APPRAISAL OF CREDIT POLICY AND ADMINISTRATION IN THE NIGERIAN BANKING SECTOR

APPRAISAL OF CREDIT POLICY AND ADMINISTRATION IN THE NIGERIAN BANKING SECTOR

(A CASE STUDY OF UBA PLC, NASARAWA BRANCH)

ABSTRACT

The study is the topic “Appraisal of Credit Policy and Administration in the Nigerian Banking Sector” (A Case Study of UBA Plc Nasarawa branch). The essence is to evaluate the effectiveness of the credit policy. This is to enable the researcher to come out with reasonable conclusion on how it strengthens the nation’s economy. The financial sector plays a pivotal role; hence the credit policy cannot in any way be over emphasized. Therefore in the daily business transaction, credit cannot be ruled out. This study enables us to know the frame work that induce banks to contract or expand lending in the economy.

CHAPTER ONE

1.0            INTRODUCTION

Nigerian banking sector had witnessed a dramatic change since 2005 till date. This has in no small way brought about reasonable change in the credit policy (lending framework) of the surviving banks. Though, there were in the past, loans given out to customers because of their relationship with the owners or management of such banks but recent  changes in the sector has checkmate such unwholesome practices. Giving out of credits is an integral part of the banking sector because customers are bound to request for loan(s) from their various banks as they engage in their business transaction so as to enable them meet up with their financial obligations in the bid to achieving the business objectives. Hence, the importance of credit policy is to ensure that the legal framework or structure is put in place to guide the borrower and borrowed, thus creating an atmosphere of mutual understanding between the parties to the credit agreement.

1.1            BACKGROUND OF THE STUDY

It is important to note that credit is old as business activities in the world. Once exchange is involve in any transaction, the likelihood of credit cannot be neglected or underestimated since credit is important in banking sector and Nigerian economy at large. The financial regulatory body (Centre Bank of Nigeria) and other convention banks come with policies to aid them in this area. These policies are guideline to be followed before any credit/loan is given out to a worthy customer. This is to put the bank, money borrowed in safety. If this is not put in place, customers could collect loan and vanish into the thin air or the staff of the bank could conspire with an outsider as a customer to defraud the bank through the loan collected.

1.2            STATEMENT OF THE PROBLEM

Many problems are always associated with granting of loans to customers. These problems are either from the bank and/or the customers. These should be conscious reflection on the following questions:

a.     What is the interest rate of the bank?

b.     What is the collateral required of the borrower?

c.      Are there unknown hidden charges?

d.     Time and ability of paying back?

Sequel to the above questions, it is obvious that the customers among other factors might not be able to get loan/credit as accessed easily by customers by coming up with policy(ies) that soften the process of granting loan

1.3            OBJECTIVES OF THE STUDY

a.     The main objective of this study is to vividly study and appraise the credit policy and its administration in the Nigerian banking sector with UBA Plc in perspective.

b.     To evaluate the importance of credit policy in assisting customers to access credit loan.

c.      To examine what is required in formulating a credit policy.

d.     To examine problems associated with giving credit customers in order to analyzing the effectiveness of the policy.

1.4            STATEMENT OF HYPOTHESIS

The basis for reasoning and explanation of the data collected are shown in the hypothesis below and their validity will be tested later with the information gathered. Thus, the following are the hypothesis being formulated in this study:

Hi: Credit policy is effective in Nigeria

Ho: Credit policy is not effective in Nigeria

1.5            SCOPE AND LIMITATION OF THE STUDY

Although, UBA Plc has branches all over the federation, but the purpose of this study, the research work will only cover UBA Plc Nasarawa branch and it was because the researcher felt that it is more convenient to her as a result of closeness. Therefore, the study is base in information gathered from UBA Plc Nasarawa in perspective and other related materials.

1.6            LIMITATION OF THE STUDY

The following are the limitations of the study:

1.     Time constraints: This has been always the problem to a researcher of this nature, yet it is an e3ssential gradient to research it is imperative to point out here the time allotted for the completion of this research work is short hence a limiting factor.

2.     Cost: Project of this nature requires huge sum of money which will be used to collect more important and up to date data. Sequel to this, it tends to very costly especially to study of our kind whose meagre resources may not be sufficient to undertake the project like this.

3.     Scanty data: Inadequacy of required statistical data for this project yet pose another limitation to the study for this reason or limiting factor, it is obvious that the research work will or may contain some errors but its recommendation can be acted upon where necessary.

1.7            SIGNIFICANCE OF THE STUDY

The research is of great importance to the management of UBA Plc as it analyzes the likely difficulties customers faced in accessing credit from the bank.

Also, it is important to the staff of UBA Plc as it will enhance better understanding of the customers and the need for the credit, hence fostering good relationship between the banks and its customers.

It is equally important to the government because it will ensure government to take sound decision regards determining and fixture of reasonable interest rate.

Lastly, it enables the policy makers to make law regards regulations of liquidity in the economy. To provide the rules and regulation about the credit framework of the Nigerian banking industry. Equally is of significance to the academia because it provides basis for anyone that find the topic interesting for further research.

1.8            OPERATIONAL DEFINITION OF TERMS

CREDIT: This is transfer of property on promise to pay in future time or determinant data

CREDIT PERIOD: This is the total length of time over which credit is extended to customers to pay.

CREDIT DECISION: It is the process of taking decision about the disposition of the account of a credit applicant.

LINE OF CREDIT: This is the maximum limit of the amount the organization will permit to be owed anyone at a time.

CREDIT INSTRUMENT: These are written evidence of nature and existence of the promise to pay in future time.

CREDIT STANDARD: These are required minimum quality of credit worthiness of a credit applicant acceptable to the organization (Banks).

CUSTOMERS: This is individual that collect credit facilities from banks.