ABSTRACT
The economic situation in Nigeria have lead
to shift in emphasis on non-oil export as a way of boosting foreign exchange
earnings as well as the diversification of the Nigeria economy. This have
become important because of the deficiency in foreign exchange caused by
fluctuations in oil prices and the Niger Delta issues which have led to drop in
government revenue. Unfortunately, Merchant banks whose primary role is the
provision of credit have been found wanting as regards granting of credit to
the non-oil export sector. This limited availability of fund by Merchant banks
to these non-oil export sectors have slowed down that sectors’ contribution to
Nigeria’s Gross National Product. Therefore, this research intends to examine
the contribution of Merchant Banks to financing the non-oil export sector; to
determine whether Merchants’ loans and advances to the non-oil exports sector
has positive impact on Nigeria’s Gross National Product as well as ascertaining
the proportion of Merchant Bank’ total deposit mobilized to loan and advances
to the non-oil sector. The research adopted the descriptive survey approach and
a sample of six Merchant Banks was randomly selected. Questionnaires were
distributed to targeted respondents and the data collated was analysed using
the Pearson Moment Correlations and the t-test was employed in testing the
significance that existed between the variable under study. The result as
revealed by the tested hypotheses shows that Merchant banks are not playing
encouraging role through the grant of loan and advances to the non-oil export
sector; there was a positive correlation between loan and advances and Nigeria’s Gross
National Product and the proportion of total deposit to non-oil export sector
loans and advance is poor. The impact of merchant bank contributions through
grant of loan and advances cannot be overemphasized as attested to by this
research granted to the non-oil export sector as that sector has the potential
to increase Nigeria’s foreign exchange as well as stimulating growth of the
economy.
CHAPTER
ONE
INTRODUCTION
1.1 BACKGROUND
A
buoyant economy is largely on its transaction.
This transaction is what most
undeveloped countries depend on for foreign exchange earnings.
Nigeria’s non-oil export in the
60s (sixties) constituted the major source of foreign exchange earnings the
‘oil boom’ of the 70s changed the major source of foreign exchange earnings to
crude oil. According to Oke, (1990:23) by 1980 the oil sector which accounted
for 22 percent of Government revenue and over 96 percent of export earning.
This crude oil become the
single dominating export product which resulted in the partial neglect of the
non-oil export. The economic downturn in the early 80’s resulted in a drastic
reduction in earnings from oil export and recent developments, especially the
dwindling revenue from this sector, there has been a rekindled interest in the
preferred sector agriculture and manufacturing are prominent.
In other words diversifying
into non-oil export will be a veritable approach. In line with this view,
Oshopitan, (1989:11) contents that “The vagaries of fortunes has resulted in a
very significant decline of external receipts from about U.S$26 billion in 1980
to about U.S12 billion in each of 1980 and 1985 and 1985 and further to only
about U.S$65 billion in each of 1987 and 1988. Indeed the emphasis now is on
value added non-oil export so as to maximize foreign exchange therefore”.
Owing to this fact, the need to
reduce the dependence of the economy on oil has become inevitable. To revive
the weak base, the government introduced and provided general incentives to
boost the non-oil sector of the economy which is the basis for growth and
development.
These measures were mainly
trade export stimulation, incentives e.g. the establishment of Nigeria Export
Promotion Council (1976) charged with the responsibility of identifying the
country’s export potentials and the collection and dissemination of information
on a continuous basis Gbosi, (1995:21).
Similarly, in a bid to effect
diversification the structural adjustment programme (SAP) was introduced in
1986. The primary objectives of SAP include the following: To reduce the
excessive dependence of the economy on crude petroleum as a major foreign
exchange earner. To enhance self reliance: to reduce the excessive dependence
of the economy on crude petroleum as a major foreign exchange earner. Okigbo
(1981:13).
Undoubtedly, one of the topical
issues of our economic management experience is the apparent failure of the
policy package to push the non-oil export sector in right direction.
To improve the situation,
various decrees were promulgated-export incentives a package in incentives
which may help the non-oil sector to earn reasonable foreign exchange for the
country.
These decrees were designed to
assist merchant banks and some other financial institution in providing finance
for the stimulation of domestic production for export. It also
gave legal backing for re-financing and rediscounting facilities crated by the
Central Bank of Nigeria to provide pre-shipment and post finance in respect of
non-oil export.
Furthermore, Nigeria Export
Import Bank (NEXIM 1991) was established to help exporter obtain reliable
information on the potentials of the market and assist in under-writing export
risk.
Nigeria Export Import Bank’s
role include bank activities like trade finance, project finance, treasury
operations, export advisory services, market information and market risk
guarantee Gbosi (1995:23).
However, research has it that irrespective
of all these effort, the growth in non-oil export earnings has not been very
significant, although there has been remarkable increase in export.
This situation is however being
redress with the implementation of Structural Adjustment programme which has
inspired the participation of many banks and other specialized institutions
from private and public sector. At present this role is played by Government,
banks and non-banking institutions. Practically, in order to restore stability
to the nation’s economy the non-oil sector need to be activated through
adequate funding or credit delivery. In this re-capitalization process, the
role of financial institutions such as commercial banks development banks and
most importantly the activities of the merchant banks cannot be over
emphasized.
Unfortunately, the inadequate
contributions of Merchant Banks Finance (loans and advances) to the non-oil
export sector has hindered the increase in volume of non-oil export,
similarly the limited availability of funds to Merchant Banks in financing
non-oil export and the slow increase in volume of non-oil exports has resulted
to a decline in the contribution of the sector to gross domestic product.
Another identified problem is the inability to ascertain the proportion of
total deposit mobilized by Merchant Banks that is granted as loans and advances
to the non-oil sector. The neglect of this sector (non-oil export) has affected
foreign exchange earning from the sector and even resulted to a slow growth and
development of our economy.
RESEARCH
QUESTIONS
This research will attempt to
answer the following question in order to enhance the effective realization of
the set objectives. To what extent do Merchant Banks’ loans and advance
contribute to increase in the volume of non-oil export?
Does the volume of non-oil
export have any significant impact on the gross domestic product?
What proportion of total
deposit mobilized by merchant bank is granted as loan and advances to non-oil
exports?
What is the contribution to
non-oil exports to Gross National Product?
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