CHAPTER ONE

INTRODUCTION                                                                                     

1.1 BACKGROUND OF THE STUDY.

        In Nigeria Commercial Banking date back to 1894 when the Bank of British West Africa (BBWA) was established – since then the general concept of  Nigeria commercial banking has  changed and transformed in various degrees and dimension particularly, the growth in terms of numbers has been quiet phenomena for example 31st Decembers 1990 the numbers of commercial banks in the country was sixty six (66) this was unexpected because various policies put in place so as to achieve a realistic and reliable exchange rate for naira disrupted price levels effect which crystallized  in an explosion of finding requirement in all economic endeavors. It was without doubt (clearly) that the injection of fresh credit and increased efficiency in the service delivery from the key financial sub-sector are imperative for full realization of economic reforms being pursued under the structural adjustment programme (SAP) during the administration of the former Head of state of Nigeria, General Ibrahim Babangida in the year 1986 also liberalized banking business in Nigeria.

                Some of the functions and services rendered by Nigeria commercial banks include the following.

a.           Mobilization of saving and Other Deposit: In it drive to mobilize funds, commercial banks open two major types of accounts namely: current account and deposit account for its customers.

b.          Granting of credit to customers: The common credit facilities available to bank customers are loans and overdrafts which are usually short – term or medium term.

c.           Transfer of funds: Banks perform this function through collection of cheque, standing order, direct debit, money transfer, telegraphic transfer and open credit or casting credit.

d.          Creating money of all deposits kept by the commercial bank of current deposits form kept by commercial bank the current deposit form the basis of the credit creation.

e.           Safe keeping of valuable considering the trust which the commercial banks have built up over the years in the eye of the commity compel with the safety of their strong room, customers usually keep their values with the bank.

1.2       STATEMENT OF THE PROBLEM

                At the core of the financial system of any country are the commercial banks. They have the potential to apply the full weight of their credit facilities for the development and growth of the country economy. Credit is seen as the blood stream of the banking business, it is the initial materials that oil the wheel of development. The situation of Nigeria today demands an injection of a healthy bank credit to effectively hasten the pace of growth. This study aims to find out the problems associated with banks loan recovery.

        The questions now are:

a.           Do most managers of commercial banks in Nigeria have the knowledge and application of loan recovery in overall bank management?

b.          How can commercial banks help to reduce bad debts as a means of increase in interest rate?

c.           Would you say that the problem encountered by your bank in its loan recovery activities are mainly caused by bank management and staff as well as loan beneficiaries?                                                                                                                                                                                                               

         1.3 OBJECTIVES / PURPOSE OF THE STUDY.

1. To ascertain the institutional arrangement (utilized) by first       bank of Nigeria Plc Asaba branch in the process of loan      recovery activities.

2. To discover or identify the problems encountered with its   customers.

3. To recommend some method that would be followed by the        bank so as to enhance an efficient and effective recovery system

       1.4 SIGNIFICANCE OF THE STUDY.

        This study draws from experiences of practicing bankers. It is helped that the research findings would be communicated in there fore. If the results do not explicitly solve the problems, it would have created a standing point for policy debate and future research in the field of loan recovery. However the research work would be of great importance to the researcher, since it is a partial fulfillment for the award of National Diploma, Delta State Polytechnic Ozoro.

  1.5 RESEARCH QUESTION.

1. Should First Bank of Nigeria plc Asaba branch continue to        utilize present loan recovery system?

2. Are the problems encountered by the bank in its loan        recovery system caused by the management staff?

3. could recovering of the condition of challenge and creating         new measures to ensure survival?

4. Is there a higher growth of risk in lending risk?

   1.6 DELIMITATION OF THE STUDY.

        This research work is concerned with the problems of loan recovery by Nigeria commercial Banks, A case study of first bank of Nigeria plc asaba branch. It includes the central bank of Nigeria, merchants and development banks as well as other financial institutions. This study however focused on the development of loan commercial banking in Nigeria form various scholars new point; bad debt in banks are also discussed in details the study goes further to high light the principles of good lending.

1.8   ASSUMPTION OF THE STUDY

1.     These had been problems of loan recovery in substantial        number of Nigeria banks, such as First bank of Nigeria    Plc, Limon Bank, UBA, New Nigeria Bank Plc etc.

2.     This problems of loan recovery have existed for quite      some time.

3.     The appropriate procedures or guidelines for loan   extension has been promulgated by the apex known as         Central Bank of Nigeria (CBN) loans are being extended   by Nigeria Commercial Banks both to the banks and non-        banking public.

1.9   DEFINITION OF TERMS

Bad debts:  A debt is said to be bad when there is no hope of         recovering it.

Bad debts recovered: It is a debt recovered which has been   declared bad already

LENDING: It means giving money to reliable customers.

LOAN BENEFICIARIES: It simply means those who borrow   money from banks.

CAPITALIZED EXPENDITURE: They are expenses which the        banks incurred during the construction of office and in    purchase of equipments.

GOOD DEBTS: A debts is said to b good when there is every hope of recovering it.

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