International Trade Financial Role Of Central Bank Of
Nigeria And Merchant Banks : (A Case Stud Of CBN !nugu
And Cro"n Merchant Bank Benin# International Trade Financial Role Of Central Bank Of Nigeria And Merchant Banks : (A Case Study Of CBN Enugu And Cron Merchant Bank Benin! R!$I!% OF R!&AT!' &IT!RAT(R! AN' ST('I!S OF NI)!RIA BAN*IN) S+ST!M "here has not #een e$tensi%e ork and research done es&ecially on the Nigeria e$&erience ith regards to the rules of the central #ank and 'erchant #ank in financing foreign trade in the country( Although a lot has #een ritten on the su#)ect #ut not s&ecifically in the Nigeria situation( "o &lace an order for the Co'&lete *ro)ect Material+ &ay N,+--- to ."Bank (.uaranty "rust Bank! Account Na'e Chudi/O)i Chukuka Account No --001,2134 "hen te$t the na'e of the *ro)ect to&ic+ e'ail address and your na'es to -3-5-,5,261( Fro' the fe research ork on the su#)ect+ a lot has #een said on Nigeria #anking syste' and its i'&act on the rules of the #anking industry to the econo'y( 7n Nigeria e ha%e to financial syste's: 'oney and #anking and go%ern'ent treasury( "he legiti'ate functions of #anks in an econo'y are the 'o#ili8ation of sur&lus funds+ &ro%ision of li9uidity+ &ro%ision of credit and in%est'ent o&&ortunity and ensuring effecti%e 'onetary control( "he #anking syste' in Nigeria consist of si$ classes of #anks( 1( "he co''ercial #anks 6( "he de%elo&'ent #anks 4( "he 'erchant #anks 0( "he federal 'ortgage #anks ,( "he federal sa%ing #anks 5( "he central #ank of Nigeria "he #anking syste' has continued its e%aluation in the 1:3-s( according to Christ (A( ;do+ the continuity e%olution of the Nigerian #anking syste' in the 1:3-s has #een gi%en a'&le i'&etus #y se%eral factors such as: a( "he continued groth of e$iting #anks and increasing nu'#er of a&&lications to float ne ones( #( 7nstruction of co'&uter technology in so'e of the #anks( c( 7ncrease in 'ost #anks re&orted &rofit in recent years( d( "he fall in oil &rices and the conse9uent reduction in our ca&acity to i'&ort hich has led to a reduction in de'and for i'&orts( e( "he autono'y hich the central #ank has recently on fro' the 'inistry of finance hich has increased its &ortfolio of res&onsi#ility( 7n our on o&inion+ there has #een an o#ser%ed secular increase in 'ost #anks &rofit+ #ut such as increase is #eing 'atched #y a corres&onding increase in &ro%isions 'ay not #y une$&ected of this &hase of econo'ic circle and as lending to agriculture and industries increases+ un'anagea#le increases in #ad de#t 'ay ser%e as or'ing signal to i'&ro%e the 9uality of &ortfolio 'anagers( Also the #anks in their effort to 'ake huge &rofit constitutes the'sel%es into a nuisance to the econo'y #y floating the central #ank 'onetary &olicies ai' at sta#ili8ing our econo'y( Also+ the introduction of co'&uter technology in the #anking syste' #ut the rate of effecti%e utili8ation is still lo( "here has also #een a ne de%elo&'ent in our #anking syste' ai'ed at &ro'oting e$&orts( "he resuscitation of the dor'ant e$&orts sector to di%ersify the econo'y<s e$&ort &ortfolio has had to a ne aareness #y #oth 'erchant #ank and co''ercial #anks of their e$&ort de%elo&'ent rule+ in that as&ect 7 suggest all the #anks should 'aintain s&eciali8ed de&art'ent charge ith the res&onsi#ility to &ro'ote e$&ort( "he central #ank as an autono'ous institution should a&art fro' its traditional rule or function ha%e to 'anage the 'onetary &olicy in a de&ressed econo'y( 7t as also gi%en res&onsi#ility of conducting foreign e$change 'arket #idding session and this has also reduced the docu'entation #urden lither to face #y the central #ank of Nigeria in using the e$change control syste'( 6(6 INT!RNATIONA& TRA'! AN' !,C-AN)! RAT! .O&IC+ IN NI)!RIA 7nternational trade is #ased on the ad%antages of geogra&hical s&eciali8ation( 7t is reci&rocal 'ultinational and 'utually ad%antageous( (O(A =aal S;CCESS 7N ECONOM7C >(A( E?7"7ON A;O *;B=7S@ERS 1:30 *. 