CHAPTER ONE

1.1  INTRODUCTION

The roles of commercial banks in our modern economy cannot be over emphasized, commercial banks in Nigeria as a financial institution helps in financing the exporting sector of the economy, by lending out short-term loans to those into manufacturing, exporting, trading and industries. Lack of bank credit (loan and advances) in our economy has brought about low rate of economic growth and diversification of most industries in Nigeria. The availability of bank credits to those in trade determines what is produced and how much of that product is produced. Therefore, commercial banks perform their important role of financial assistance by rendering important services by granting (loans and advances) to various sectors of the Nigerian economy. Commercial banks support the economy by serving the credit needs of their customary and providing a safe place for the cash balance. Of individual credit activities on the export sector of the Nigerian economy, there are general statements which guide or channel actions in decision making about the export sector advance and investment of commercial bank. Every year, the Central Bank as part of their duty in controlling monetary policy, publish credit policy guidelines for the fiscal year.

The aspect of the guidelines that the commercial bank covered are as follows:

i. Aggregate credit ceiling

ii. Sectoral allocation of commercial bank activities on the export sector (loan and advances) 

iii. Capital fund adequacy

iv. Reserve requirement

v. Interest rate on export sector

vi.Commercial bank equity holding in company

The importance of export trade to economic growth cannot be overemphasized, this trade goes beyond the national boundaries of moving goods from a country to another in order to earn foreign exchange. Export are the goods and services which a country sends to other countries abroad in return for some payment made in foreign exchange. Over the years, Nigeria has engaged herself in international trade (export trade), which is very important in earnings of foreign exchange, which helps to contribute to the growth and development of the economy. In some economy, export trade has been found to perform as the engine of growth especially through high productivity export, a nation can take advantage of international division of labour and procure desired goods and services from abroad at considerable savings in term of inputs of productivity resources, thereby helping to increase the efficiency of export industry.

A study in sub-Saharan shows that economic growth is stimulated by export trade, the federal government in 1979, created a package of incentive for the export sectors, these include directive to bank to streamline credit facilities to exporters, apart from the commercial banks granting credit to exporting sectors (oil and non-oil sector) in Nigeria, there are other institutional bodies put to engage in financing export trade in Nigeria such as Nigeria Export-Import Bank (NEXIM), Nigeria Export Promotion Council (NEPC), the Nigeria Export Processing Zone Authority (NEPZA) and others. Commercial bank has played a very crucial role in financing the exporting sector especially the preferred sector of the economy that is non-oil export (agricultural and manufacturing) sectors.

1.2  STATEMENT OF RESEARCH PROBLEM

Export trade makes significant contributions to most economies, since credit is vital be trade, this study is designed to analyze the impact of commercial banks credit in Nigeria. Export trade provides foreign exchange for the country. However in recent years the performance of non-oil export (agricultural and manufacturing) trade has decline. This was due to exploration of crude oil, which is now Nigeria’s main source of foreign exchange.

This research is faced with the following problems which include these questions:

1. What impact has the contribution of Commercial banks credit have on the growth and development of the Nigerian economy? 

2. How has bank credit aided trade in the exporting sector?

3.Has the performance accorded the non-oil export (agricultural and manufacturing) sector by way of directing the commercial bank to grant more loan to them, really boosted their output.

4. How can bank credit be utilized by the exporting sector (oil and non-oil export trade) so as to achieve or attain desired economic development?

5. What is the relationship between economy growth and total credits of the commercial bank on export in Nigeria between 1983 to 2009?

1.3  OBJECTIVES OF STUDY

The essence of commercial bank credit is to give loans and advances to help investors or customers finance their project. Commercial bank credit stands to bridge the gap created by low domestic savings and income. The main objective of the study is to examine or analyze the impact of which commercial bank credit has on the Nigerian export trade. Therefore this study is thus to achieve the following objective.

1. To examine and find out the impact of commercial bank credit on the Nigeria export trade.

2. To examine the structure and impact of the Nigeria export trade (oil and non-oil) export sector of the economy.

1.4  HYPOTHESIS OF THE STUDY

Null Hypothesis (Ho): The credit made by commercial banks has no significant impacts on export trade in Nigeria’ economy.

Alternative Hypothesis (H2): The credit made by commercial banks has a significant impacts on export trade in Nigeria’ economy.  

1.5  SIGNIFICANCE OF THE STUDY

This study is relevant to the government in the sense that, it enable the government to know the necessary policy that will enhance export.

This study is also beneficial to the exporter because it will help them know how to get the necessary credit to enhance their exporting activities.

Finally, it is also relevant to the banking industry because it will enable them to know the amount of credit to channel to the exporting sector.        

1.6  METHODOLOGY OF RESEARCH

This work will be carried out through theoretical analysis of statistical data, econometric model using the following

i. Single regression analysis form involving equation.

ii.The T-test which is used to test the level of significance of correlation coefficient.

The study is also carried out using secondary data. The major source of secondary data to be used are journal, financial newspaper, magazine, Federal Office of Statistics, various business and bank journals and also text books.

1.7  ORGANIZATION OF THE STUDY

This study consist of five chapters, chapter one focuses on the general introduction to the study, chapter two is basically on the literature review, chapter three focuses on the methodology, i.e. specification of model, chapter four deals with data presentation and interpretation of regression result, while chapter five focuses on the recommendation, summary and conclusion.