation, also the availability of fund for financing the activities is necessary.

The main purpose of financial institution is to aid private individuals and government to finance their business projects.  Financial institution could be seen as the pillar that causes business activities to progress.

There are financial institutions that deal with physical cash transaction, these institutions are known as banking system - for example First Bank Nigeria Plc and there are non-banking financial institutions that complement the activities of the financial institution of business activities.  

Examples include National Providence Fund (NPF), financial companies, pension scheme, insurance companies, the corporative society, investment companies.

Furthermore, there are various markets that make up the financial institutions.

Foreign exchange Market:  This type of market creates opportunities for foreign exchange for the benefits of investors in carrying out international business.

Liquid capital and money market:  This is where long and short term lending and borrowing instruments are treated by the owners and users of funds.

Stock Exchange Market;  In this market the share of companies are declared for interested agents to buy.  For the main reason of this study, the researcher will be writing on the banking financial institution, but before limiting it to the case study, below is a short history of commercial banks in Nigeria.

COMMERCIAL BANKS IN NIGERIA (ORIGIN)

Banking business in Nigeria started in 1892 by African Banking Corporation, invited from South Africa.  The bank was taken by British Bank for West Africa in 1894 now known as First Bank of Nigeria Plc. Barelays Bank now known as Union Bank of Nigeria Plc was established in 1917.  The two expatriate banks dominated the banking industry or sector until 1933 when National Bank of Nigeria was established.

According to Nwankwo (1980), many indigenous banks were established between 1929 and 1952, but most of them failed due to poor management, mal-administration, lack of training and motivation apart from low capitalization and stiff competition from foreign owned banks.  Only three indigenous banks and two foreign owned banks survived that period.  By 1952, the First Bank ordinance was introduced.  It stipulated minimum capital base for banks.  Soyobo (1991) called the period that followed 1952 to 1959 the first banking boom era.

However, Nwankwo noted that no bank was established in Nigeria between 1962 and 1970, presumably because of the impact of regulations and the civil war (1967 – 1970).

The industry has twelve (12) Merchant Banks and 29 Commercial Banks in 1986, but by December 1990, there were 48 Merchant banks and 58 commercial banks apart from 5 development banks and the people’s bank established in 1989.

First Bank of Nigeria Plc was incorporated as a limited liability company on 31^st March 1894 with head office at lever pool.  It started business under the corporate name of the Bank of British West Africa (BBWA) with a predecessor, the African Banking Corporation that was established earlier in 1892.  This lead to the prominent position which the bank has to establish in the banking industry in West Africa.

For over a century, First Bank of Nigeria Plc has distinguished itself as a leader in the banking institution and a major contributor to the economic development of Nigeria.

In the early years of operations, the bank recorded an impressive growth and work closely with the colonial government in performing the traditional function of a central bank such as; issue of space in the West Africa sub-region.  It was a progressive system that a branch was opened in Accra Ghana in 1896 so as to justify its West African coverage.  Also in 1898, another branch was open in Freetown Sierra Leone.  This operational system marks the beginning of the banks International banking operation.

And in 1900, the bank established second branch in Nigeria and was located in Calabar.  Two years later the operation was extended to the Northern part of the Nigeria.

The bank has network coverage of 315 branches throughout the federation including a branch in the city of London and it maintains the largest branch network in the banking industry.

1.2     STATEMENT OF THE PROBLEMS

Banking is a long-term system of which expected funds are committed to enterprises to pay back within a period of time for about twenty years depending on the type of loan. 

But in the recent times, banks have failed to function effectively in this area and there have been several complaints such as frequent appointment of directors, high staff turnover etc., this has also led many banks into distress.  The researcher wants to find out the causes of the problems and proffer a suggestion.

1.3     PURPOSE OF THE STUDY

The sole aim of this research study is to identify the role of financial institution in enhancing business activities in the Nigerian economy, with reference to First Bank Nig. Plc, Kumasi House Branch, Abuja.

This research will draw down to the topic of the research work and the problems encountered in the nation’s economic development and as well recommend some possible solution to the problems such as;

Ø  To identify reasons for low lending habits

Ø  To ascertain their lending regulations and rates

Ø  To find out whether they have qualified staff as top management

1.4     SIGNIFICANCE OF THE STUDY

This research work will help the entire economy-especially business organizations, the government and other banks in their decision making as well as help to improve their performance of business activities.

It will also go to a very great extent in helping those that have no knowledge of what banking is all about and all the students in higher institution who are inspiring to know about the subject matter.

1.5     RESEARCH QUESTION

The questions to be carried out on the role of financial institution in enhancing business activities have brought about the following research questions.

Ø  To what extent has First Bank Plc gone to satisfy the needs of their customers in creation of bank deposits?

Ø  To what extent do banks give loans to their customers?

Ø  Do customers pay back the loan as and when due?

Ø  What machinery are used in recovering the loans if not paid back?

Ø  What are the qualifications of managers handling the credit unit?

1.6     RESEARCH HYPOTHESIS

H_o1:      Financial institution does not satisfy the needs of their customers in creation of bank deposits

H₁:       Financial institution does satisfy the needs of their customers in   creation of bank deposits

H_o2       Customers do not pay back loan as at when due

H_i        Customers do pay back loan as at when due

H_o3:      The extent of bank loan to customers is not encouraging

H_i:       The extent of bank loan to customers is encouraging

1.7     SCOPE AND LIMITATION OF THE STUDY

This research work covers the specific roles financial institution plays in enhancing business activities in the country and its consequences on the economy of Nigeria using First Bank Nigeria Plc, Kumasi House Branch as a case study.

Limitation will be stated here when I have done more research work and findings on chapter 2, 3 and 4.

1.8     DEFINITION OF TERMS

ROLE:                              Duty in an undertaking

FINANCIAL:             Concerning money and finance

INSTITUTION:          An institution is an organization established for social, educational, religious etc purposes.

PILLAR:         Supporter of business activities or something

TRANSACTION:      The act of carrying out business activities with somebody or an organization.

ACTIVITIES: Programme going on in a particular business

FBN:             This refers to First Bank of Nigeria