CHAPTER ONE

1.0 INTRODUCT1ON / BACKGROUND OF THE STUDY

In our modem economy there is a distinction between surplus economic
units and the deficit economic units and the deficit economic units and in
saving and investment mechanism. This has necessitated the existence of
financial institutions whose jobs include the transfer of funds from savers to
investors. And one of such institution is the commercial bank.
Traditionally, the essential feature of a commercial bank lies on the services
it renders to its numerous customers. These services basically include
deposit mobilization credit management. Money transmission, consultancy
services etc. however, one of the most vital functions and which has much
impact on the economy as a whole is credit management. The primary
function of commercial bank is the extension of credit to worthy borrowers.
Commercial banks are rendering these important services, through their
services. Hence if productions increase capital investments arc expanded and
a higher standard of living is realized. Thus, in carrying out all these
functions bank management is guided by the objective of the bank which
centre on profitability. Credit extension management is one of We most
intricate functions performed by banks. This is because loans constitute the
greatest risk, in the banking activities. It might result in bad debts in a
normal business and must be charged as such when calculating the profit or
loss for the period.
Beside, business on the other hand cannot exist without debt. It is now
impossible to achieve anything whether as an individual or as a group of
person without going into some form of debt or the others. It seems to be
generally agreed that debt is essential to business. There is no doubt that the
sensible and strategic acquisition of debts is essential to business. In line
 with the above, provision for bad and doubtful debts not only affect the
profitability of bank but also its total assets and dividend payment doubtful
debts in most commercial banks are major source of concern not only to
management but also to the share holders who are becoming more
apprehensive by their findings.
1.2 BRIEF HISTORY OF UNION BANK OF NIGERIA PLC
The history of Union Bank of Nigeria Plc started with the opening of the
colonial bank officer in Lagos, Jos, and Port-Harcourt in 1917 with initial
capital of N10,000,000.00 at its first branch in Lagos, the following year,
1918, more branches were opened at Ibadan, Kano, Onitsha and Zaria etc.
In 1925 the bank was acquired by Barclays bank its name was changed to
Barclays Bank BCO (Dominion Colonial and Overseers).
The hank developed and grew rapidly over the years and by 1957, branches
had been opened in almost all part of the country. In compliance with the
directive of government in 1 968, that all companies (including banks) must
be incorporated in Nigeria Barclays bank DCO was incorporated in Nigeria
in 1969 and its name was limited with its registered I-lead Office at 40
Marina Lagos.
As a result of Nigeria Enterprises promotion Decree of 1972 and 1977. The
Federal Government of Nigeria acquired 52% of the banks share leaving
40% of Barclays bank international limited row Barclays bank plc, while the
remaining 8% was taken up by the Nigerian public.
Barclays bank plc sold 80% of its remaining share to Nigeria in 1979. Thus,
reducing her equity holding to 20% following this development, the banks
name was changed to Union Bank of Nigeria limited to reflect the new
ownership structure that is Federal Government of Nigeria 52% private
Nigeria investor 28% and Barclays bank and no longer a subsidiary of
 Barclays bank plc. Although Barclay bank plc still continues to oiler
technical and correspondent services as in the past. Today the hank has
about 240 branches throughout the country.
1.3 STATEMENT OF PROBLEM
The main objective of the study is to appraise the lending procedure and loan

