The study conducted is based on the stance of commercial bank lending in Nigeria, via the workings of the monitory policy accordingly. In essence regulatory policy in Nigeria has been conducted under wide ranging economic environments since the establishment of the Central Bank in Nigeria over 30 years ago. However, in recent years the Federal Government has made conscious and determined efforts to set and attain a high level standard of macro-economic aggregates in order to high light, the effect of regulatory policy on commercial bank lending in Nigeria.


In accordance, the study has been able to ascertain that due to present challenging conceptual and technical problems, these efforts have not shown their full weight on the improvement of the economy.


The purpose of this study is to help in identifying and ascertaining the ways through which regulatory policy changes are effected on commercial bank lending accordingly. In the course of this, the nature of various regulatory  policy instruments employed from 1996-2003 will be reviewed: further examining Nigerian Commercial Bank lending structure in accordance to the regulatory  policy designs. Also the study aims at finding possible defaults in giving out commercial

banks loans.


Also, the significance of the study itself dwells on this ability to examine the conceptual and practical problems, encountered in the mechanisms of bank lending in commercial banks via its regulatory posture in Nigeria. This is significantly done where the role and effects of regulatory policy measures are properly explained in the study.


More so, the relevance of the study is further reinforced by the fact that Nigeria has been experiencing a depressed economy especially during the period under review and it is through these key sectors which have been tagged. ““The preferred and less preferred sectors” that the deteriorating situation can be reversed.


The collection of data for the study was generated mainly from secondary data and subsequent empirical analysis by ordinary least square method. The approach is in testing the hypothesis of aggregate money supply in the economy against total loans and advances of institutional banks accordingly, via the estimation of regression equation in the study for a more accurate estimation this model design is adapted to use of a simple linear equation.


The major limitation of the study was that of data collection. Since data was collected from various publications therefore personal interaction and collection of data provide difficult. Also the problem of obtaining up to data statistics impeded the study seriously, as some of the data were not available as at the period of conducting the study.


Finally, the study has been able to come to an affirmed conclusion that regulatory  policy through with its constraints has contributed significantly to creating an enabling environment for commercial banks disbursement of loans and advances. However there is still much to be done to help plug the loopholes that still exist, in the course of regulatory  policies trying to prevent excessive growth in liquidity in the Nigeria Banking System.



Title Page

Certification                                                                                      ii

Dedication                                                                                        iii

Acknowledgment                                                                              iv

Abstract                                                                                            vi

Table of Contents                                                                              vii



1.0      Introduction                                                                           1

1.1      The Problem Analysis                                                            4

1.2      Purpose of Study                                                                   5

1.3      Statement of Research Questions                                          6

1.4      Statement of Hypothesis                                                        7

1.5      Relevance of Study                                                                 8

1.6      Scope and Limitation of the Study                                         9

1.7      Significance of Study                                                             9

1.8      Definition of Terms                                                                9



2.0      The Nature of Regulatory  Policy Theory                                12

2.1      Regulatory  Policy Formulation in Nigeria                             17

2.2      Regulatory  Policy in Nigeria (1995-Till Date)                        19

2.3     Formulation and Administration of Regulatory Policies in Nigeria    28

2.4      Basic Principles of Lending                                                    29

2.5     Techniques and Instrument of Regulatory Policy management in Nigeria 34

2.6     Effectiveness of Regulatory Policy on First Bank Plc Lending  41

2.7      Implementation of Regulatory Policy in FBN Plc                    46


Chapter Three

3.0      Methodology                                                                          49

3.1      Sources of Data                                                                      49

3.2      Restatement of Research Questions and Hypothesis              49

3.3      Method of Data Collection                                                      50

3.4      Design of Research Model                                                      51

3.5      Limitation of Data Collection                                                 52



4.0      Introduction                                                                           53

4.1      Presentation and Analysis of Data                                         54

4.2      Distribution of Commercial Banks                                         56

4.3      Bank Credit to Private and Public Sector                               59



5.0      Summary, Conclusion and Recommendation                        61

5.1      Summary                                                                               61

5.2      Conclusion                                                                            65

5.3      Recommendation                                                                   66

5.4      References                                                                              70








Regulatory policies  in Nigeria has been conducted under wide ranging economic environments since the establishment of the Central Bank of” Nigeria (CBN) over thirty year ago. However, in recent year, the Federal Government has made conscious and determine efforts to set and attain a high level standard effort of macro-economic aggregates in order to highlight the impact of regulatory policy on commercial bank lending in Nigeria. However, due to present challenging conceptual and technical problems, these efforts have not shown their full weight on the position of the economic.


