IMPACT OF COMMERCIAL BANKS ON NIGERIAN EXPORT TRADE
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IMPACT OF COMMERCIAL BANKS ON NIGERIAN EXPORT TRADE
ABSTRACT
The impact of commercial bank credit (loans and advances) on Nigerian export commerce is investigated in this study, which spans the years 1983 to 2009.
Following a thorough examination, it was determined that export trade has generated a significant quantity of foreign cash for the country, particularly when it comes to oil export. As a result, the Nigerian balance of payment and economic level have improved.
However, non-oil exports have also contributed to their own quota as part of foreign exchange earnings, but the government should make more policies to promote the growth of non-oil exports in the country,
particularly the agricultural sector, and the banking sector should also encourage them by granting a higher percentage of credit (loans and advances) to the sector, in order for them to contribute more of foreign exchange resources and ensure a reduction in export earnings in the country.
1.1 INTRODUCTION TO CHAPTER ONE
Commercial banks’ responsibilities in our modern economy cannot be overstated; as a financial institution, commercial banks in Nigeria aid to finance the exporting sector of the economy by making short-term loans to people in manufacturing, exporting, trade, and industries.
Our economy’s lack of bank credit (loans and advances) has resulted in a poor pace of economic growth and diversification of most industries in Nigeria. What is produced and how much of that thing is produced is determined by the availability of bank credits to those in commerce.
As a result, commercial banks play an essential role in financial aid by providing important services (loans and advances) to many sectors of the Nigerian economy. Commercial banks help the economy by meeting their customers’ credit demands and offering a safe haven for their cash balances.
There are general statements that direct or channel actions in decision making on the export sector advance and investment of commercial banks on individual credit activities on the export sector of the Nigerian economy.
Every year, the Central Bank publishes credit policy guidelines for the fiscal year as part of their responsibility to oversee monetary policy.
The commercial bank addressed the following aspects of the guidelines:
i. Maximum aggregate credit limit
ii. Sectoral distribution of commercial bank activities (loans and advances) on the export sector
iv. Adequacy of capital funds
iv. The reserve requirement
v. Interest rates in the export sector
vi. Commercial bank ownership of the corporation
The significance of export commerce to economic growth cannot be overstated; this trade extends beyond the national limits of exporting commodities from one country to another to generate foreign cash.
Exports are commodities and services that a country delivers to other countries in exchange for payment in foreign currency.
Over the years, Nigeria has engaged in international trade (export trade), which is very essential in terms of earning foreign cash and contributing to the economy’s growth and development. Export trade has been found to perform as a growth engine in some economies, particularly through high productivity export.
Through high productivity export, a nation can take advantage of international division of labour and procure desired goods and services from abroad at significant savings in terms of inputs of productivity resources, thereby helping to increase the efficiency of the export industry.
According to a study in Sub-Saharan Africa, export trade stimulates economic growth. In 1979, the federal government created a package of incentives for the export sectors, including a directive to banks to streamline credit facilities to exporters.
Apart from commercial banks granting credit to exporting sectors (oil and non-oil sectors) in Nigeria, there are other institutional bodies put in place to finance export trade in Nigeria, such as the Nigeria Export-Import Bank.
Commercial banks have played an important role in funding the exporting sector, particularly the preferred sector of the economy, non-oil export (agriculture and manufacturing).
STATEMENT OF THE RESEARCH PROBLEM
Export trade contributes significantly to most economies, and because credit is essential for trade, this study is meant to examine the influence of commercial bank lending in Nigeria. Foreign exchange is obtained through export trade.
However, non-oil export performance (agriculture and manufacturing) has declined in recent years. This was owing to crude oil exploration, which is currently Nigeria’s primary source of foreign exchange.
This study is confronted with the following issues, which contain the following questions:
1. What effect has the credit provided by commercial banks had on the growth and development of the Nigerian economy?
2. How has bank credit facilitated trade in the exporting sector?
3. Has the performance assigned to the non-oil export (agricultural and manufacturing) sectors by directing commercial banks to provide them more loans actually increased their output?
4. How can the exporting sector (oil and non-oil export commerce) use bank credit to obtain or achieve targeted economic development?
5. What is the link between economic growth and total commercial bank export credits in Nigeria from 1983 to 2009?
1.3 OBJECTIVES OF THE STUDY
The purpose of commercial bank credit is to make loans and advances to investors or consumers in order to assist them finance their projects. Commercial bank credit has the potential to fill the void left by low domestic savings and income.
The study’s major goal is to investigate or analyse the influence of commercial bank loans on Nigerian export commerce. As a result, the goal of this study is to accomplish the following.
1. To investigate and determine the impact of commercial bank lending on Nigeria’s export commerce.
2. To investigate the structure and impact of Nigeria’s export trade (oil and non-oil) sector of the economy.
1.4 STUDY HYPOTHESIS
Null Hypothesis (Ho): Commercial bank lending has no major impact on Nigeria’s economy’s export commerce.
Alternative Hypothesis (H2): Commercial bank lending has a considerable impact on Nigeria’s economy’s export commerce.
1.5 SIGNIFICANCE OF THE STUDY
This study is important to the government since it informs the government on the policies that will boost exports.
This research is also valuable to exporters because it will teach them how to obtain the necessary credit to expand their exporting business.
Finally, it is important for the banking industry since it will help them choose how much credit to route to the exporting sector.
1.6 RESEARCH METHODOLOGY
This job will be completed by doing a theoretical study of statistical data and developing an econometric model utilising the following tools:
i. A single regression analysis form with an equation.
ii. The T-test, which is used to determine the level of significance of the correlation coefficient.
Secondary data is also used in the study. periodicals, financial newspapers, magazines, the Federal Office of Statistics, numerous business and bank periodicals, and text books are the primary sources of secondary data to be used.
1.7 ORGANISATION OF THE STUDY
This study is divided into five chapters: chapter one covers the general introduction to the study, chapter two covers the literature review, chapter three covers the methodology, i.e. model specification, chapter four covers data presentation and interpretation, and chapter five covers the recommendation, summary, and conclusion.
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