1.1 BACKGROUND OF THE STUDY
One important factor affecting the level of economic activities in any economy is change in supply. These changed affects directly the rate of spending by the citizen of the country. It is therefore, because of the economic importance of monetary that the monetary authorities has devoted time and resources towards money management with a view of reaping the benefits inherent therein.
The credit guideline, which is my topic of study, has formed the apex instrument used by monetary authorities in Nigeria to influence economic activities. The guidelines are informed of central bank of Nigeria monetary policy circulars prescribing sectoral and aggregate increase and decreasing in credits by the commercial and merchant banks.
According to Anyanwu J.A. (1998) the credit guidelines can be used to regulate the pace and content of economic in an economy. This involves authorities interference with the volume and direction of credit by the commercial and merchant banks to those sectors of the economy. This is why the government divided the economy into major sectors, the preferred or high priority sector and the less preferred or high priority sector and the less preferred or “others” sector.
The preferred sector comprises of agricultural industrial or manufacturing enterprises residential building construction, exports and essentials services sub-sectors.
The government has since the introduction of the credit guidelines in 1964, being urging banks to grant more credit facilities to this sector or order to boost the rate of economic development in the country. The less preferred sector of the economy also comprises of general commerce, government and “others”. Government also urges the banks to allocate less funds or exercise restraint in granting loans and advances to this sectors because of the affects it this sectors because of the affects it would have no the general price level.
Credit guidelines could also be regarded as an anti-inflationary techniques preventing the flow of funds to those sectors. Of the economy that are very sensitive to inflationary pressures.
According to Orjih .J. (1996): credit Guidelines is the policy sp0elt out by the central bank of Nigeria CBN, which regulates the credit creation of the commercial banks.
This control measure was adopted by the CBN for achieving the objectives of general economic policy. It changes the volume, quantity, availability cost and direction of money and credit in a given economy.
TABLE OF CONTENTS
TITLE PAGE II
APPROVAL PAGE III
TABLE OF CONTENTS VI
1.0 INTRODUCTION 1
1.1 BACKGROUND OF THE STUDY 1
1.2 STATEMENT OF THE PROBLEM 3
1.3 OBJECTIVE OF THE STUDY 4
1.4 SIGNIFICANCE OF THE STUDY 6
1.5 LIMITATION OF THE STUDY 6
2.0 REVIEW OF RELATED LITERATURE 9
2.1 GENERAL REVIEW 9
2.2 OBJECTIVE OF CREDIT POLICY GUIDELINES16
2.3 INSTRUMENTS OF CREDIT GUIDELINES 19
2.4 CREDIT GUIDELINES “HISTORICAL
3.0 RESEARCH DESIGN AND METHODOLOGY 29
3.1 SOURCES OF DATA 29
3.2 LOCATION OF DATA 30
4.1 FINDINGS 31
5.0 RECOMMENDATION AND CONCLUSIONS 35
5.1 RECOMMENDATION 35
5.2 CONCLUSIONS 37
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