management of banks using Union Bank of Nigeria Plc as test case with a
view of highlighting the effectiveness and adequacy or otherwise of the
credit management policy of Nigeria banks in reducing the occurrence of
bad debt.
1.4 PURPOSE OF THE STUDY
1. To determine the relationship between provision for bad debts and gross
earning of Union Bank of Nigeria Plc.
2. To find out why there has been an increase in bad debt recorded in Union
Bank of Nigeria Plc.
3. To determine the relationship between total lending and total
classification debts in Union Bank of Nigeria Plc.
4. To determine the effect of bad doubtful debts on profitability of Union
Bank of Nigeria Plc.
5. To examine the effectiveness of the bank’s techniques for credit
management.
1.5 RESEARCH QUESTIONS
This study will provide answer to the following question.
1. What is the relationship between provision of bad debt and gross earnings
of Union Bank of Nigeria Plc?
2. What is the relationship between total lending and total classified debts in
Union Banks of Nigeria Plc?
 3. To what extend does lending affect profitability of Union I3ank of Nigeria
Plc.
4. What effect do had and doubtful debts have on the profitability of Union
Bank of Nigeria Plc?
5. How effective is the management of loan s and credits in Union Bank of
Nigeria Plc?
1.6 STATEMENT OF HYPOTHESIS
Hypothesis is a testable tentative and probable explanation of the
relationship between two or more variable that create a state of affairs or
phenomenon (Orjih 1996).
Ho: There is no relationship between total lending and total classified debts
in Union Bank of Nigeria Plc.
Hi: There is significant relationship between total lending and total
classified debts of Union Bank of Nigeria Plc.
Ho: There is no relationship between provision for bad debts and gross
earning of Union Bank of Nigeria Plc.
Hi: There is significant relationship between provision for bad debt and
gross earning of Union Bank of Nigeria Plc.
Ho: There is no relationship between provision charged for bad doubtful
debts and profit of the bank. Union Bank of Nigeria Plc.
Hi: There is relationship between provision for bad and doubtful debts with
profits of the bank.
1.7 SIGNIFICANCE OF STUDY
It is hardly an exaggeration that the different between success and failure in
the banking industry is in the effective management of the bank loan and
advance. Efficient loan management is vital to the protection of asset and the
achievement of adequate return to investments on the technique of lending
 by comparison. There applies to he very little imprint on the subject of loan
management and recovery. A study on this subject will therefore be a
welcome addition to the existing volume of banking literature.
Effective loan management recognizes that beyond the application of sound
banking principles whenever a loan is made. There is need for urgency in
appreciating the point when loan begins to look doubtful in arriving at a
decision as to the appropriate action and in taking the action this will enable
the bank to at best obtain full repayment including occurred interest or at
worst to mitigate the eventual capital loss.
The economy as a whole will benefit the study because if the level of bad
debts is reduced. Bank will be left with more profit to enable them make the
expected contribution to the development of the economy.
1.8 SCOPE OF THE STUDY
The study focuses mainly on commercial banks in Nigeria since their
incorporation. Some selected commercial bank would be used as the case
study. Emphasis will be laid mostly on Benin City.
This is because this state can be used as fairly representation of what is
likely to be obtained in other states in Nigeria.
The study would also analyze the various types of credits granted by the
selected commercial banks and the conditions for granting these credits to its
various customers. Also a look into how the banks manages its credits in
order to guarantee recovery and minimize the occurrence of bad and
doubtful debts.
It must also be noted that, though some difficulties WILL BE
ENCOUNTERED when obtaining information that are especially of
financial nature from the selected commercial bank, it is how believe that
 these problems are minimal and not significant enough to neglate the finding
of the study.
1.9 LIMITATION OF THE STUDY
The major limitation to this study is the unwillingness by commercial banks
to disclose, discuss the actual figure of debts classified as bad. This
uncooperative attitude of banks had made it virtually impossible for a
meaningful comparative study of the organization with the banking industry.
Hence, the following constraints were therefore in the course of the research
work viz.
a. Courage: The research attempted to achieve total courage of all branches
of bank direct from branches. They were found impossible considering the
geographical locations of banks branches.
b. Problems of Finance: The current poor economic state has created
tremendous hardship for the people. As a result of the very high
transportation forces the researchers could not get to the different branches
of the bank of study for more necessary information.
c. Limited Time Factor: The limited time factor under which this project
work was out was a major constraint, there was no sufficient time and
effective collection and computation of the required data combining and the
project work was difficult.
1.10 DEFINITION OF TERMS
BANK: The bank in this study refers to commercial bank is described by the
banking Act 1969 as a bank whose business aware of the changed posed by
these debts. Had debts destroy part of the earning assist of bank such as loan
and advance been the main source of earnings and also determines the
liquidity and solvency of banks. In other words, being profitability and
liquidity problem. Bad debts are emotive words to bankers because they
represent losses to the banks. When debts go bad it established the banks
liquidity position since funds expected to meet depositor demands are not
readily made available.
The twin problem of liquidity and profitability are major constraints to
interval growth of banks and the nation economic development bad debts
destroys credit creation process of bank since a loan which is not repaid
cannot act as a new deposit for further lending. When there is decline in
credit creation new firms will find it difficult to grow while existing one will
find it expand. Besides bad and doubtful debts and accelerate the problem of
unemployment by sparking off a spate of retrenchment within and outside
the banking organization.
In Nigeria, the future of the banking industry especially the commercial
banks forms the perception of the risk takers is damaging prompting such
criticism and tongue casting form experts and concerned citizen. Bank
management is aware of this ugly trend. Hence the establishment of unit by
most banks charged with the responsibility of streaming actions towards
covering of debts previously considered doubtful. A ready example are the
establishment of Debt Recovery Department (DRD) by Union Bunk of
Nigeria Plc, and the setting up of a task force on debt recovery by
cooperative and commercial bank Plc. Having regarded to these problems a
prevalent hanker should lend cautiously and manage loan effectively with a
view to minimizing the incidence of had debts.
In this study we shall survey the possibility of minimizing bad debts through
improved standard and effective lending controls. For this purpose we shall
appraise the lending procedure and loan management of Union Bank of
