Full Project-THE IMPACT OF INTEREST RATE DEREGULATION ON COMMERCIAL BANKS’ LENDING OPERATIONS IN NIGERIA
1.1 BACKGROUND OF THE STUDY
There had been administrative control on the nation’s interest rates until July 31, 1987 when, in consonance with the spirit of the structural Adjustment programme (SAP) of the Federal Government the Central Bank of Nigeria issued a circular on interest rates bordering on the deregulation of this financial sector of the economy. As a signal to the direction, the Central Bank wanted the interest rate to go, the minimum Re-discount Rate (MRR) was raised from 11 to 15% which now peaks at 18.5%. The apex financial institution (CBN) declared that interest rates payable on deposits or chargeable on loans and advances were henceforth to be determined by the interplay of the market forces of demand and supply.
Nigerians being what they are agitative and speculative went to town some decrying the policy as the last straw that would break the back of our fragile economy, others extolled the policy as the best and boldest steps ever taken towards the revamping of the ailing economy. These divergent views of the financial experts both in the academic and in the Banking sector about the likely impact of the interest rate deregulation motivated me to appraise the impact of the deregulation on commercial banking operation. Notable among those who bemoaned the deregulation of interest rate was Abiodum (1987). According to him, Deregulation a fragile economy like ours will have the overall effect of dampening it since the high interest rate will cause slow down investment as borrowing will be curtailed. But this view was opposed by Iklude (1987) 2. he was of the view that “interest rate deregulation will not only bring relief to the financially repressed economy but will ensure a real return on deposit which has over the year been negative. What these argument boiled down to was that interest rate deregulation would lead to efficient allocation of financial market resources because interest rate will now reflect relative scarcity and relative efficiency in different uses.
According to Abraham Nwankwo (1987) 3 “Bigger banks will price small ones out at the market by lending cheep to customers and paying them interest rate on their deposits”. It is in the light of the controversies that accompanied the interest rate deregulation that prompted the deregulation on commercial Bank lending operation.
1.2 STATEMENT OF THE PROBLEM
Interest Rate deregulation, like other stringent economy measured by the present administration has far reaching consequences on the nation’s banking industry and on the borrowing public. Commercial banks that had lent huge sums of money before the deregulation of interest rate were in stormy water making their customers repay their loans at the new rate. The borrowing public complained that their banks had without prior notice unleashed high interest rate on them. They were at daggers drawn as the measure created had blood between the banks and their customers. The interest rate deregulation with its attendant high interest payable on loan and advances terribly limited the borrower’s quest for loan/advances since it was impossible for most of them to get inflationary adjusted rate of return on their borrowed fund-this has remained elusive for many borrowers. Inspite of the deregulation, customers complain that commercial Banks pay very little interest rate for example on savings and charge borrowers/customers more than twice what they pay them on their savings accounts. This they complained was unfair as the return became negative when adjusted with the rate of inflation.
The general public also complained that banks (especially commercial and merchant Banks) have been posting huge profit after tax inspite of the bitting effect of the economy. The bank’s credit ceiling was partly responsible for the state of the affairs, invoking economic Aloxim that the constant liquidity mop up on the banking sector by the apex financial institution was also responsible saying, the more illiquid a bank is, the more profitable it becomes”.
A performance appraisal of the impact of the deregulation is long over due at least to shade light on the above controversies surrounding the policy three years after its introduction, thereafter, the problems are hereunder stated in question as follows:
(i) Did commercial bank’s loans and advances deteriorate during the deregulation of interest rate?
(ii) Did depositors react favourably by increasing the volume of their deposit after the deregulation?
(iii) How have commercial banks been surviving the directives of deregulating the interest rate in this sector of the economy?
1.3 OBJECTIVES OF THE STUDY
The study aims to determine and analyze the impact of interest rate deregulation in Nigeria specifically, the study seeks to answer the following questions:-
1. Whether the interest rate deregulation has affected the volume of commercial bank’s lending over the years.
2. Are the effect statically different according to the size of the banks?
3. The study will also find whether the interest rate paid to deposits mobilized by the commercial banks.
4. The study will also find whether there were more loan losses (bad and doubtful debt) during the era of interest rate moderation than this period of deregulation .
