CHAPTER
ONE
1.0 INTRODUCTION
The banking system is an important sector of the
economy because it acts as an agent for mobilizing funds from those who wish to
deposit their money and allocating the same to those who want to borrow, thus
facilitating the efficient functioning of commercial and .manufacturing
activities.
The credit allocation and control policies are
required by the bank and other financial in particular development activity.
Control of advances are usually targeted at reducing unwise spending and
promoting industrialization with a view to reviewing the economy through
generation of employment to promote development.
Government gives a directive by constituting a
forum of control for bank to recover all loans advances disbursed on reduction
basis so that funds available would be channeled to more preferred sectors
specifically agro-based, agro-alhed, agro-chemicals industries and exports.
Most of the times, the control of credit at the head office and at the branch
levels are essentially. On the same basis. The only difference is that the head
office and regional administration are completely detached form the scene, and
this takes a more realistic approach in appraising proposals with limited and
defined power, whereas as a branch often makes a hurried assessment, which in
most cases is completely full of sentiment, pressure and influences. As stated
above, the banking and financial sector plays the role of intermediary. The
sector mobilizes funds from small and big savers who have no immediate need for
such funds and provided such funds for users who are basically business
entrepreneurs and investors who need such funds.
These surplus funds owners may deposit their funds
in the banking sector in the form of investment and they are generally referred
to ultimate savers of funds. On the other hand, the users are the business
entrepreneurs and individual who have brilliant ideas on how to create
additional wealth in the economy, but lack the necessary capital to execute
their plan and concretize their ideas from the above this group is referred to
as the ultimate users of funds. Ti must be noted that one of the basic
objectives of any bank is the generation of profit, which is realized through
the banks ability to attract new deposits while retaining the old ones and
putting them into profitable use. Such deposits funds in the opinion of the
management is not immediately required for everyday working needs of the
depositors and so it must be channeled appropriately to places
where they are needed for economic development.
However, for any bank to achieve its objectives it
must be able to manage or control its credit portfolio effectively. If the
spate of bad debt now engulfing the banking industry is to be abted, these
speculative tendencies on the part of the customers and passive approach by
lending officers towards credit control like administration process require a
process of action, analysis and follow up.
1.2
BRIEF HISTORICAL BACKGROUND OF FIRST BANK OF
NIGERIA PLC
First bank of Nigeria plc was founded by Alfred Jones,
a shipping magnate form live pool, who started the business of banking in Lagos
In 1979 and 1991, the bank of Nigeria changed to
first Bank of Nigeria Ltd, and first Bank of Nigeria Ltd, and first Bank of
Nigeria Plc” respectively. First Bank is having the largest network of branches
in Nigeria
1.3
STATEMENT OF THE PROBLEM
There are some problems faced by some banks today,
which a manager or credit officer must lay more emphasis on. The research will
take a look into the ways by which the problem of lending and credit control
can be eradicated in banking ( if this is a reality in the banking sector) what
are the problems of leaning in banks? What problems does the credit
control manager en manager encounter, in
problems in granting, monitoring,
supervising and recovering of loans? All of these
form a basis for this research work.
1.4 PURPOSE OR OBJECTIVES OF THE STUDY
The
objectives of the research work are as
follows
1. To examine the credit allocation and the credit
control policies which are required by the work.
2. To know the general performances of the bank on
credit control.
3. To examine the security pattern of the bank in
advances and loans and in what form?
4. To examine the basic principles employed by the
bank managers in granting, monitoring, supervising and recovering of loan.
5. To know the role of the central bank in the
management of credits by commercial and
merchant bank.
1.5 SCOPE
AND DELIMITATION
This research has a special emphasis on first Bank
of Nigeria plc, Yakubu Gowon way branch, Kaduna
1.6 RESEARCH
QUESTIONS
These research questions constitute the areas the
researcher intends to examine, which are as follows
1. Is an effective credit control system important to
the progress and development of a banking business?
2. Should collateral securities be presented for the
managers when making prepositions.
3. Does the procedure for monitoring, supervision and
repayment of loans vary from manager to manager?
4. Are there major procedures for following up of loan
repayment?
5. Is the procedure of credit central still in
existence
6. Is the credit control procedure effective?
7. What are the requirements for loans to customers?
1.7 DEFINITION
OF TERMS
LOAN: it simply means that the bank lends, usually with
interest and at a stipulated time and terms of payment.
ADVANCE;
it can be called overdraft, it is usually on a
continuous basis with fluctuation balances within a given limit.
COLLATERAL:
it is insurance evaluate: at the background to make
or substitute at the borrowing that the bank wants to make if the unexpected
happens there by jeopardizing the safety of the lending. It will therefore
minimize the risk of defaulting in the repayment of the credit on maturity.
CREDIT:
an avenue in
which loan able fund is made available to a prospective borrower, which is to
be repaid in a determinable future date. The bank control the loanble fund.
RISK: a measurable uncertainty involved in any decision
making, be it granting of loans or an advances
BANK: A bank is a financial institution which collects
and from dividends or organization, safeguard them and undertakes to surrender
them to their owners which required but also at a certain time, lends some of
these funds to those who needs to borrow it and pay back with interest.
CONTROL: Performance evaluation that provides feed back of
the result.
SECTOR; it is a
branch of the banking industry or area within the banking sector for the
purpose of controlling operation.
AGRO-ALLIED
INDUSTRIES: These are
industries that use agricultural procedures to produce with order identity
dependents on others
AGRO-BASED INDUSTRIES: They are the industries that have
their by – products used specifically in the agriculture sectors.
AGRO-CHEMICALS: These are industries that produce
chemicals e.g insecticides in the agriculture sector.
DIRECTIVES: These are instructions given by the governments so
as to control ministries in the affairs of different sector.
PREFERRED
SECTOR: this is sector to
which government allocates either finance as other resources more than the
remaining sectors. Hence, their sector that needs attention by government.
FINANCIAL
INSTITUTIONS: these are
institutions that deal with finance as the name implies. They are concerned
with receiving and disbursement of funds or money.
FINANCIAL
INTERMEDIARIES; These are
people that go in better the lenders and the borrowers or they act as people that go between the financial
institutions and those that want to transact business with the institutions.
EFFICIENCY: The degree to which inputs are used in relation to
a given level of output.
PROFIT: Revenue minus cost
ECONOMY: The management of an administration of the
material resources of a country.
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