6,-!( Aust as ithin each country+ it &ays one &erson to s&eciali8e in soa& 'aking and another in agriculture and yet another in heat culti%ation and then e$change their resources( 7t is ad%antageous for each country to de%ote its industry to these &roduct for hich its resources are 'ost suita#le+ e$&orting its s&ecialty in e$change for the s&ecially of other countries ("( "ER7BA ECONOMCS FOR @7.@ER E?;CA"7ON MACM7==AN *RESS 1:30! According to @ollis B Clenery( Sustained econo'ic groth re9uires a transfor'ation of the structure of &roduction that is co'&uta#le ith #oth the e%olution of do'estic de'and and o&&ortunities for international trade( 7nternational trade co'&rises e$&ort and i'&ort of goods and ser%ices of one<s country( No dou#t+ e$&ort is an engine of groth+ a &otent strategy for 'utual inter de&endence a'ong orld nation and of course an instru'ent for technological and industrial e'anci&ation( According to Bela Balasea+ e$&ort oriented &olicies a&art fro' &ro%iding si'ilar incenti%es to sales in #oth do'estic and in foreign 'arket lends to resources allocation according to co'&arati%e ad%antage allo for greater ca&acity utili8ation &er'it the e$&loitation of econo'ics of scale+ generate technological i'&ro%e'ent in res&onse to co'&etition a#road and in la#our sur&lus countries contri#ute to increased e'&loy'ent( 7nternational trade in Nigeria has contri#uted a lot to the country<s infrastructure and 'an&oer de%elo&'ent( "he structure of Nigeria<s e$ternal trade co'&rises its e$&ort and ser%ices outside the country( "he do'inant features of Nigeria<s e$&ort trade and one that is co''on to 'ost de%elo&ing countries is the &redo'inance of &ri'ary &roduct and the relati%e insignificance of 'anufactured goods( Nigeria<s 'ost single e$&ort co''odity is crude &etroleu' hich constitutes o%er :-B of total e$&ort earning( Other 'a)or e$&ort &roducts are: cocoa+ &al' kernel+ ru##er hose share of total earning a'ounted to 6(2+ -(3+ -(5 and -(0B res&ecti%ely( A conco'ittance of the increase in i'&ortance of &etroleu' a'ong Nigeria e$&ort is the fall in the de&endence of the country on agricultural &roducts es&ecially in the 1:2-s( 7n ter's of i'&ort+ 'anufactured goods for'ed Nigeria<s 'ost i'&ortant i'&ort co''odities( 7n dealing in international trade+ an e$change rate 'ust #e a&&lied #eteen nations engaging in the #usiness( According to Alha)i .(O( Otiti+ the role of e$change rate in foreign transaction and &ay'ent cannot #e o%er e'&hasi8ed for no international trade transaction #eteen one country and another can #e settled ithout a&&lying on e$change rate #eteen the to currencies( "he e$change rate is this a 'ediu' of e$change of one currency for the other( 7n Nigeria the central #ank is res&onsi#le for the deter'ination of e$change rate &olicy( "he Nigeria e$change rate &olicy in recent ti'es has #een influenced #y it<s &ossi#le contri#ution toards anti inflation effort and the #alance of &ay'ent needs of the country( (Alaha)i A#u#aka Ah'ed Bello CBN *u#lication Col( 6 Aune *g( 2!( 7n 'y on o&inion+ international trade is a trade #eteen nations of the orld and it has contri#uted a lot in the acceleration of &olitical and social econo'ic de%elo&'ent of our country( *rior to 1:2-( Nigeria<s e$&ort co'&rised &rinci&ally of agricultural &roduct including( Cocoa+ cotton+ groundnut+ &al' oil+ ru##er and ti'#er( At the ti'e of inde&endence in 1:5-+ these and other non/oil e$&ort( By 1:2- the shore of these &roduct in total e$&ort had dro&&ed to only 06B 'ainly as a result of the de%elo&'ent in the &etroleu' oil sector( Since 1:2-+ therefore+ &etroleu' #egan to take the head in Nigeria<s total e$&ort as it accounted for a#out ,:B of total e$&ort in that year( "his do'inant &osition of oil e$&orts