5. The research is also aimed at finding whether commercial banks made more profit before or during the deregulation.
6. What else do commercial banks to attract more deposits to enhance commercial banks’ lending operation.
1.4 SIGNIFICANCE OF THE STUDY
A study of this nature which is more of a p0erformance appraised of the commercial banks’ lending operation during the deregulation is of great significance to group of persons, institutions and governments.
The study will be of great importance to the banking sector of our economy because from the empirical view of the impact of interest rate deregulation on commercial bank’s – CBN will also find the study valuable because it will enable it feel the purse of the commercial banks’ three years after the deregulation. Commercial banks’ customers will also find results of the research very useful since it will enable them have a generalized view of lending operation by commercial banks in a deregulation economy. commercial banks’ management will from the research evolve aggressive survival strategies.
1.5 SCOPE OF THE STUDY
This study was concerned with the impact of interest rate deregulation on commercial banks’ lending operation. For effective coverage the study focused on loan and advances, leaving operations like call. Money and inter-bank lending as well as other short term placements of funds. This research examined the volume of deposit liabilities, loans and Advances, Bad and doubtful debts and Net profit over the period of the Union Banks of Nigeria Plc Enugu.
For effective and valid investigation, the following hypotheses have been postulated which will be tested using appropriate statistical instruments.
Ho: These is one significant difference between the volume of leading (loans and advances) by commercial banks in interest rate regulated economy and one of interest rate deregulation.
HA: There is a significant difference between the volume of lending (loans and advances) by commercial banks in interest rate deregulation.
Ho: Commercial banks recorded more loan losses (bad and doubtful debt) in interest rate deregulated period than one of interest rate regulation
HA: Commercial banks did not record more loan losses (bad and doubtful debt) in interest rate deregulated period than one of interest rate regulation.
Ho: These is no significant difference between the volume of commercial banks’ total deposit liabilities in interest rate regulated period and one of interest rate deregulation.
HA: There is a significant difference between the volume of commercial banks’ total deposit liabilities in interest rate regulated period and one of interest rate deregulation.
1.8 RESEARCH QUESTIONS
In order to find out the impact of interest rate deregulation on commercial banks’ lending operations in Nigeria ,the following research questions should be considered.
1. What impact does the interest rate deregulation crear in commercial banks’ lending operation?
2. What problems does it create in commercial banks’ lending operation?
3. How can these problems be solved to enhances the performance of the commercial banks’ lending operations?
1.9 DEFINITION OF TERMS
The definition of term used will be made only on the conceptual frame work for general comprehension of each term rather than on the theoretically analysis.
Interest Rate: Is used broadly to express the relationship in percentage between the interest for a given period of time and the principal. Whereas interest when used in absolute term means a payment for the use of a borrowed fund for a period of time.
Deregulation: Disentangling of official or administrative control and allowing for the interplay of at market forces of demand and supply to determine the rate of exchange of values. Deregulation of interest rate in Nigeria called for the setting of a floor rate below which it is no longer economically viable for any bank to lend, hence the minimum Rediscount Rate of the central Bank of Nigeria.
Lending: This is letting of sum of money usually by a Bank or other financial institution to a borrower to be repaid with or without interest
Deposit: An account of funds consisting of cash and or cheques, drafts coupons and other cash items that may be converted into cash upon collection. The deposit is given to the commercial banks for the purpose of establishing credit balance.
Savings: The amount of existing income that is not spent on consumption. Savings as used in the research context is that part of income that is not consumed but are left in the commercial banks for some future use.
Bad debt: An amount due on an open account that has been proved to be uncollectible. Any uncollectible receivable is formed bad debts
Get the Complete Project
This is a premium project material and the complete research project plus questionnaires and references can be gotten at an affordable rate of N3,000 for Nigerian clients and $8 for International clients.