In essence, right from the formative years of the Central Bank of Nigeria to the present times of stringent regulatory control, regulatory policy has become a veritable means of achieving aggregate economic potentials. In the specific environment of the 1970's the main objectives of regulatory policy were the maintenance of relative price stability and a healthy- balance of payment position, as well as the acceleration of the space of economic development.


Generally, regulatory control depended on the use of' directory regulatory  instruments Such as selective credit control and credit ceilings, interest rate controls, prescription of cash reserves requirements, exchange control and imposition of special deposits.


Then the use of market-based instrument such as open-market operations were not feasible, because of extreme narrowness and underdevelopment nature the financial market, the inadequate supply of the relevant debt instruments and the deliberate restraint on rates.


Along the line, the most popular instrument of regulatory  policy used was the issuance of credit rationing guidelines took the form of setting the rates of change for the aggregate and components of commercial bank loans and advances. Between April 1972 and march 1976, the use of aggregate credit ceiling was dropped for specifications on Sectoral distributions of credit. Furthermore, the focus n sectoral distribution of bank credit throughout the period was to stimulate the productive consequently stem inflationary pressures. In essence a number of special deposits were imposed on the bank to reduce their fees reserve and creating capacity. They also serve quite effectively as instruments of regulatory control, leading accordingly td a recession oil boom of the early 80's.


The situation was particularly serious between 1982 and 1985 when stringent economic controls were not effective in arresting the deteriorating situation. Inevitably, a period of economic adjustment bad to come with the introduction of the Structural Adjustment Programmed in 1986. It saw the introduction of an inevitable economic adjustment in which memory policy appear to have borne a relatively share of the burden of adjustment process embarked upon by the federal Government in July 1986 was to restructure the production and consumption patterns of the economy, through the elimination of price distortion and reduction of the over - dependence of the economy on the export of crude oil and imports of' raw materials and consumer goods. The regulatory  control framework remain essentially the same, except that some complex selective credit controls and the liquidity and cash requirements were sill in vogue at the inception of the Programme were design to dampen inflationary pressures and restrict the demand for available foreign exchange resources.


The effectiveness of regulatory policy in Nigeria on commercial bank leading in the 1990's, will depend to a large extent on reducing to the barest minimum constraint of yesteryears. Starting from 1990, the ceilings on bank credit expansion were no longer to accommodation exceptions as before bank credit was to include loans and advances, and investments including leasing assets and net inter bank float.


Another important step was the introduction by the central bank of a set of prudential guidelines for licensed banks. Three other policy actions in 1991 worth mentioning are: determination of interest rates by market forces, prescription of a maximum margin between the bank's average cost of the regulatory  policy, which relies on the control of money stock in order to influence financial and economic activities.


Finally, the issue to be examined in this study is the impact. These policies have had on commercial bank lending, highlighting the use of economic indicators and their outstanding signals.



i.        Regulatory  policy in the current Nigeria context encompasses action of' the Central Bank that affect the availability and cost of First Bank Plc reserves balance and thereby the overall regulatory  and credit condition in the economy.

ii.       The regulatory  policy is however not the only macro-economic policy tool.

iii.      The effectiveness of regulatory  policy has infact depended crucially oil the stance of fiscal policy.

iv.          Exchange rate policy has also exerted an important influence on the economy, particularly from supply side, quite apart from enhanced flexibility that a floating rate regime could, in principle lend to the conduct of regulatory  policy.

v.            The First Bank Plc Industry is involved in the business of providing financial service to the Nigerian economy, thus the Central Bank. Policy stance on money and the financial system affects First Bank lending performance.

vi.          The Inadequacy of funds for capital development.

vii.        The ever rising increase in recurrent expenditure.

viii.       The burden of providing basic amenities for public officers.