contri#uted to #e 'aintained such that #y 1:24 it has risen to a#out 34B and rise further to a#out :3B of the total e$&ort of N1-(, Billion and N3(5 Billion at the end of 1:31 and 1:36 res&ecti%ely( "he o%er de&endence on oil as the country<s 'a)or e$&ort should not #e alloed to continue as a fall in the oil 'arket ill kee& the econo'y in standstill( Nigeria should encourage the e$&ortation of non/oil goods like agricultural &roduct( 7 suggest that go%ern'ent should shift e'&hasis on the e$&ort of non/ oil &roductsD they should encourage agriculture to ena#le the &eo&le to &roduce agricultural &roducts 'ore than they need on the i'&ortation+ and the go%ern'ent should #ase their i'&orts on co''odities that are essential #ut not necessarily score( "he country should reduce i'&ort and shift e'&hasis on the &ro'otion of e$&ort and less de&endence on i'&ort to ena#le the' conser%e the scarce foreign e$change( 7n 'y o&inion+ e$change rate is the &rice for hich one national country is e$changed for another for any transaction to take &lace+ e$change rate 'ust #e a&&lied+ if this follos that settle'ent of i'&ort #ills #eteen the i'&orter and e$&orter cannot #e effect ithout first of all ascertaining the orth of one currency in ter's of settle'ent co'es in+ the original contract #eteen the to &arties ould ha%e #een taken into consideration the relationshi& #eteen the currency of the i'&orter and e$&orter countries( 7 suggest that attention should #e directed toards e$change rate of Nigeria<s e$&enditure on i'&orted rates of recei&t for e$&ort( 6(4 BA&ANC! OF .A+M!NT AN' NI)!RIAN FOR!I)N TRA'! "he international #alance of &ay'ent is one of the 'onetary 'echanis' in%ol%ed in international trade it is a co'&rehensi%e record of all actual or official transactions ith financial and econo'ic #eteen one country and the rest of the orld( (Odusanya "(O Balance of &ay'ent lecture!( According to M(C( Caish Balance of &ay'ent is a statistical record ke&t in for' of #alance sheet co'&rising of all econo'ic transactions #eteen one country and her trading &artners o%er a &eriod of ti'e usually one year( "he 7(M(F descri#es it as a syste'atic record of all econo'ic transactions during a &eriod #eteen the resident of re&orting countries( 7t 'ay #e defined in statistical sense as on ite'i8ed account of all transaction in%ol%ing recei&t fro' foreigners on the one hand and &ay'ent 'ade to foreigners on the other hand( "he #alance of &ay'ent is not only di%ided into credits and de#its+ according to the &rinci&les of dou#le entry #ookkee&ing+ it is also di%ided hori8ontally into to 'a)or categories according to the #oard nature of the transaction concerned and the relationshi& to the national econo'y( "hese categories are the current account and the ca&ital account( "he current account consists of all transaction relating to the re&orting country<s current e$&enditure( "hese include e$&ort and i'&orts of goods and ser%ices along ith unilateral transfers (&ersonal+ official or institutional transfers!( "he current account transaction also include such ite's as trans&ortation ("rans&ort and 'erchandise insurance! tra%el in%est'ent inco'e (interest+ di%idend and &rofit on securities outside the country!( "hese are called current transactions #ecause they gi%e rise to or are a use of current national inco'e( "he current transactions are distinguished fro' ca&ital transaction+ hich directly affect ealth and de#t+ hence national in future &eriod #ut not national inco'e &roduct or consu'ed currently( "he 'easure of sur&lus or deficit in the #alance of &ay'ent reflect changes in the net li9uidity &osition of the country thus a deficit a&&ears in the #alance of &ay'ent hen antony'ous transaction re9uiring 'oney &ay'ent e$ceed autono'ous transaction in%ol%ing 'oney recei&ts( "he deficit 'eans that country is loosing li9uidity to othersD it is running don its li9uid foreign assets and or accu'ulating li9uid foreign lia#ilities( Con%ersely a sur&lus e$ist hen autono'ous &ay'ent are less than autono'ous recei&ts( Essentially therefore+ a deficit or sur&lus in the #alance of &ay'ent in%ol%ed #oth current and ca&ital transaction( 6(0 R!C!NT '!