CONSTRAINTS AND PROSPECTS OF LOAN RECOVERY IN NIGERIA COMMERCIAL BANKS
1.1 BACKGROUND OF THE STUDY
Commercial banking in Nigeria began in 1894 with the founding of the bank of British West Africa (BBWA). Since that time, the general principles of Nigerian commercial banking have undergone various degrees and dimensions of change, but the growth in terms of number has been particularly remarkable.
For instance, this trend has seen the number of commercial banks in the nation rise to sixty-six (66) as of December 31, 1990. This came as a surprise because several policies implemented to produce a reasonable and trustworthy exchange rate for the Naira disrupted price levels.
A multiplier and downstream impact resulted, which exploded the amount of funding needed for all economic endeavours. Without a doubt, the structural adjustment programme (S.A.P.) under the leadership of the former head of state of Nigeria,
General Ibrahim Badamosi Babangida, in the year 1986 also liberalised banking in Nigeria required the injection of new credit and increased key financial subsector to fuel the realisation of the economic reforms being pursued.
The expansion of the realm in which banks might operate is another factor in the rise in bank numbers.
The overall deregulation provided banks the freedom to conduct additional business, and in particular, it allowed for the emergence of a distinction between commercial banking and merchant banking. So, among the services offered by the Nigerian commercial bank are:
Collecting deposits of any type from clients and making them available to them upon request. Safekeeping of valuables for people, such as wills, share and bond certificates, and other articles in sealed boxes and envelopes.
Therefore, using the Ughelli branch of the First Bank of Nigeria plc as a case study, the researcher wished to determine and evaluate the challenges and prospects of debt recovery in Nigerian commercial banks. Both main and secondary dates were heavily utilised in the structuring of this empirical study.
Primary data were gathered using the telephone, interviews, questionnaires, and observations; secondary data were gathered using the telephone, interviews, questionnaires, and observations; and third-party sources included textbooks, magazines, the internet, and annual reports.
1.2 STATEMENT OF THE PROBLEM
Commercial banks in Nigeria are the backbone of the country's financial system. They have the capacity to use all of their available credit to support the expansion and growth of the nation. Credit is viewed as the lifeblood of a company.
The valuable resources are what grease the wheels of progress. In order to successfully accelerate the pace of expansion, the country's current predicament necessitates the injection of healthy bank credit.
According to Haggot Bank Hart (1984), the fundamental strength of a successful and efficient (well-functioning) financial system is its capacity to fund credit requirements that will support economic growth.
According to a 1973 publication by the Bank of Japan, commercial banks have made a considerable contribution to the growth of the Japanese economy, which is partly attributable to their ability to have sufficient capital accommodations.
Commercial banks in Japan provide the majority of the funding needed by businesses, and they do this via lending to consumers (borrowing from banks). As a result of the commercial banks' stockholders' lack of fear, this is not the case in Nigeria.
According to Ejiofor P.N. (1981), bank shareholders became significantly more concerned about the percentage of problematic and questionable debts in the bank's financial book (statements). This is due to the fact that rising bad and iffy loans have an impact on how quickly they are divided.
From the aforementioned, the challenges and potential for debt recovery The early liquidation of banks that were previously in good health due to this virus has made commercial banks a severe concern in Nigeria; for this reason, this study is being conducted.
1.3 OBJECTIVES OF THE STUDY
The following is a summary of the study's goals.
1 To determine the institutional setup that first bank of Nigeria plc Ughelli utilised (used) during the course of its recovery actions.
2 To determine the identify of the issues its clients are having.
To suggest a course of action for the bank to take in order to improve an effective and efficient loan recovery mechanism.
1.4 RESEARCH QUESTIONS
Does First Bank have any trouble recovering its loans?
Is the institutional setup utilised by First Bank of Nigeria Plc, Ughelli, suitable?
Is there a way for First Bank of Nigeria Plc to improve its debt recovery system?
1.5 significance OF THE STUDY
In summary, it is anticipated that the research findings
1 Act as a guide for current and potential investors in commercial banks, not just the Ughelli branch of the First Bank of Nigeria plc.
2 Gives bank management and policy makers a place to start when reevaluating some of their loan rules.
3 Bring regulation authorities' attention to the requirement for a consistent accounting policy with regard to the provision for loans and bad debts.
1.6 RESEARCH HYPOTHESES
H0: First Bank of Nigeria Plc has no issues trying to collect loans from customers.
H0: First Bank Plc's Ughelli branch's institutional setup for debt recovery is inappropriate.
H0: First Bank of Nigeria Plc has no choice but to improve its current efficient loan recovery mechanism.
1.7 SCOPE OF THE STUDY
Only First Bank and the Central Bank of Nigeria will be the institutions under consideration. Technically, we could extrapolate this institution's findings to arrive at our conclusion and recommend a course of action.
1.8 DEFINITION OF TERMS
LOANS: These are sums of money that businesses, like banks, lend and borrow from clients or consumers.
RECOVERY: This is the process of finding missing objects and returning them.
Commercial: This is the making or doing in order to make money.
Commercial banks, acceptance houses, financial companies that offer discounts, and merchant banks are all considered to be banks under the Nigeria Banking Act of 1969.
In other words, a bank is a financial establishment where cash, jewellery, and other items are stored for security.
A commercial bank is a financial institution that is set up to hold and lend money to individuals, businesses, or governments with the intention of creating and maximising profit.
BAD DEBTS: When there is no chance of retrieving a debt, it is deemed to be bad.
When there is a strong likelihood that the loan will be paid back, it is said to be a good debt.
LENDING: This is the act of disbursing cash to dependable clients.