Loan management in Nigerian banks : a study of the efficiency of commercial banks' lending function in a developing economy
This study investigates the efficiency of commercial bank lending in Nigeria against the background of the generally held a priori assumption that there is an important role for these institutions in the process of economic development. As the primary aim of the study is to identify and define approaches for improving the lending function in Nigerian banks, it was first necessary to examine various facets of this activity. Thus an appraisal of the banks' lending record was undertaken. Through a series of surveys the lending attitudes and practices of the bankers were also investigated. To obtain an independent but complementary view on these issues, an empirical study of the perception of bankers and their lending services by their customers was conducted. Finally a comparative study of loan planning and control in U.K. and Nigerian banks was undertaken in order to draw out possible lessons for Nigerian banking practice. These enquiries revealed important weaknesses in the loan management of Nigerian banks. It appeared that their lending was neither adequate nor appropriate. Loan planning and control were also found to be either non-existent or deficient in the banks. Building on these findings the next stage of this research concentrates on measures that could be taken to improve bank lending efficiency. To test the feasibility of the hypothesis that Nigerian banks could be more efficient and yet remain safe and profitable, a hypothetical 'efficient' bank was created and simulated in both normal and crisis situations. The simulation results confirmed this hypothesis. It is concluded that there is a need for the government to provide essential infra-structural support to both lenders and borrowers. The research results also point to the view that the banks should improve their management practices particularly in the light of the practices in other developed and developing countries.