$!&O.M!NT IN NI)!RIA BA&ANC! OF .A+M!NT For a #etter understanding of the #alance of &ay'ent+ let us re%ie so'e recent de%elo&'ent in the country<s #alance of &ay'ent( "he #egin ith+ it should #e 'entioned that hile the co'&lication of Nigeria is #alance of &ay'ent is #ased on the line discussed earlier( "ransactions are usually se&arated into those of the oil sector and non/oil sector( "he oil sector co'&rises the transactions of the crude &etroleu' &roducing and e$&loring co'&anies hile the non/oil sector is 'ade u& of the rest of the econo'y including the %arious go%ern'ent &arastatals and enter&rises( "hus+ oil hich is an i'&ortant &heno'enon in Nigeria<s econo'y is also %ery crucial as far as Nigeria<s #alance of &ay'ent is concerned( "he current situation is such that de%elo&'ents is the #alance of &ay'ent long &recariously on the situation in the oil sector #efore the disco%ery of oil+ the Nigerian econo'y as funda'entally an agro/ #ased econo'y+ relying 'ainly on the &roduction fro' agric sector for her foreign e$change earnings( Agriculture accounted for 36B and other non/oil e$&orts a#out 1,B of total e$&orts %alue of the country in 1:56( #y 1:2- the share of these &roducts in total e$&ort had droo&ed to only 16B+ 'ainly as a result of the de%elo&'ent in the &etroleu' oil sector( ?uring this &eriod+ the country found itself ith 'assi%e oil re%enue+ there as a &roliferation of &ri%ate sector fir's hich ere largely de&endent on i'&orted in&ut( Conse9uently+ although the &olicy of the go%ern'ent as to use the huge oil re%enue to di%ersify the econo'y and in &articular to de%elo& the agricultural sector( >ide s&read i'#alances and distortions in the Nigerian econo'y e'erged during the oil #oo'( According to Alha)i A#u#akidi Ah'ed+ in his #ook ENigerian Econo'y and SFEMF Billion CBN &u#lication Se&te'#er 1:32 *g( 16 the country as transfor'ed fro' one de&endent on oil during the &eriod of oil #oo'+ for e$a'&le the share of agriculture in .ross do'estic &roduct decline fro' a#out 0-B in the early 1:2-<s to 6-B in 1:3-( Moreo%er+ #y 1:3- oil accu'ulated for a#out 63B of .(?(*+ 31B of go%ern'ent re%enue and :5B of e$&ort earning( "he hea%y de&endency on oil and i'&orted in&uts rendered the econo'y %alua#le to e$ternal shocks ith the colla&se of the orld oil 'arket in 'id 1:31( to 'ake 'atters orse+ the country &ursued restricti%e trade and e$change control &olicies hich in retros&ecti%e ere counter &roducti%e( >ithin fi%e years of oil #oo'+ Nigeria as a#le to s9uander hat reser%e it has #uilt u& and ended u& in a chronic deficit in her #alance of &ay'ent( Before the do'inance of the oil sector+ &articularly #eteen 1:5- 1:2-+ the #alance of &ay'ent<s #eha%iour as less erratic( @oe%er+ the #alance of &ay'ent had sang at one ti'e or the other fro' a &osition of strength o that of eakness( "he discussion a#o%e re%ies #riefly the de%elo&'ent of the #alance of &ay'ent in Nigeria since inde&endence in 1:5-( it also re%eals that the #eha%iour of the #alance of &ay'ent in Nigeria as rather erratic &articularly since 1:2-( further 'ore the &eriod since 1:2- is one ith a nu'#er of un&recedented records in ter's of #oth #alance of &ay'ent sur&lus and deficit( 7t is a &eriod 'arketed ith u&s and dons in the country<s #alance of &ay'ent de%elo&'ent( 7n addition+ the rather erratic #eha%iour or our #alance of &ay'ent &osition since 1:2- has led to the go%ern'ent attending to each #alance of &ay'ent &ro#le' ith so'e short generally rela$ed during &eriod of #alance or &ay'ent sur&lus and tightened against hen the &osition falls #ack to that of a deficit( "hus language solutions are not e'&loyed to tackle the #alance of &ay'ent &ro#le'( 6(, .RINCI.