The study intends to identify the ways through which regulatory  policy impacts are felt on commercial batik leading in Nigeria. In essence the study hopes to review the nature of various regulatory  policy instruments employed from 1985 to 1995. Furthermore , the Study intends examining Nigeria commercial bank leading structures to accordance to the regulatory  policy design.


Finally, the study aims at finding possible default in giving out commercial bank loans and in finding Solutions to identified problems, making recommendations where possible.



However, looking more incisively a whole performance Picture of the industry can be obtained in -areas of savings, mobilisation, lending, investments etc are assessed separated of all these no other area has been known to be subject to much evaluation than LENDING. In accordance, these are some research questions which will help to highlight the performance of regulatory policy on commercial bank lending in Nigeria as follows:

1)      Have regulatory policies been able to actualizes it§ position in the portfolio management of commercial Banks in Nigeria?

2)      Has the sectoral allocations of loans been desirable?

3)      Do banks lend enough on the aggregate in accordance to regulatory policies?

4)      Is the relationship between aggregate money supply and commercial banks loans and advances pronounced?



In accordance, commercial banks have been known to “pool” the funds of saver re idle funds in economy and transfer them by way of loans and advances, to area of the economy which are prod6etive but lack the required funds.


The Central Bank of Nigeria takes advantage of Commercial Banking (First Bank) functions to direct regulatory  policy to either affect the

i.        Depositors saving

ii.       Loans and Advances


This has obliviously led by the statement of the following hypothesis to evaluate the limits of the relationship.

H0:    There is no relationship between Aggregate money supply and First Bank loans and advances.

H1     There is pronounced relationship between the Aggregate money supply and commercial bank (First Bank) loans and advances.



The study is envisaged to be of utmost importance for its attempt in examining the conceptual and practical problems, exposing the possible difficult challenges encountered in the mechanism of bank lending in First Bank via its regulatory  posture in Nigeria. This is significantly done when the role and effect of regulatory  policy measures and properly understood.


Therefore, the fact that this study is based mainly on the uniqueness of First Bank lending in recognition of public confidence within the Nigerian set up. Also the relevance of” the study can be further reinforced by the fact that Nigeria has been having a depressed economy especially during the period under review and it is through these key sectors which have been tagged “the preferred and less preferred sectors” that the deteriorating situation can be reserved.



For this research study, the Nigerian economy Is the focus of this study. Therefore, it shall analyse tile impact of regulatory  policy on First Bank lending in Nigeria.

Firstly from July 1986 to November 1998 which saw a radical departure from the dictum of control in economic and regulatory  management with the adoption of structural Adjustment programme.

Secondly, it is tile brief phase since late November 1993 to date, under this phase, it sliall focus Oil the selective reimposition of administrative control in economic and financial managernent.



This study is envisaged to be of utmost importance for its attempt in examining the conceptual and practical problems, exposing the possible difficult challenges encountered in the mechanism of bank lending in First Bank included in its regulatory  posture in Nigeria.



The following terminologies were consistently relevant to this write up:

Banking Policies: these are rules, regulation, directives and procedures from government to guild and control the activities and transaction in the banking system and other financial institutions.  

Offshore Banking: This refers to the banking activities of a bank outside the geographical bounding of its nation.

Economic and Stabilization Act of 1982: These centered a package of fiscal, monetary and exchange control measures much aimed at conserving the country’s foreign exchange.

Aim Chair Banking: This is the banking system whereby all the banks employers stay comfortable within the banking premises for the depositors to deposit their money as opposed to the banking whereby banks market for depositors which come into existence after the structural adjustment programme.

Regulation/Monetary Authorities: This include the country bank of Nigeria/Nigeria deposit insurance co-operation on Federal Ministry of Finance who are involved in mentoring and the regulation of monetary system.

Apex Bank: This refers to the central bank of Nigeria.

Structural Adjustment Programme: This is a programme introduced in 1986 by Gen. Ibrahim Babangida in order to restructure the Nigeria economy from strangle hold of the regulation.

Decree 24 of 1991: This refers is the central bank of Nigeria and other financial institution decree of 1991 (BOFID)

Decree 25 of 1991: This decree give legal banking to the establishment of primary mortgage financial institution.

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