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THE ROLE OF COMMERCIAL BANKS IN THE DEVELOPMENT OF RURAL AREAS IN NIGERIA

1-5 Chapters
Simple Percentage
NGN 4000

BACKGROUND OF THE STUDY: The importance of the financial sector of an economy, which comprises banks and non­bank financial intermediaries, the regulatory framework and the ever increasing financial products, in stimulating economic growth is widely recognized in the literature on development economic. Schumpter (1934) in his seminal publication on the theory of economic development set the pace for the avalanche of other works on the interdependent relationship between banks and economic growth (Goldsmith, 1969; Fry, 1988; Patrick, 1966).

Through the process of financial intermediation, the financial sector act as the engine of growth and more so in emerging markets such as Nigeria where it is openly acknowledged that the provision of adequate financial resources is a sine qua non for the country’s industrial take­off, transformation and eventual economic prosperity. The literature is also rich on the significance of banks in the growth and development of any economy.

Banks and other financial institutions all over the world act only as intermediation agent by mobilizing financial resource form the surplus units in an economy and channeling the same to the deficit units. The banking institutions do not own these resources but rather in accordance with the agency hypothesis, these institutions act as the risk managers of the funds. In performing this financial intermediation, banks also function as unique agents that combine the traditional intermediation function with the payment services. Thus, the industry is the enabling hub of national and global payment system by facilitating trade transactions within and amongst numerous national, regional and international economic units and by so doing, it enhance commerce, industry and exchange. As a catalyst in the process of economic growth, the Nigeria banking institutions have progressively become deep, broad and sophisticated in structure and operations.

Over the last two decades the financial system, and the banking sector in particular, has undergone remarkable changes in terms of ownership and control of its operating institutions, the depth and breadth of its trading instruments, the number and distribution of established institutions, and the regulatory and statutory framework guiding the operations and transactionary relationships amongst the financial and other corporate economic entities within the system. As will be seen later in this project, the Nigerian financial system of which the banking industry constitutes the dominant sector, has been used for redirecting one or more of those vital variables for economic growth and prosperity of the country. In the light of this, the research work is focusing on the activities within the banking industry of the financial sector of the Nigeria economy and their influence on other sectors of the economy through which there can be economic growth. The study will examine the financial implication on Nigerian economy and extent to which the governments undertake economic development as deliberate policy scheme to reposition the banking industry.