&! OF COM.ARATI$! COST "he fact that countries fro' international trade is su''ed u& in &rinci&le of co'&arati%e cost+ hich states that countries ill #enefit fro' international trade #y s&eciali8ation in those co''odities in the &roduction of hich they ha%e greatest co'&arati%e cost ad%antage o%er other countries or the least co'&arati%e cost disad%antage( Basically this 'eans that countries should concentrate on &roducing those co''odities hich they &roduce 'ore chea&ly than other co''odities( 7t 'ay #e #ecause of a%aila#ility of chea&er la#our+ ca&ital or natural resources( 7n 'y understanding+ the idea of co'&arati%e ad%antage can #e e$&ressed #y the use of an analogy in hich the #est architect in a &articular ton also ha&&ened to #e the #est car&enter in the ton+ it ould not 'ake an econo'ic sense for the 'an to #uild his on fra'e #ecause he can earn 'ore 'oney #y de%oting all his &rofessional energy to his )o# as an architect+ e%en though he has to e'&loy a car&enter less skillful than hi'self to #uild his ho'e( A country like the architect ill gain if it concentrate it<s resources on the &roduction of those co''odities it can &roduce relati%ely 'ore chea&ly and 'ost efficiently( A country 'ay re9uire a co'&arati%e ad%antage in any one of nu'#er of ays( 7t also result fro' the skill of the la#our force ac9uired though the tradition or through the si8e of the la#our force relati%e to the a'ount of land or ca&ital( 7t 'ay also co'e a#out #ecause of cli'ate and geogra&hy( 6(5 TRA'! R!STRICTION A restriction on trade is any 'easure that interferes ith the free 'o%e'ent of flo of goods #eteen countries and there#y &re%ent resources #eing used in accordance ith co'&arati%e cost( Restriction could #e #y &rohi#ition+ Guatas+ "a$es on trade+ su#sides+ E$change control 'essages etc( All these are ai'ed at reading the %olu'e of i'&orts of country( ?uring the &eriod of oil #oo' in Nigeria+ there as a &roliferation of &ri%ate sector fir's+ hich ere largely de&endent on i'&orted in&uts( "his resulted in the searcity of our foreign e$change+ since that ti'e the go%ern'ent has #een a&&lying so'e restricti%e in 'easure to conser%e our 'eager foreign e$change+ this had led the #een &laced on i'&ortation of so'e co''odities that are essential #ut not necessarily scarce( 6(2 INT!RNATIONA& TRA'! '!$!&O.M!NT AN' T-! !$O&(TION OF T-! NI)!RIAN !CONOM+ "rade has long &layed a 'a)or role in the social and &olitical life of Nigerian co''unities( 7n &re/ colonial ti'es+ the area of &resent day Nigeria consisted of thousands of societies and &olitics ranging fro' the large scale e'&ire Sudan+ through forest kingdo's to the s'all scale autono'ous co''unities of the south/east( >hile econo'ic relationshi&+ de&ending 'ore #asically on the relati%e distri#ution of units of &roduction and consu'&tion+ often cut across social/&olitical #oundaries+ the &olitical syste' often &ro%ided on internally coherent organi8ational fra'e ork for 'editating the flo of trade #eteen the &olities( Agriculture as the #asic econo'ic acti%ity and &ro%ided the sta&le of trade( "he &attern of flo of agricultural co''odities reflecting ecological and cultural differences+ #ut #esides agricultural &roducts there as an acti%e 'arket in ra 'aterials and 'ineral &roducts as ell as craft and 'anufactures( 7n the 'ain+ traditional trade as a &oerful integrating force+ the #ulk of trade as locali8ed #ut a significant &ro&ortion as trade o%er long distances+ co''odities for long distance trade as 'ainly strategic goods and lu$ury ite's+ includingD salt+ gold+ leather+ goods+ te$tile+ )eelry+ horses and sla%es+ a li'itation i'&osed #y high cost of trans&ort ith &ri'iti%e technology( ?irect contact ith