CHAPTER ONE

BACKGROUND OF THE STUDY

Manufacturing is the capacity to produce goods with labour materials and

inputs produced by others. Simple forms of manufacturing have characterized

all organised societies but the application of steam power to production in

Britain in the late eighteenth and early nineteenth centuries significantly

increased the capacity for production and since this first industrial revolution

economic progress has in many peoples minds been linked with the capacity

to produce and trade in manufactured products.

Manufactures now dominate world trade and typically are around 80 percent

of world exports in any year with developing accounting for nearly one- third

of this. In the bulk of developing countries outside the LDCs and the oil rich

states manufacturers account for a majority of export revenue. In terms of

regional distribution the bulk of developing country manufactured exports

come from East Asia (70 percent in 2005) with approximately 40 percent of

those from china.

Export data are also available by product category gives developing country

and regional shares is manufactured exports by selected types of product. It

shows developing countries as a group taking more than 50 percent of world

exports in the labour intensive simple technology categories of textiles

footwear and leather

The banking sector in Nigeria in 2006 financial year was oligopolistic in

structure as only ten banks 11.1% of the 90 operation accounted for 54.5% of

total assets 52.4% of total deposit liabilities and 46.1% of total deposit

liabilities of deposit money bank as at 31/12/2006 amounted to #2705 billion.

Whilst aggregate credit to the domestic economy amounted to #1302.2

billion. In 2006 sectoral allocation of deposit money banks credit continued to

favour the less productive sector of the economy as only 40.9% of the total

credit went to agriculture solid minerals exports and manufacturing down

from 46.2% in 2001.

In the year 2007 the general performance of banks was not significantly

different from what happened in the previous year. Ten banks out of the 89 in

operations accounted for 55.3% of total credit. At 3047.9 billion the

aggregate assets the level as at Dec 31 2006.

The manufacturing sector or service enterprise with capital investment

exceeding #950000 in machinery and equipment. The importance of

manufacturing sector in the promotion of economic development has always

been at the front developing strategies. More so Nigeria like other

developing nations adopted the use of import substitution policy as a means

of manufacturing. This aims of producing domestic consumer goods in those

industries.

Major functions of Nigeria deposit money banks

1. Acceptance and safe keeping of deposits

2. Granting credit facilities to consumers

3. Transferring funds on the instructions to customers

4. Management of customers investments

5. Acting as executors and trustees of “wills”

6. Providing facilities for safe-keeping of important documents and other

valuables.

7. Providing foreign exchange facilities to travellers

8. Advising customers on insurance matters

9. Project finance

10. Providing financial advisory services to customers

11. Packaging real estate transactions.

Statement of problem

The nation had enunciated import substitution and processing of raw

materials policies in the past. These had made the sector to be

dependent on the industrialised nation of the world for capital

equipment and contributed in no small way to our present economic

predicament. The sector is currently heavily dependent on importation

of raw material and spare parts. This has put pressure on the countries

foreign exchange earnings.

Manufacturing sector like any other business cannot be carried on

extensively unless funds are available for maintenance and

procurement of equipment and necessary inputs. on the other hand

deposit money banks accused the manufacturer of loan given to them.

Thereby not bringing high degree of loss in their banking activities

Unfaithful and dishonest to them are being critized sequels to this

manufacturer. moreover the small scale business can hardly be over

stressed most manufacturer in Nigeria economy have been denied of

attention report assessment or could it be that the deposit money bank

are not playing their role in promoting manufacturing?

Adequate funding is a requirement for running a successful

business and it is certainly one of the major reasons for the poor

performance of most companies in the Nigeria manufacturing sector.

This is because banks are wary of investing their distressed sector that is

hemmed in by a hostile business environment is not encouraging. Sad

enough the evolving scenario these days at least before the crash in

the capital market is that the capitalists and banks prefer to advance

facilities to clients to enable them invest in securities market. Such

clients would in turn go to bad” and watch their investments multiply

over night without doing anything rather than too invest such money in

any SME (small and medium scale enterprise) or so called “risky”

business. This thinking of the capitalists and the banks further weakened

the real sector thereby denying the manufacturing sector the

opportunity to generate employment.

OBJECTIVE OF THE STUDY

1. To find out if inadequate credits from the deposit money banks to the

manufacturing sector has contributed to the reduction in the

productivity of the manufacturing sector.

2. To determine how the unwillingness of the deposit money bank to give

loans to the manufacturing sector has affected.

3. Also to look into the problems that militates against the manufacturing

sector apart from finance in Nigeria and the recommendation where

necessary.

HYPOTHESIS OF THE STUDY

The following hypothesis are tested on this study

Ho: The manufacturing sector contribution has no significant impact to

lending in the deposit money bank.

Ho: Deposit money bank interest rate has no significance effect on

manufacturing development in Nigeria.

SIGNIFICANCE OF THE STUDY

The result of the study will provide an insight into the relationship between

deposit money bank credit and the manufacturing sector. It will provide the

basis for which policies should be made by the government through the

monetary authority (the central bank of Nigeria) towards the prioritizing of

credits granted to the manufacturing sector.

Again it will expose the important role the deposit money banks play

towards the productivity of the manufacturing sector and to therefore

make sure that there is a good working relationship between sectors.

The study makes clear the actual contribution and operations of deposit

money banks in Nigeria. It will also sensitize the society on the importance

of deposit banks in Nigeria.

The study will be important to the policy makers and the government in

order that to adopt and implement policy measures that will boost the

economy through the financial institution.

It will also depict the negative and positive side of the activities of the

negative and positive side of the activities of the general public and

bankers for some correction and changes in order to boost the economy.

Also it is believe that the findings of this research will lead to further on

how deposit money banks and the other manufacturing sector which will

eventually lead to the development of the economy.

The usefulness of this study is that it will highlight to the nation as a

whole on how best to manipulate deposit money bank loans for financing in

order to improve the state of industrial product in the country.

It will also give the government an overview of constraint of industrial

financing and how best to manage deposit money bank loan in order to

yield output.

It will show deposit money banks how to increase industrial financing

for growth in the economy.

RESEARCH QUESTIONS

These are self guide question used to guide the research in the course of

providing solution to the problem

The following are questions that arise when drawing references from

the study.

a. How does deposit money bank significant to influence on the

manufacturing output.

b. Does manufacturing development depend on the deposit money bank

loan.

c. Do deposit money banks give loan for manufacturing finance?

d. If so to what extent has the manufacturing sector growth since the

assistance started.

e. Is there any relationship between deposit money banks financing and

the Nigeria industrial growth?

LIMITATION OF THE STUDY

The main task of the study is to given in full determine the impact of

deposit money banks in fund mobilization for industrial growth and

development but due to insufficient time for industrial growth and

development but due to insufficient time frame for the purpose of simple

and articulate analysis the study is restricted to deposit money banks

specifically. The study is limited to the period of 2005-2010 which saw the

significant impact played by the financial sector in the Nigerian economy.