The study is designed to examine the impact of banking on the economic development of Nigeria. Concept of this project work will give an appraisal of the strategies that will serve as an improvement to the economic sector. The various chapter of this will pave way for the researcher to understand whether banking has a positive impact in Nigeria economic development. The complexity of the banking activities coupled with challenging nature of the program require for banking reforms in the area of capital investment evaluation of credit facilities and other industrials development. The efficiency and Effectiveness with present technological advancement will encourage positive output towards accomplishment buoyant economic. The study shall adopt the ex post facto research design. The study collates historical data for the period 1999 – 2012. By implication, the study is a time series analysis. Secondary data is used for the study. Data for real GDP per capita growth, Deposit and Lending Interest rate, liquid liabilities, banking industry credit to private sector and other relevant data will be obtained from the Central Bank of Nigeria Statistical Bulletin and NDIC Annual Reports and Account. Finally, This study made use of both independent and dependent variables in its analysis



The history of Banking in Nigeria started back in 1892 with Eider Dempster company which engage itself in the business of moving coins around the country, later that year African banking cooperation was found which provide services to elder Dempster company failure of the bank led to the formation of bank of British West African, but between 1929 – 1951 lead the establishment of indigenous bank and even more today where a lot of them have collapsed as result of mis-management, under capitalization among the factors.

Bank have crucial role to play in a nation’s quest economic development. They serve as major institutional mechanism for mobilizing resources from surplus unit of the economy and channeling these to deficit unit through credit expansion. According to Usman (1997) Bank occupy center stage in the effect of accelerating of both local and foreign resources for investment purpose”. In any economy, the financial system is the hub of productive activity, as it perform the vital of financial intermediation. It is the primary provider of payment services and fulcrum of monetary policy implementation.

As cited by Dicko (2005) the neo-classical production theory identified capital and labour among others as critical factor determining growth in output. But in developing countries with abundance of cheap labour, capital is very scare and expensive. The financial institution by providing the much need capital for output the growth fill an important gap in the development process”.

It could also be emphasized that there have been significant contribution by past economist such as Devidson (1994) and Mishy (1975), following the seminal work of Melemon (1973) and Shaw (1973). They emphasis that financial system does matter in facilitating economic development under a liberalized and reformed environment. Dikleo (2005) is of the opinion that the concept of development and growth has universally transformed to a wider phenomenon. Some 50 years ago it focused on economic variable only.

Today it encompasses indicator (HDI) have replaced the tradition per capital income’ as indicators of development”. The main thrust of his project is to identify whether the financial system and the banking system in particular has been able to social economic roles of equitable wealth creation.


This project centers on the role of Banking and Finance in the development of Nigeria economy with particular reference to united bank of African (UBA) Nasarawa Branch.

The project will give a highlight on the development of banking an Nigeria and laid down emphasis on the different kinds of Banking and their various function of the effect the economy.

Nigeria has a vital growing market in African and has a recent years acquire important role in the world economy with a population of 120 billion (appropriately) people which endorsed with the fast and largely untapped natural resource with petroleum being the major foreign exchange earner. Nigeria banking system evolved it increasing assisted in resources mobilization for economic development prior to the establishment of the central bank of Nigeria in march 1958 operate as rudimentary banking system tailored to need of British government, had been as existence in the Nigeria.

Banking has contributed immensely to the Nigeria economy, it has provided services of employment opportunities and services to the massesd on the businessman, client and the government from to time. There are various bank that can be classified or mention e.g. Central Bank, Universal Bank Merchant bank and Mortgage bank etc. the universal bank can be identified by the services they render such as saving bill of document and act as an agent to the customer, granting of loans, import and export financing. The universal bank institution in Nigeria can be classified into two major groups. These are purely indigenous bank owned 100% and minority foreign interest.

However, prospect is therefore aimed at high the impact of the universal bank in the economic development of our great nation (Nigeria) by appraising their performance.

The introduction will not be complete without recognizing the apex of the banking industry that is the central bank of Nigeria (CBN) which is charged the responsibility of maintaining the monetary standard and sound financial structure with objective of creating approximately environment for economic growth and development.


The impact of bank services especially universal bank cannot be over emphasize. The main reason for this research work is to discover the problem militating against their operation, these problem have to be consider with the aim of giving relevant suggestion for improvement, the problem there among other things included.