You can also check other Research Project here:
- Adult Education
- Agricultural Science
- Banking & Finance
- Biblical Theology & CRS
- Biblical Theology and CRS
- Biology Education
- Business Administration
- Computer Engineering Project
- Computer Science 2
- Criminology Research Project
- Early Childhood Education
- Economic Education
- Education Research Project
- Educational Administration and Planning Research Project
- English Education
- Environmental Sciences Research Project
- Guidance and Counselling Research Project
- History Education
- Human Kinetics and Health Education
- Maritime and Transportation
- Marketing Research Project 2
- Mass Communication
- Mathematics Education
- Medical Biochemistry Project
- Organizational Behaviour
- Other Projects
- Political Science
- Public Administration
- Public Health Research Project
- More Research Project
- Transportation Management
Need a Project Writer for a Different Topic
- MSC PROJECT WRITING SERVICES
- MBA RESEARCH PROJECT WRITING SERVICES
- Research Project Writing Services in Lagos Nigeria (Professional Writers) -Law, MSc, MBA,PhD, Dissertations, Thesis, Assignment, Speech
- Masters Research Project Writer in Lagos Nigeria
- MBA Research Project Writer in Lagos Nigeria
- LOOKING FOR A WRITING SERVICES FOR AN URGENT ASSIGNMENTS OR PROJECT WORK
- PROFESSIONAL WRITING SERVICES IN LAGOS NIGERIA (TERM PAPER, SPEECH WRITING, ASSIGNMENT, THESES, DISSERTATIONS, RESEARCH PROPOSAL, PROJECT WRITING SERVICES etc)
- BUSINESS ADMINISTRATION RESEARCH PROJECT WRITER IN LAGOS NIGERIA
- CONSULT A RESEARCH PROJECT WRITER IN LAGOS NIGERIA (PH.D, MBA, MSC, M.ED, BSC)
- MANAGEMENT RESEARCH PROJECT WRITER IN LAGOS NIGERIA
- Education Research Project Writer in Lagos Nigeria
- Environmental Sciences Research Project Writer in Lagos Nigeria
- Guidance and Counselling Research Project Writer in Lagos Nigeria
- Human Kinetics and Health Education Project Writer in Lagos Nigeria
- Early Childhood Education Research Project Writer in Lagos Nigeria
- Christian Religious Studies(CRS) Research Project Writer in Lagos Nigeria
- Educational Administration and Planning Research Project Writer in Lagos Nigeria
- Political Science Research Project Writer in Lagos Nigeria
- Accounting Research Project Writer in Lagos Nigeria
- Economics Research Project Writer in Lagos Nigeria
- Management Research Project Writer in Lagos Nigeria
- Marketing Research Project Writer in Lagos Nigeria
- Public Administration Research Project Writer in Lagos Nigeria
- MBA Research Project Analysts
- In Need of MBA Research Project Writer in Nigeria
- MBA Dissertation Research Project Writer
- MBA Project writer
- EDUCATION DEPARTMENT PROJECT WRITING SERVICES
- BACHELOR OF SCIENCE (BSC) DEGREE PROJECT WRITING SERVICES(B.ED,B.A,B.SC)
- MASTER OF BUSINESS ADMINISTRATION (MBA) RESEARCH PROJECT WRITING SERVICES
- MASTER OF SCIENCE (MSC) RESEARCH PROJECT WRITING SERVICES
- POST GRADUATE RESEARCH PROJECT WRITER
- POST GRADUATE DIPLOMA (PGD) RESEARCH PROJECT WRITER
- MASTER RESEARCH PROJECT WRITER
- MASTER DEGREE RESEARCH PROJECT WRITING SERVICES
- POSTGRADUATE RESEARCH PROJECT WRITING SERVICES
- MASTERS RESEARCH PROJECT WRITING SERVICES
- RESEARCH PROJECT WRITER
- EXPERT IN RESEARCH PROJECT/THESIS/DISSERTATION WRITING SERVICES IN LAGOS NIGERIA
- HIRE A PROFESSIONAL BSC/HND RESEARCH PROJECT WRITER
- HIRE A PROFESSIONAL MBA/MSC RESEARCH PROJECT WRITER
- HIRE A PROFESSIONAL THESIS WRITER IN LAGOS NIGERIA
- SC/M.SC/MBA/PGD RESEARCH PROJECT WRITER IN LAGOS NIGERIA
- Master Degree Research Project Specialist/Writer in Lagos, Nigeria
- Hire A Research Project Writer in Lagos Nigeria
- Research Project Specialist in Lagos, Nigeria