Nigeria Plc, and accesses the effectiveness or other wise of the existing
credit management in the hank. We shall also present suggestion on how to
improve includes the acceptance of deposit withdrawals by cheque.
2. Loan and Advance: It this content loans and advances refer to bank
lending by way of overdraft loans and advance in this contents or study is
referred to as risk asset of commercial bank.
3. Classified Balance: This classified balance of a customer account is the
customer total liability less the value of any security accumulated interest
charged from the time the account was classified as bad.
 CHAPTER TWO
THE REVIEW OF RELATED LITERATURE
2.0 INTROI)UCTION
The instruments used by government to control credit shall not be left out on
our discussion because these instruments packaged as credit guideline are
issued annually under the new popular monetary policy circular to all
licenses banks. The instruments are as follows: Reserve requirement, cash
reserve requirements, open market operation, moral suasion, special deposit
ad stabilization securities.
In addition also, the criteria which are called guide or cannons of sound
lending in commercial banks will also not be left out they are;
i. Character
ii. Capacity
iii. Condition
iv. Collateral
V. Capital
The various types of loan offered by commercial banks such as short term
loan, medium term loan and long term loan and also the types of securities
for bank lending which consist of land. insurance policies, stock and shares,
debentures shall also he dealt with in this discussion because of its
importance. Under the theoretical frame work, the need and criteria for
lending will be extensively discussed in the literature Mandel (1974).
2.1 THEORETICAL FRAME WORK -
The need and criteria for lending will be extensively discussed in the
literature Mandel (1974) described credit simples as the right of a leader to
receive money in the future in return for his obligation to transfer the use of
funds to another party in the extension. The facility is as old as man though
the primitive society, it was known as mutual aid because it was based on
ancient custom of the ensuring subsistence of all member of the community.
Credit, therefore arises out of the need to bridge the gap between the surplus
and deficit economic units such that the highest level of satisfaction is
achieved. In modern societies, the intermediation function is performed by
the financial institution, notable among arc the commercial banks.
In agreeing with this view (Lorleg 1970) stated and that by lending Banks
factor in growth process of any economy and that by lending. Banks
provides valuable services to the community as they services to the
community as they serve to channel money from those who have idle funds
to those who can put the money into constructive use. Furthermore
commercial banks are in business to make loans. However, the loans should
be worked out in such a way that it will not seriously endanger the loan
portfolio and solvency of the bank. This view appreciates the loan
through Some dangers may arise, lending is, and should be a major activity
of commercial banks. The techniques and complexities lending have been
changing with growth in the society opinions as to what banks do or should
in the business of lending have also varied. (Adniyi 1985).
Perhaps that is why Matter (1979) described banking as an act as well as a
science. He went further to say that in addition to the wealth of technical and
legal knowledge, a bank manager should develop the attitudes to assess very
request for or advance according to innumerable factors pertaining to the
potential borrowers. He then identified three basic principles that should
guide all banks lending viz, safely, profitability, and suitably. In addition to
the principles enunciated by Matter, other important guiding factors include
the character and integrity management, accounting and technical skill of the
borrowers as well as his experience in the particular field for which the
finance is required and the profitability of the ensure proposal investment
generating sufficient profit to ensure repayment of the advance. The
important of these traditional commons of lending not withstanding. pitchers
Pitcher (1 970) citizen undue relevance emphasis on them by the character
of the borrower must he a prime factor in any decision making. He also
agreed that the integrity of’ the borrower must be undoubted especially
where the security is inadequate, He however wondered whether honesty is
simple enough to ensure the success of an enterprise in this difficult and
demanding condition of our time. The answer is obviously no for instance.
All the integrity in the world will be of little help to the managers will of a
company that is rapidly sinking into oblivion, perhaps because they did not
apt their product to meet the need of’ a counter a disproportionate risk ;
overhead cost and file in fade. Therefore, we could not hut agree with him,
pitches when he advocated that the banker should also consider the capital
and capability of the customer and also enlist the aid of management
accounting and other techniques of credit more sophisticated methods of
examining how (the bank money and how and when repayment will he
achieved. It also restricts unfairly the flow of bank credit to soundly
managed enterprise which could borrow funds successfully if only they
possessed good collateral. We cannot but experience in the modern society
have show that security can not substitute for good lending judgment since it
will not made a bad loan good but can make a good loan better.
In this non contribution Richardson (1976) noted that beyond the need to
observe the basic bank lending principles lies the need for effective loan
management which he said is paramount. Effective loan management is
mu[tithcetcd and Richardson OpineS that one major aspect of it is the need
for urgency in appreciating when a lending begins to look doubtful. In
arriving at a decision is to the appropriate action and in taking such action.
This view was supported by Dyer (1980) ‘when he posited that once is
lending proposition has been agreed upon may assume that it is necessary to
review the facility annually. This according to him is because a variety of
unexpected events can combine to modify the projected tend of the
borrowing. Making it necessary the branch manager to have frequent
discussions with customers when these overdraft limits have been exceeded
or when expressed by Osayameh (1986) when he opined that account do not
just get had over nigh. Usually, some times during which it is the duty of the
banker to show considerable interest in managing the account.
As Dandy (1975) put it. much sickly account can be nursed bank do health
by careful launching at the right time.
In short the ratio help the banker to assess the degree of risk being taken.
Emphasis being placed on earning capacity and operating efficiency. Matter
(1979) grouped financial ratio into five categories as follows.
i. Liquidity ratios which provide a measure of firm’s ability to meet its
short term obligations as they fall due.
Ii . Leveraged ratios, which measures the extent to which a firs
operations are financed with best capital.
iv. Efficiency ratios, which are used to measure the capabilities of the
management to utilize the firm’s asses.
 v. Profitability ratios, which indicate the overall profitability of the
enterprise.
vi. Equity related ratios, which are of primary concern to common
stock holders.

