A CRITICAL ANALYSIS OF THE CONTRIBUTIONS OF COMMERCIAL BANKS TO THE ECONOMIC GROWTH OF NIGERIA

Nigeria as a nation is characterized by a developing economy due to the fact that the various sectors responsible for economic development are not optimally utilized as a result of which we have not being able to tap fully the natural resources that Nigeria is blessed with as it could increase our national earnings leading to an increase in per capita income instead. We have a reverse situation where there is low per capital income. Low standard of living increase in the level of insecurity etc.

The first task every government put in its table of priority is economic development. Nigeria among other nations of the world is not excluded. In order to keep the development of the country in progress Bank plays a pivotal role especially the commercial banks. It is of importance to not that of this point the bedrock of every economy is the banking sector, of which the commercial bank is a leading pace. As a matter of fact, no country in the world in this present dispensation can boast of having developed or tested development without the adequate and timely contribution of commercial banks.

However, one of the major setbacks to economic development in countries today is the inadequate supply of capital. It is in this regard, the commercial banks serve as ling between those who need capital and those willing to save and make the money available to investors. They are expected to provide to an extent large credit facilities and divert voluntary savings into productive channels. In addition, they are to offer technical advice to industrialist by way of feasibility studies which ensure that investment are made in the right direction.

Furthermore, there are numerous agencies/sectors involved in economic development, but of all the sector that stimulate growth and development into the economy of Nigeria is the commercial banks perhaps the commercial banks the most important role such as help to pool savings and excess liquidity from millionaires or rather millions of individuals and firms within the country making them available to those that require them for various purposes.

Economic development requires sustained improvement in social welfare that are pervasive through the society and modern economic growth that is confined to a small enclose within a developing society particularly if a non-indigenous people dominate that enclose, it is not economic development. Economic development requires that modern economic growth affect a broader segment of the total populace in a way that will enhance their welfare. It entails the provision of basic needs, acceleration of economic growth, reduction of inequality and unemployment, eradication of absolute poverty as well as changes in attitudes. Subsequent to the above provisions that stimulated the establishment of commercial banks in Nigeria is to meet the aspirations of the citizenry. This research work is aimed at identifying the contributions that commercial banks have made to the development of the Nigerian economy.

1.2        STATEMENT OF PROBLEM

The role of commercial banking system as it relates to economic growth of a nation has been empirically attested for positively in the literature (Yakubu and Affoi, 2014; Aurangzeb, 2012; Olokoyo, 2011; McKinnon, 1973; Shaw, 1973; Schumpeter, 1911). This it does from the enormous and impeccable growth-inducing functions this financial sub-sector plays in the development of an economy. Moreover, this ideal channel of growth has been accepted within the Nigerian context, which has motivated series of banking reforms and laws in the banking system in order to create a competitive, resilient, vibrant and healthy commercial banking system. For instance, the establishment of the Central Bank of Nigeria in 1959 to regulate the activities of commercial banks; the indigenization policy of 1977, which paved way for Nigerians to become active participants and to halt capital flight out of the sector needed for further expansion; the financial liberalization starting from the mid80’s (during the SAP period) that brought in an explicit partial deregulation of the sector to encourage healthy competition and marketbased/oriented financial sector as well as series of other reforms like the recapitalization and consolidation strategy by the Soludo-led administration. However, in spite of these structural changes and remarkable growth observed in the commercial banking sector in terms of the number of banks in operation, bank density and their assets portfolio relative to other non-bank institutions in the financial sector in Nigeria, its performance has remained relatively unsatisfactory with respect to the growth process.

 In line with this assertion, Maduka and Onwuka (2013) wrote thus, despite the growth record of banks and non-bank financial institutions in Nigeria, and financial liberalization policy, the Nigeria economic growth is sluggish. The per capita income is less than $4,000. Most of the industries are winding up and thus giving rise to unemployment. At this juncture, it might be necessary for one to ask if the financial market in Nigeria is underdeveloped to support the investment needed to boost economic growth. This may be partly due to dearth of empirical studies which will shed light on how commercial banks can contribute meaningfully to economic growth in Nigeria. In particular, to contribute to economic growth the nexus between growth and investment, quality of service, savings mobilization must be clearly understood through an empirical investigation. This is so far lacking or insufficiently explored.