THE ROLE OF FINANCIAL INSTITUTIONS IN THE MANAGEMENT OF LOAN SYNDICATION IN NIGERIA ECONOMIC.


ABSTRACT

In summary of this, the objective of this study therefore are to look at the operations of loan syndication in Nigeria.  The study will also give suggestions on how the problem of loan syndication can be solved to improve the practice of loan syndication in Nigeria.

TABLE OF CONTENT

CHAPTER ONE

INTRODUCTION

1.1         BACKGROUND OF THE STUDY

1.2         STATEMENT OF THE PROBLEM

1.3         OBJECTIVES OF THE STUDY

1.4         SIGNIFICANCE OF THE STUDY

1.5         LIMITATION OF THE STUDY

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1         FEATURES OF LOAN SYNDICATION

2.2         PARTIES OF LOAN SYNDICATION

2.3         THE BORROWER

2.4         THE LEAD BANK

2.5         THE PARTICIPATING BANKS

CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

3.1         SOURCES OF DATA

3.2         LOCATION OF DATA

3.3         METHOD OF DATA COLLECTION

CHAPTER FOUR

THE FINDINGS

CHAPTER FIVE

RECOMMENDATION AND CONCLUSION

PROPOSAL

Since money is the machine that carter ports the economic growth and development in its economy, then this study has to examine the role of financial institutions in the management of loan syndication.  The study delves into identifying the parties and procedure involved in a loan syndication business and its important to the economy.

Loan syndication as we will observe, helps in spreading risk of lending between different banks, it also helps in putting the management of lending on experts hands, this study was also carried out in other ascertain to what extent banks have contributed to the Nigeria economy through their provision of loan syndication to firms or contractors.

The objectives of this study therefore are to took at the operations of loan syndication in Nigeria.  The study will also give suggestions on how the problem of loan syndication can be solved to improve the practice of loan syndication in Nigeria.

For an economy to develop, there must be the existence of viable investment opportunities.  That is why the project also examined both development banks, agricultural banks commercial and merchant banking in the financing of large scale enterprises through loan syndication in Nigeria economy.  In this study, a total of 5 (five) banks made up of commercial banks development banks, agricultural banks and merchant banks, would be used as the sample of banks that carry out loan syndication business.  Also four companies that benefited from loan syndication business.

Some of the finding is that financial institutions do not give priorities to a particular sector of the company before giving syndication loans.  Also there is no effective government regulation that is governing loan syndication operation in Nigeria.  Customer’s view the terms of syndication loan agreement so favourable compare to the magnitude of the service rendered.

As a result of the above findings, the following recommendation is made.  The customers should negotiate carefully the terms and condition of syndication loan.  The financial institution should also try to improve on infrastructural facilities, improve on documentation and also reduce the consortium lending charges.

 

CHAPTER ONE

INTRODUCTION

1.1                               BACKGROUND OF THE STUDY

Financial institutions occupy a vital position and play a landable role in the economy of the nation.  Their major purposes are proper mobilization of find as well as provision of capital for industrial development, which is aimed at enhancing economic growth and development.

In the early year of banking operation in Nigeria, banks performed their intermediary function by giving loan mainly on individual basis (i.e separately) but as the country entered the threshold of development and more investment opportunities opened up, industrialist started demanding large sums of money which is provided by bank on medium or long term basis.

However, banking is a highly regulated industry the world over with restrictive monetary and credit guideline in loan growth and reserve requirement, sectoraol allocation to priority sector of the economy, and excess liquidity mop-up through the assurance of stabiclation securities to the bank to mention a few due to these restrictions, it is difficult for a bank to meet up with the huge loan demanded of their customers.  Also, it is well know that lending is not risk free, and that bank prefer to spreas their risk with others in the banking industry.

Against this background, banks come together forming what is know as “Consortium” to advance finds is called loan syndication and is sometimes called “Cosortun”.  Lending it can also be define as the agreement between two or more lending institution to provide a borrower with credit facility utilizing common loan documentation.

Loan syndication is now being practiced in Nigeria starting formteh 1960’s when a constrtuim of commercial banks and acceptance houses discounted trade bills for marketing boards under the produced bill finance scheme.  Formalized loan syndication came into being during the oil boom of the 70s when there was need for adequate capital of finance the industrialization programmes.  During this period, few merchant bank had been incorporated.

Loan syndication has assumed international dimension because of the need to provide adequate capital to finance the fast growing world economy.  An international syndicated credit is manage and under written by one or more finance.  Institution normally from a location other than the domicile of the borrower, lenders from different countries could provide the borrower with access from their countries or to move its own currency from other contracts of domicile.

1.2       STATEMENT OF THE PROBLEM

To investigate why Loan syndication is not properly managed given priority attention by monetary authorities.  Despite it’s strategic place in financing viable projects, capable of injecting foreign currency, creating employment, and facilitating grapid economic development.

To examine critically the place of financial institutions in the management of Loan syndication in the economy.

Loan syndication is a child of circumstances arising from legal lending restrictions, risk sharing and liquidity problems.  The researcher would like to know despite the constrains prevailing is it still a supplementary option for business financing.

1.3       OBJECTIVES OF THE STUDY

For an economy to develop, there must be a supplemtary source of financing viable investment projects beyond the limits of an individual financial institution, it is on this basis that we would like to define the objectives.

The research study is to include the followings:

i.              To identify those fundamental problems confronting Loan syndication and suggest how much problems can be solve.

ii.            To ascertain the effect of Loan syndication in the economic development.

iii.           To highlight the potential s of Loan syndication in the economy

iv.           To recommend that syndicated loan is not deferent from other loan.  Rather it is subject to conditionalities, attracts higher interest rate, subject to default, and time lapses in packaging as a result of bureaucracy involved by consortium banks.

1.4       SIGNIFICANCE OF THE STUDY:

This study is expected to provide useful information on Loan syndication to the following.  The students by the use of this project make researchers and source information on the rule of financial institution in the management of Loan syndication.

Financial institution via this project will learn how to keep to their Loan syndication agreements, it will also encourage the financial institutions to give financial accommodation through Loan syndication because it is more beneficial to them financial institution will also learn how to reduce the time frame in packaging a syndicated loan.

The borrower, with the aid of this projects will know the appropriate procedures involved in obtaining loan through syndication.  Since Loan syndication contributes immensely to the development of our economy both the government and the targeted audience will benefit from the project.  The government with the help of this project know more about the benefit of Loan syndications in our economy.