2.2 GOVERNMENT CONTROL OVER CREDIT

Lending to commercial and merchant banks is controlled by the government
through the central bank of Nigeria. Therefore has the primary responsibility
for formulating monetary policy in the country. This case the central banks
proposals arc made on integral part of the Federal Government annual
budget which combines approved monetary and fiscal measure. The
instruments are many and varied because of the institutional limitation on
the effectiveness of the traditional instrument ol monetary the central hank
of Nigeria has devised other instruments in lines with its development
objectives. These instruments package as credit guideline are issued
annually under the new popular monetary policy circular to all licensed
banks. The instruments are comprised of; Aggregate Credit Ceiling: Every
year, the Government prescribed the rate of expansion of credit in the
economy. Banks are not allowed to increase fair aggregated loans and
advances beyond a certain percentage of the previous year’s aggregate figure
where a bank exceeds the stipulated penalties.
2. Reserve Requirements: This is an obligation under which commercial
banks are required to hold a certain proportion of their assets liquid from to
ensure that they meet the cash demands of their customer. There are two
variants of this requirement. viz.
a. Cash Reserve Requirements: This instrument requires each bank to maintain
demand deposit liabilities. The ratio varies according to example in 1996, all
 commercial and merchant banks arc required to maintain with the central
bank of Nigeria a cash ratio of 80% of total deposit liabilities as against 69%
stipulated from 1995.
b. Liquidity Ratio: This instrument requires each commercial bank to keep a
certain percentage of its assets in liquid form.
3. Interest Rate Structure: Economist described interest rate as the rate at
which the community discounts the further it is the lost of money to the
saver or tender. Until very, recently the interest rate structure in Nigeria has
been managed by the central hank of Nigeria which fixed the range within
both lending and deposit rates could he maintained.
4. Open Market Operation (OMO):, This is the buying and selling of
Government Securities. For example development bonds, treasury
certificates, etc. in open market by the Central Bank of Nigeria on the behalf
of Federal Government of Nigeria with the intention to control the quantity
of money.
5. Moral Suasion: This is an attempt by the monetary authorities to use their
influence and prestige in the financial community to persuade banks to
restrain their lending or allocate it in a different way.
6. Special Deposits and Stabilization Securities: These are supplementary
reserves and they are quantitative in nature since they aim at controlling the
quantity of money in circulation.
7. Direct Control of Bank Credit; This means that selective credit control
strives to control the flow of bank credit to different sectors of the economy.
And by means of selective credit control the central bank orders the
commercial banks on the direction of credit.
2.3 LENDING AND CREDIT ANALYSIS
Most commercial activities of the banks are originated at the branch level
with the area office and head office acting mainly as authorizing and control
centres. Branch offices are the contact point with the public. It is at the
branch offices that the account demitted. All credit small or big are therefore
submitted to the branch manager except were special credit service are to be
offered to corporate customers. In which case the request could go straight
and is granted.
The bank recognizes that a well made loan is collected. Therefore a
customer request for bank facility is granted. The judgment of the lending
officer and his confidence in the ability of the borrower cannot be over
emphasized nevertheless certain criteria are fixed and which the borrower
must meet in order to qualify for the advance. These criteria which are called
guides or cannons of sound lending are in banking practices known as the
five C’s of credit. These are character, capacity, and capital condition and
collateral. These attributed, which related to both the customer and his
business are discussed below:
a. Character: this is the most important of all the live C’s of lending yet it is
not quantifiable. It is said to be the combination of traits and qualities that
distinguishing one individual from another. This distinguishing mark can be
good or bad for the banker, the integrity and financial uprightness of a
customer matter a lot especially in credit consideration.
b. Capacity: Here the consideration is the financial capacity of the customer.
the customer must therefore ensure that he has the financial capacity to
manage the volume of credit he is requesting from the bank where the bank
establishes a customer incapacity, the credit will be approved. It is a
statement of Fact that a good management can turn a financial weak
 enterprise to a profitable and strong one while a bad and inefficient
management tends to depreciate.
c. Conditions: in this aspect the bank looks at the condition based upon
which the request is made. If all necessary conditions are in place for the
business to take place etc.
i. The security provided by the customer must be adequately insured where
applicable with the banks interest noted on the police. The security should
he reviewed periodically to ensure that the cover is adequate.
ii. Where the third party security is to be provided to the bank the customer
must ensure that the third party understands fully the consequences of
charging his asset as
Capital: The hank is as much interested in the total volume of capital
employed as in he capital structure is the capital is adequate the hank will all
things being equal favour the business in which the borrower state is higher.
The capital position is assessed from the statement of affairs of the
borrowers of the audited account.
E. Collateral: Bank lending is based on the abi1it’ of the project collaterals
