Full Project on Impact of Commercial Banks’ Credit on the Manufacturing Sector


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                                                                                            CHAPTER ONE




1.1 Background to the Study


            The manufacturing sector as a subsector plays a vital role in driving the industrial development of a country. It involves the fabrication, processing, or preparation of products through combined utilization of raw materials and other factors of production. In advanced countries, the manufacturing sector accounts for a significant share of the industrial sector output and a substantial proportion of the country’s Gross Domestic Product (Ebi and Emmanuel, 2014). The manufacturing sector is an avenue for productivity relating to import replacement and export expansion, creating foreign exchange earnings and per capita income which causes unique consumption patterns (Anyanwu, 2000).


            In Nigeria, this sector is responsible for about 10% of total GDP annually and in terms of employment generation, manufacturing activities account for about 12% of the labour force in the formal sector of the nations’ economy (Bada, 2017). Over the last three decades, Nigeria has consistently regarded the promotion, growth and development of the manufacturing sector as a crucial catalyst for transforming the country to an industrialized, economically stable and viable one (Bennett et al, 2015). This sector creates investment capital at a faster rate than any other sector of the economy and at the same time promotes wider and more effective linkages among different sectors (John and Terhemba, 2016).


             It was observed by Adediran and Obasan (2010) that the chances of a country been industrialized is increased by the development of the manufacturing sector. The effectiveness however of manufacturing industries in Nigeria is dependent on the availability of resources such as raw materials, financial capability to fund investments in modern equipment, human resource development and technology (Adegbie and Adeniji, 2014).


            Since 1960, rapid and sustained growth of the domestic economy has been of strong importance to successive governments whereby several National Development Plans have been implemented to boost productivity as well as diversify the economy but the required resources have been very scarce thereby necessitating the need for financial institutions to play an important role in capital formation and financial support (Bada, 2017). In 2010, through the Central Bank of Nigeria, the federal government made the sum of N200 billion available as Manufacturers’ Intervention Fund. “The objectives of the fund include fast-tracking the development of the manufacturing sector of the Nigerian economy by improving access to credits to manufacturers, improving the financial position of the Deposit Money Bank, increasing output, generating employment, diversifying the revenue base, as well as increasing foreign exchange earnings. It is also meant to provide inputs for the industrial sector on a sustainable basis” (CBN, 2010)


            As financial institutions, commercial banks perform intermediation roles by mobilizing funds from the surplus units of the economy into the deficit units for productive activities in an economy. The role of commercial banks’ credits to the growth of the manufacturing sector cannot be overemphasized as the credit services provided by commercial banks are essential drivers to innovation and growth (Nwanyanwu, 2010). Banks have to be effective intermediaries for the mobilizing and channelling of deposits to the manufacturing sector.  It was shown by Anyanwu (2000) that the productivity in Nigeria has been restricted by low investments and the poor investments have been traced largely to banks’ unwillingness to make credits available to manufacturers owing partly due to the mismatch between the short-term nature of commercial banks’ credits and the medium nature of funds needed by industries


                                 Download Full Project on Impact of Commercial Banks Credit on the Manufacturing Sector


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