This study centered on improving the management of loanable funds in commercial banks. The study was comparative in nature, using Trade Bank of Nigeria (TBN) and Inland Bank of Nigeria (IBN).

These two banks were chosen because of their accessibility, high rate of mobilization of deposits and loan defaulting.

The major instrument used for data collection included oral interviews, bank records of daily operations, annual report and statement of accounts. Four hypothesis were formulated in line with the statement of the problems. The data obtained was organized and analyzed with the use of chi square test for goodness of fit, coefficient of correlation, percentage of loan chart and component bar chart were also used respectively where necessary.

The study finally revealed if the incidence of loan default was continuously on the increase/decrease and if such increase/decrease was more in government owned banks or in privately owned banks. It also saw if such increase/decrease was higher/lower in relation to deposit mobilization.

In order to find solution to the problem, it was suggested that banks should adhere strictly to the principles of good lending, improve on security valuation, ensure that men of high integrity are employed at the credit department and emphasize on prudent supervision and control of loan accounts. Other suggestions were purely focused on advisory and credit worthiness for effectiveness and proper management.

ACKNOWLEDGEMENT

My greatest appreciation goes first to GOD ALMIGHTY for seeing me through and giving my family and I good health.

My appreciation also goes to my project supervisor, Mr. F.C. Okechukwu and my Head of Department (HOD), Mr. Wilson U. Ani for all their encouragement during this strenuous moment of my life. I will not fail to thank the other lecturers in the department especially Sir Dave Osuagwu, my academic adviser and indeed the polytechnics who have collectively made me what I am today.

I am also grateful to the authorities of Trade Bank of Nigeria limited especially Mr. Frank Edet (The Branch Manager) and his wonderful secretary. Mr. Steve Okonkwo, Alhaji Mageri Misan and Alhaji Ibrahim Garba of the IBN, Head office Bauchi, who did not hesistate to give me all the material and information used in this work and as well, all the necessary assistance I needed.

My heartful appreciation also goes to Mr. Musa Shaibu of Universal Trust bank PLC (UTB), whom at different intervals contributed immensely to this work both morally and otherwise and my dearest uncle Akunne Anionwu of Central Bank of Nigeria Ibadan who linked me up with the CBN at Enugu.

My special thanks also goes to my pastors, Tom Obiazi and his darling wife Sarah Obiazi and the entire members of Christ Embassy (BLW) Onitsha especially Sis. Peace, Bro. Onyeisi, Bro. Evarist Ikeomy every member of Excel and Diplomatic PCF and others, keep up the good fight.

My wonderful friends are not left out especially Ikechukwu Emodi who has been there to inspire and encourage me throughout this research work, Chinwe Okeke, Ifeoma Ogegbu and numerous others that both time and space cannot permit their individual mention here, but will receive God’s grace, which is ever present and sufficient for us according to their contributions in Jesus Name, Amen.

OFOKANSI STELLA, NKEMDILIM

TABLE OF CONTENTS

PAGE

TITLE PAGE

CERTIFICATION

DEDICATION

PREFACE

ACKNOWLEDGEMENT

ABSTRACT

TABLE OF CONTENT

CHAPTER ONE: INTRODUCTION

1.1 Background of the study

1.2 Statement of the problem

1.3 Objective of the study

1.4 Significance of the study

1.5 Research question

1.6 Hypothesis

1.7 Scope and limitations

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1 Commercial Banking in Nigeria: Origin and development

2.1.1 History of Trade Bank Plc

2.1.2 History of Inland Bank

2.2 Commercial banks and economic development

2.3 Banking credit facilities and the Nigerian Economy

2.3.1 The bank loans and advances

- Overdrafts

- Short term loans

- Medium term loans

2.4 Commercial Bank lending criteria

2.4.1 Basic Principles of lending

2.4.1.1 Safety of advance

2.4.1.2 Suitability of advances

2.4.1.3 Profitability of advances

2.4.2 Factor that influence commercial bank lending policies

2.4.2.1 Capital position of banks

2.4.2.2 The risk and profitability of various types of loan and advances

2.4.2.3 Suitability of deposits

2.4.2.4 The position of the Economy

2.4.2.5 Monetary and Fiscal policies

2.4.3 The commercial bank lending policies

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Source of data

3.2 Study area

3.3 Sample (Specimen Banks)

3.4 Analytical techniques.

CHAPTER FOUR: PRESENTATION AND ANALYSIS

4.1 Test of Hypotheis one

4.2 Test of hypothesis one

4.3 Test of hypothesis one

4.4 Test of hypothesis one

CHAPTER FIVE: SUMMARY OF FINDING, RECOMMENDATION AND CONCLUSION

5.1 Causes of loan default in Commercial bank lending

5.1.1 Bank customers.

- Lack of strict adherence to the principles of good lending

- Poor credit analysis

- Lack of supervision and control of loan account

- Dishonest Bank officials

- Unqualified and conservative managers and lending officers.

- Lending on political grounds.

5.2 Government policies

5.2.1 The Banks

5.2.2 The customers

5.2.3 The economy

5.3 Benefit of impending the management up loanable funds in commercial bank lending.

5.4 Recommendations.

5.4.1 Adhere strictly to the principles of good lending

5.4.2 Valuation of security, the bank staff

5.4.3 Business advisory unit (credit agency)

5.4.4 Supervision and control of loan account

5.4.5 Training of the managing and lending officers.

5.4.6 Loan syndication

5.4.7 Ensure realistic integrity of the credit departments.

5.4.8 Rescheduling of loan

5.4.9 Privatize commercial banks with substantial government interest.

5.5 Conclusion

Bibliography

Questionnaire

Tables

4.1.1 Relative percentage of loan defaults to total loans and advances for Trade Bank of Nigeria for the period of 1996 – 2000.

4.1.2 Relative percentage of loan defaults to total loans and advances for Inland Bank of Nigeria for the period of 1996 – 2000

4.2 Relative percentage of loan defaults for the specimen banks.

4.3.1 Coefficient determination for loan defaults for the specimen bank.

4.3.2 Coefficient determination for loan default for IBN

4.4.1 Coefficient determination for profits for IBN

4.4.2 Coefficient determination for profits for IBN

CHARTS

4.1.1 Bar Chart of rate of loan default between 1996 – 2000

4.1.2 Bar Chart of Rate of loan default between 1996 – 2000

4.2.1 A compound bar chart of percentage of loan default in the specimen bank.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

banking institutions perform an enviable role of being an important source of capital for development. This emanates mainly from the role, which banking institutions play in mobilizing various deposits and deploying same towards feasible and viable money yielding ventures.

Banks through the provision of loans and advances, which are the lifeblood of the business community, occupy a very important position in the structure of the nations economy. The size, type and level of such profitable outlets, along with other complimentary factors contribute to the improvement of the economic well being of the country in which these banks are located. As a result of this, banking institutions have been seen as agents of economic growth and perhaps economic development. These deposits which are loanable funds can only be made available to banks, if customers make substantial deposits, which may accrue from loans and advances. This enables the banks to run its day to day administration cost remain in business and pay satisfactory dividend to its shareholders. Thus banks have a lending policy to establish the director and use of funds from shareholders deposits, to control the composition and size of loans portfolio and determine the general circumstances under which it is appropriate to make advances.

Such loans and advances, are put into productive use by borrower, which leads to increased productivity and profits. These borrowers as a result of the increased profits are able to pay back the principal as well as the interest on such loans and advances, while the bank in turn will extend such repayment as loan and advances to other potential borrowers.