that are taken just in case the unexpected happens. It is emphasized that
collateral make the owner / borrower normally committed to the project and
to repay the advance.
A lot of information is needed by the lending officers to properly address the
cannon of lending vis-visbale prospective borrower. An initial interview
fracture is the first basic step and very crucial in the analysis of the credit by
union bank of Nigeria plc. The customer submits his application to his
branch manager who conditions the initial interview sound lending question
must be asked.
2.4 TYIES OF LOAN OFFERED BY COMMERCIAL BANKS
 Commercial banks generally provided loan on short term, medium term and
long term.
These types of loans are explained.
a. Short Term Loan: Commercial banks are usually interested in short
loans. These loans run between six months and one year. It is used to
provide short term working capital to the production cycle. However,
short term loan is granted to business customers. Large corporate bodies
and some medium small scale enterprises, this could he in term of
overdraft. In this case, customers account could be overdrawn, the
facility is renewable at expiration of the period provided. It is the practice
of the bank to not on the overdraft or any other to short term. Loan
contract agreement, that is payable on demand and could concealed the
description of the bank.
b. Medium Term Loan: This type of loans runs between three and five
years. It can be obtained in a number of ways for various uses and
repayment patterns, such finances are to provide For the purchase of
plant and machinery (i.e. project financing) or to provide general working
capital.
c. Long term Loan: These are loans exceeding five years. It is usually
associated with large capital project. This type of loan is generally
provided by the merchant banks and development banks.
2.5 TYPES OF SECURITIES FOR BANK LENDING
The need for security for hank lending arises as a result of high profitability
of credit risk the hank should not rely on security while making decision as
to lend or not, in that the last favourable section to a bank is the exercise of
funds, security must he obtain.
Security should not be looked up on as the source of repayment hut as
something to full hank on if his expected source of resort For recovery of
loans. Therefore, it should not he seem as a substituted to prudent and
through credit analysis. Writing on securities for hank lending Avenigi
(1981) emphasized that hank lending is based principally on trust and faith
in the Customers and his business the subject matter and his business the
subject matter for which the loan is being enough. But because of the risk of
recovery, bankers generally insist on obtaining securities for the loan
granted. In line with the above, Ogwezi (1993) in his contribution said that
“the aim of the financial analysis from the point of view of a lending banker
is to obtain some improvement about liquidity. Profitability and capital
strength etc. “All these facts together with information otherwise obtained
will insist in the evaluation of the degree of risk interest in the lending
proposal.
Thus, the bank will look just as closely at the facts and figures concerning
the sources of repayment as it would be if no security was to be lodged. If
follows then what banks are obliged to accept anyone or more of the
following securities either to he held on depositor to be further processed
land, insurance policies, stocks and shares debentures, bond and indemnities
etc. “All these facts together with information otherwise will insist in the
evaluation of the degree of risk interest in the lending proposal.
It is important that the bank analyze the securities being lodged thoroughly
in order to ensure that in case of arise default in payment by the borrower
that will be entitled legally to full bank on the assets presented as security
granted. To this, the bank must in satisfaction f the loan, ensure before
signing of the authorization of the stocks and shares used for securities of
bank lending must he quoted on the Nigeria stock exchange. Therefore why
banks insist on quoted stock as securities are as follows.
a. The valuation of quoted shares and stock is usually very easy.
b. The transfer of quote share is not restricted, and these shares are truly
transferred
c. The stocks and shares are readily marketable. These securities are
explained below.
1. Land: This is a free gift of nature which includes real estate. Land also
is immovable property which includes land and everything attached to
the earth. Land which also includes building is the commonest and most
acceptable security for lending by the hankers, and finances houses in the
country. This is because land appreciates in value over the years and it is
equally marketable and reliable as a security for hank lending factors to
he considered on land are title and value.
2. Insurance Policies: Banks do accept life policies as a form of security
because they usually have surrender values. During the life time as well
as a benefit value at this, or in (his case of endowment policies, at the end
of’ the agreed period. And to be of use as security they must he
assignable. Assignment being a transfer of rights under a contract.
3. Stock and Share: The stocks and shares of limited liability companies
quoted on the Nigeria stock exchange are normally accepted as securities
for advance.
This is because they are easily value and readily marketable. however,
the companies whose stocks and shares are to be used as security must be
a quoted company that is the one that can float shares and stocks at the
flow of the Nigeria stock exchange market.
4. Debentures: This is a financial securities used in raising long term
funds by quoted companies. A debenture security has a certain rate of
 interest and is given on specified terms as greed to by the parties
involved.
For banks to accept debentures and security, the legal status of the
company must be ascertained to determine the articles of association of
the authorize. And also the hank with company’s tax payment.