Bank include those of poor record keeping, poor account system, embezzlement, fraudulent practice, poor organization planning control and loan portfolio management, problem of competition, the market for banking service is not homogenous its differentiation by preferential to the characterized of client or customer and by the traditional to which banking houses are accustomed.


The overall objective of this study is to investigate the impact of banking to the economic development of Nigeria. The study strives to accomplish the following specific objectives:


  1. To evaluate the impact of bank credit on economic growth in Nigeria.


  1. To appraise the impact of growth in liquid liabilities (M2) of banks on economic growth in Nigeria.


  • To ascertain the impact of Net Interest Margin in banks on economic growth in Nigeria.



This is done to enable the researcher to gather information about his finding and to enable him solve the problems which his is faced with and this will be done through:

  1. How far does bank credit advancing have effect on economic growth in Nigeria?



  1. To what extent does growth in liquid liabilities of banks have effect on economic growth in Nigeria?


  • How does Net Interest Margin in banks affect economic growth in Nigeria?



The following hypothesis is becomes relevant in this study.

1.5         Research Hypotheses


Based on these objectives, the following hypotheses were formulated:



  1. Bank credit does not exert positive and significant impact on economic growth in Nigeria.


  1. Growth in liquid liabilities of banks does not exert positive and significant impact on economic growth in Nigeria.


Net Interest Margin of banks does not exert positive and significant impact on economic growth in Nigeria


The research is significant to business and to Universal bank, the government and any person intending to invest in Universal bank to also help investor both in public and private sector of the economy. To specific roles played by Universal bank in the development of economic which may include bank facilities and consultancy among others. It may enable the general public to realize the role and importance of universal bank toward economic development. The study will also enable utilize polytechnic who may want to know the role of banks.


The scope of the study is to look into impact of the universal bank in an economy as well as the way universal bank in Nigeria carry on their business in respect of development. It will however look at their agricultural financial scheme. This project goes further to look into problem facing universal bank and suggestion ways of improvement, the history of universal bank from 18-92-2000 will be looked into.


Bank: A bank is a financial institution owned by the shareholder, the public or the government. These money and other valuable thing are kept. They give loans and overdraft to their client and perform other related universal activities to them.

Banking Services: The banking act of 1969 define banking or banking business as “The business of receiving monies from outside source as deposit irrespective of the payment of interest and granting a money loan and acceptance of credit or the purchase or bill and cheque. The purchase and sale of securities for account or other measuring of the obligation to require claims in respect of loan prior to their maturity or the assumption of guaranties and other warrantee for others.

Ceiling of Credit: This is the limit beyond which bank are not allowed to exceed in their lending policy usually given by central bank of Nigeria.

Customer: Account to legal decision by Lord Daley on great western Railway versus London and countey Bank in (1901) defined a customer as any person who as some sort of any account either deposit or current account or some relation with a banker”. Some of the required to be customer must be a major (not an intact or minor) not an insane person and he or she must have been bared by any court of law.

Overdraft: These are usually terms facilities design to improve export working capital as well as reduced problem.

Capital: Refers to money raised to start business or money invested in business.Saving: Refers to money ledged or kept within a bank for safety purpose and interest is calculated and payable to the customers.Bank Note: Refers to a price of paper money with value printed on it.Negotiable of Bill: This is meant that bank purchase an outward bill for collection drawn by export or importer abroad such purchase would be made before the bill or remitted. Abroad for collection.Letter of Credit: A bank at the instance of foreign buyer can authorized a Nigeria bank through an oversea bank to the importer have complaint of inadequate fund to finance the export to the oversea budget.

Loan syndication: It is a system whereby some one or more banking (financial institution) jointly arranged a loan for a client for a specific project.

Bank Distress: This occurs when a bank is unable to meet up with or honour its current maturity financial obligation as they fall due for payment. This is also called technological insolvency and it donate only lack of liquidity.


Debt Factoring: This involves turning over the responsibilities for collecting a for debt to a specialized institution. It is an outright sole of debt to a financial company from cash to be realized for any immediate use if could be with or without resources.

Collateral Security: These are pledge or guarantee made or shown to the banks to secure a loan from the bank as supplement to some more marketable asset which include building, plant machinery, motor vehicle, when customer failed to redeem this pledge.

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