CHAPTER THREE
RESEARCH DESIGN AND METIIOI)OLOGY
3.0 INTRODUCTION
This chapter is concerned with method employed in collecting relevant data
for the study. It includes the determination of source of data, area of study.
 Population sample and sampling procedure as well as the method adopted
for the analysis of the data.
3.1 RESEARCH DESIGN
A research design is the “blue print” that addresses the problem of scientific
inquiry. In practice all aspects of research design are integrated, Nachmias
and Nachrnial (1985:96). This research work is an assessment of the
Economic implication of credit management in Nigeria commercial banks
and for the entire banking system. The researcher has chosen Union Bank of
Nigeria Plc, Benin City and Sapele as samples where questionnaires won Id
be administered. The research method is descriptive in native. This involves
obtaining data from respondents with the aid of questionnaires (that is a
form or list of question to be completed by the respondent).
3.2 RESEARCH POPULATiON AND DISTRIBUTION
Population is described as the totality of all elements, subject or members
that posses a specilic characteristic. The population of this study is Union
Rank of Nigeria Plc Benin City. The population of 50 persons selected at
random and was made up of the managers. staff and the customers of the
above mentioned bank.

3.3 METHOD OF DATA COLLECTION

The methods of data collection used by the researcher include primary and
secondary data.
a. Primary Data: Primary sources are original works of research or raw data
without interpretation or pronouncement that represent an official opinion or
position. Primary sources are the most authoritative because the information
has not been filtered or interpreted by a second party. The researcher made
use of the following two method of primary collection.
 I. Interview method
ii. Questionnaire method
I. Interview: Interview is defined as a method of collecting relevant
information from one or more respondents through direct oral
questioning in form of conversation (Eghule 200 1). It is a
conversation carried out with the definite aim of obtaining
information. The information is gathered through the responses of the
interviewer to a planned sequence of questions. As a follow up to
questionnaire, the answer obtained from interview can help to validate
information supplied in the questionnaire. The interview conducted
was very important in giving the respondent a chance of providing a
high response rate. The researchers visited the branches and discuss
with them on their credit management procedures and incidence of
had debt in their hank. The researcher equally conducted oral direct
interview on some other stall’ involved in lending. Thus, this has
helped the researcher to come up with valid data for this research
work.
(i) Questionnaire: A questionnaire is a list of questions designed to elicit
information from respondents by way of answering them. The
questions arc related to the aims of’ the study and the hypothesis is to
be tested. The questionnaires are haunted or mailed to the
respondents. These questions may generate information about the
feeling, beliefs, experience or attitude of the respondents or about
some other persons.
b. Secondary Data: Secondary sources are interpretation of primary
data. It involves consulting and reading existing documents. It is
referred to as second hand information which is ready for inferences
 or other uses for which the data is meant. The secondary data source
was made up of facts, ideas collected from the following
Library.
2. Published annual report and account (and another periodicals) of
Union hank of Nig. Plc. and the Following selected commercial banks
br purpose of’ comparison.
a. First Bank Nig. Pie
b. United Bank for Africa Plc
c. Union Bank monthly returns of loans and advance figures to central
hank of Nigeria.
d. Central Bank research unit Enugu and various publication of central
bank, including annual report and financial speeches and lectures on
or relating to the researchers project topic. The various books and
handouts.
3.4 METHOD OF DATA PRESENTATION / ANALYSIS
This is where the data are presented and analyzed objectively. The
researcher has to first edit the response from the respondents; go through the
tables for accuracy and validity. This is necessary as it helped to eliminate
errors in the consistently and the data was classified and tabulated.
This was followed by the analyses and interpretation of the data. The two
techniques in analysis for the purpose of this research are:
Text Method: This is a two dimensional representation of statistical
information or data. It assembles information or data. It assembles
information on the attributed, under the study in such a way that the
relationship between the information can be observed and clearly identified
at glance. It involves a systematic arrangement of fact and figure in series of
boxes made of row and columns.
The information obtained through interview was analyzed and related.
Questions in the questionnaire were legally analyzed and this was used to
test the hypothesis and equally helped the researcher to arrive at a current
view findings.
METHOD OF HYPOTHESIS TESTING
a. Correlation Coefficient: It measures the magnitude and direction of
relationship between variable. A correlation coefficient could be
higher, low, positive or negative. It is measured on a scale which
ran from (-1) through (0) to (+0). Therefore, method of measuring
coefficient as the spearson product memout correlation coefficient.
This represented by the symbol can applicant both sets of scores
are continues.
b. It can be calculated by suing two methods: that is the derivation
from the mean method and the raw scores method.
b. Spearman Rank order of Correlation Coefficient: The purpose is
to establish if there is any form of association between this variable
when the variable arc arrange in ranked form.
 CHAPTER FOUR
1.0 INTRODUCTION
This chapter will cover the presentation and analysis of data collected
through the questionnaire. for the testing of research hypothesis as stated in
chapter one of this research work.
4.1 PRESENTATION AND ANALYSIS OF DATA
The second set of primary’ data was through oral interview of the manager
of the credit recovery department of Union Bank of Nigeria Plc. A total of
36 questionnaire were administered and the questionnaire had total of 10
questions We shall discuss our finding on the trends in the lending patterns
of our study hank the Union Bank of Nigeria Plc. We note that principle
objective of lending is to generate revenue. The continued existence of a
hank depends on its ability to extend credit and risk investment depend
considerably on good return bring generated.
However, for the analysis hypothesis earlier formulated will he used as a
guide and questions relevant to (hose hypotheses will be analyzed with the
available data, some questions will he analyzed to enable the researcher
draw conclusion about other important aspect of the study or research. The
spearman rank order correlation coefficient will be used to test the
hypothesis 1—hc/2 and the lormula is N(N2-1)
 Questionnaire Analysis
total number administered = 36
‘Total number returned = 36
Repose rate = 100%
SECTION A
Table I

Sex Instrument No. of Response Percentage %

Male 28 71%
Female 8 29%
Total 36 100%

From the above sex

group, the table shows that the male respondents were twenty eight (28)
which represent 71% of the entire number, while 8 females responded and
represented 29% of the total number.
Table 2
Employment
No. of Response Percentage %
Instrument
Managers 9 22%
Junior staff 4 11%
Senior stall 23 67%
Total 36 10(YY0
The
above table shows the employment status in the bank which consist of the
managers, junior staff and their senior stall. However, out of the total
number covered, nine managers responded and this represented 22% junior
stall responded four and this represented 11% while 23 customer responded
and this represented 67%.

Table 3

No. of
Group: Age Instrument Percentage %
Response
l8—30years 23 56%
30—40 years 11 33%
40 — 50 years - -
50 years and above 2 11%
Total 36 100%
The table of
age group category shows that the total 36 which were administered with the
questionnaire, 23 respondents belonged to age range of 18 — 30 years of 30
— 40 years recorded 11 respondents and represented 33% of the total
number. The age range of 40 — 50 years recorded no response. The age
range of 50 years and above had 1 2 respondents and represented 11% of the
number.

Table 4
Education I3aekground No. ol’ Response Percentage %
SSCE 5 I4%
ND 12 38%
 IINI)/BSc 9 18%
MSc 10 30%
Total 36 1 00%

The table above show that the SSCE holders were live and represented 1
4%, the ND holders were twelve and represented 38%, I1ND/BSc were Nine
which represented 8% and MSc were ten which represented 30% out of the
total number.
SECTION B
QUESTION I: Does the incidence of credit management affect commercial banks
in Nigeria?

RESPONSE No. of Response Percentage %

Yes 36 100%
No - -
total 36 100%

In the above table, the

entire thirty six responded positively which represented 100%.
With what the respondents said, it could he rightly taken that the incidence
of credit management affects commercial hank in Nigeria.
QUESTION 2: Does your hank operate a good management structure?

RESPONSE No. of Response Percentage %

Yes 36 100%
No - -
total 36 100%
From the table above, the entire respondents responded positively to the
questions that are being asked. With what the respondent said, it could be
accepted that the bank of study operate a good credit management structure.
QUESTION 3: Do you consider the bank interest rate as being responsible
for the incidence of credit management in your bank?

No. of
Response Percentage %
Response
Yes 33 96
No 3 4

The above Total 36 100% table shows that

33 respondent said
yes which represent 96% while 3 respondent said No and represent 4%.
QUESTION 4: Do your bank give out short term loan to avoid incidence of
credit facility’?

No. of
Response Percentage %
Response
Yes 36 100
No - -
total 36 100%
All respondent
agreed that the
bank of study (Union Bank of Nigeria Pie) that they give out short
term loan to avoid incidence of credit facilities.
 QUESl’1ON 5: If yes. has the loan customer been keeping with payment
schedule?

Respons
No. of Response Percentage%
e
Yes 30 89
No 6 11
30 of the Total 36 100% respondents
agreed that customers keep
with payment schedule which represent 89% while 6 respondents said that
customer does not keep with payment schedule.

QUIST1ON 6: Do your bank accept fixed asset before giving out loan?

No. of
Response Percentage %
Response
Yes 28 50
No 6 27.8%
No idea 2 22.2
From the lotal 36 100% above table, 50%
agreed that hank accept
fixed asset before giving out loan: 27.8% responded that bank does not
accept fixed asset before giving out loan while 22.2 said No idea..
4.2 INTERPRETATION OF RESULT AND RESULT FINDINGS
In order to ensure proper research work, a total of 36 copies of questionnaire
were distributed of which 36 were returned successfully. This quantity
represents 76.94% of total copies of’ questionnaire distributed. Obviously,
this percentage of responses is high enough to form opinion about the entire
population. The questionnaire was prepared iii the height of’ the return
hypothesis postulated and the data observed were. presented and analyzed
accordingly. In view of the analysis carried out, hypothesis one which state
that, there is no relationship between total lending and total classified debts
in Union Bank of Nigeria Plc. And in the same view the statement of
hypothesis two stated that there is a significant relationship between total
lending and total classified debts of the Union Bank of Nigeria Pie.
On of the major objectives in effects we have seen in the literature review, is
the promotion of effective development by providing financial facilities is to
enhance productive activities at the grassroots level.
The obleclive as revealed by this research work has not been achieved: this
is constrained to tlw p’ogIinme of credit fhcilitics in banking system in
Nigeria. Another importanec 1tor that is reducing customer patronage of
credit facility rate of interest and difikukies in opening an account. These
would drastically reduces the patronage reduces the patronage of the
customers to the bank.

CHAPTER FIVE
 SUMMARY OF FINDING, RECOMMENDATIONS AND CONCLUSION
5.1 SUMMARY
I have used the relevant total loans, total classified debts, total provision lir
bad and doubtful debts from (1993 — 2002) to study the credit
administration procedure and the incidence of bad debts in a commercial
bank the (Union I3ank of Nigeria Plc). I used various methods of measuring
the effectiveness of bank loan management, the ratio provision chargcd to
total loan management, the ratio provision charged to total lending. I also
study the effect of bad debts on the profitability of the bank. From my
investigations and studies, the following findings were made:
Having regarded to the design of its credit facilities Ibrms of the bank, it has
been giving due consideration to earning capacity in lending. However,
practical compliance could not be vouched for at all levels since some of the
lending staff did not seem to understand the purpose of some of the forms.
2. Even through the secured portion of total lending has been increasing the
changes in total classified debts were still high and positive, indicating that
security dos not prevent an account 1mm going had.
3. Sectoral Documentation classified debts to enable the bank to identify the
sector with higher default rate for closer monitoring did not appear to have
received adequate attention.
4. Interest earning on loans constituted a major component of gross earning
of the bank had debts were also to have adverse effects or banks overall
profitability.
5. The spearman rank order correlation coefficient was used to find out that
there is significant relationship between total lending and total classified
debts, gross earning and provision charged for had and doubtful debts. And
also total classified debts and provision charged for had and doubtful debt.
5.2 RECOMMENDATIONS
Having conducted this study as carefully as I can and in view of y findings, I
could advocate that the traditional methods of lending to which the banker
have become accustomed. in order to ensure effective and efficiently in
commercial hank lending and also to solve the problems of loan, a change
will have to be made to relate the following improvement in the whole
banking system generally.
The advance department should be stafkd with qualified and resourceful
officer capable of making seasoned decision base on credit analysis.
2. These stalls should benefil from regular training and retraining
programmers on lending appraisals.
3. There should be closes and proper monitoring of loans beibre and after
disbursement. In fact the monitoring should continue For the entire life of
the loan.
4. The bankers should lay relatively more emphasis on the integrity of the
borrower and the ability of the customer.
5. The loan portfolio should ensure, that there is a smoother relationship
between the academically and professionally qualification. Hence the
Nigeria institute of bankers. professional examination should be made
compulsory for the upliftmcnt of the bank state
6. That the government should as much as possible reduce the incidence of
conflicting policy pronouncement which has adverse efThct on business
projections. It is hope also hope that If these recommendations arc taken
credit appraisal would be more précis and the incidence of bad debts will he
reduced. (Union Bank of Nigeria Pie).
5.3 CONCLUSION
To management loan and credit effectively, effort have to be made to obey
and
respect the cannons of good lending and ensure adequate control and
supervision of the facility extended within the frame work of government
regulations and guidelines sound lending requires a clear well articulated
easily accessible policy document which speed up ht philosophy of lending.
This will ensure that loan losses are kept at a minimum via a programme
which permits constant supervision of the project being financed, easy
identification of delinquent loans and instituting corrective measures (Union
Bank of Nigeria Plc).
It is instructive to note that no one can have complete control of his
environment which in bank jn is dominated and external and internal factors
such as economic and political situations and unpredictable behaviour of
human being. All these factors re subject to change and therefore increase
the risk of bank. The study therefore conclude that the effective way of
reducing default rate is proper assessment of credit application of determine
the degree of risk and the elThctivc monitoring of commitments to ensure
recovering through cash flow trading without recourse to security realization
or liquidation of debtor.
 BIBLIOGRAPHY
Adeniyi, 0. (1984). The Laws of Practice of BANKING in Nigeria. Ifc Press\
Ltd.
Anihueze. H. C. (1 998). I3anking Practice Nigeria. Glabic Ventures Press
Asika, N. (1992). A Research Methodology Nigeria. Macmillan Publishers
Corley, L. (1975). A Bank Account of Your Own. London Chance Press.
Dandy, 1. (1975). The Branch I3anker. London Institute of Bankers.
Ezegule, A. and Ogwo. E. (1990). Principle of Managing Project Nigeria. Africa
Fep. Publishers.
Funks and Wagnally (1992). New Encgdopedia Vol. 7
Mother, E. (1997). The Loading Banker. London Water 100 and Sons
Nwankwo. G. (1986). Nigeria Financal System. London Macmillan
Olashere. 0. (1985). Nigeria Billing and Economic Management. Lagos
Intervention bank.
Orjih. J. (1996). Element of Banking. Enugu Rod Communication Publishers.
Pitcher, M. (1997). Management Accounting for the Banker. London of
Institution of Bankers.
Union I3ank of Nigeria Plc (1993 —2003). Annually Report and Account:
Union Bank of Nigeria Plc (2002). Unpublished Internal memorandum of Staff
Strength.
Uzoagu, N. (1 981). Money and Banking. Enugu, Fulk Dimension Publisher. 39