Euro&ean traders on the coast #rought a ne di'ension to trade+ the restructuring of le%el 'assi%e re9uire'ent of Euro&ean and A'erican 'arkets and &rofound affected the state of the society and &olitics( "he trade in sla%e as directly associated ith the rise of 'ilitaristic e'&ire kingdo's and &rinci&alities( S&eciali8ed trading co''odities de%elo&ed along the 'a)or routes and coast to 'ediat the trade #eteen the interior sla%e &roducers and the e$ternal sla%e #uyers( "he e$&ort #ase #egan to change hen Nigerian entered the &etroleu' e$&ort 'arket in 1:,3( "he re%olution ca'e ith the e$&losion of international &etroleu' &rices in 1:2-<s( unlike agricultural e$&orts+ the link #eteen the &etroleu' industry and do'estic &roduction and consu'&tion syste' ha%e #een 'ini'al( AS*EC"S OF ?E*EN?ENCH Co''odity trade is only one of the co'&le$ of econo'ic relationshi& hich lie Nigeria to the outside orld #ut it is the 'ost #asic and underlies 'ost of the others( "he other i'&ortant econo'ic relationshi&s 'ay he classifies under ser%ices+ direct in%est'ent and finance( COMMO?7"H "RA?E Si8e and co'&osition: "he Nigeria econo'y is one of the 'ost o&en in the orld( An e$a'ination of international statistics slos that in 1:34 Nigeria<s 'erchandise trade as e9ui%alent to ,,B of it<s .(?(*( "he &erfor'ance as #y for the highest a'ong the ten 'ost &o&ulous third orld countries (a%erage &erfor'ance 64B!( A'ong the ten 'ost &o&ulous industrial 'arket econo'ics it as sur&assed only #y the Netherlands (:0B! hat kind of trade is this+ e ay #egin our analysis #y considering the e$ternal trade in co''odities in the content of co''odity structure of the Nigeria 'arket as a hole( 6(3 T-! B!N!FITS OF INT!RNATIONA& TRA'! Fro' the econo'ic &oint of %ie+ international trade is i'&ortant since it allos countries to s&eciali8e in the &roducts or ser%ices it can #est &roduce( "hese can #e e$changed ith the &roducts etc( of other countries to the 'utual ad%antage of #oth( "his &rocess is kno as co'&arati%e cost( 7nternational trade #rings a#out loer cost as a result of larger econo'ics of &roductions( 7nternational trade could also destroy the 'ono&oly &oer that a single &roducer ithin a country has o#tained and 'ay also ha%e good effects on relations #eteen countries as it leads to great contact different &eo&le( 7nternational trade is orld ide and has the folloing ad%antages: i( "he &roducts of the orld are distri#uted o%er a greater are and therefore hen e$change+ a greater nu'#er of ants are satisfies( Britain ha%e adherent su&&lies of a fe ra 'aterials #ut the range of agrie &roduct is li'ited on account of cli'ate( Countries such as Nigeria+ est/7ndies etc( ha%e national conditions hich fa%or agriculture and are a#le to gro &roducts hich cannot #e gron or &roduced in Britain for cli'ate reasons( "he e$change of goods and ser%ices ill encourage high standard of li%ing for the inha#itants of all &artici&ating countries( ii( "he &eo&le of the orld differ in national a#ility )ust as 'aterials co''odities differ in order res&ects( "e differences 'ay #e in skills ac9uired #y traditions+ or those thought through ha%ing the o&&ortunity of &ro&er education and #raining( Foreign trade ena#les the orld to 'ake the #est use of these differences that e$ists a'ong the &eo&le of the orld( iii( 7nternational trade 'akes the countries of the orld interde&endent and the ell #eing of each country is to the #enefit of all( "he industry of the orld is si'ilar to a large 'achine here there are thousand &arts and each de&ends on the s'ooth and efficient orking of others( F(NCTIONS OF M!RC-ANT BAN*S "he 'erchant #anks is Nigeria in kee&ing ith the econo'ic &olicies of go%ern'ent+ trend to &erfor' the folloing ser%ices to #oth the &referred and less &referred sectors of the econo'y at &resent as re%ealed #y the study carries out on croun 'erchant Benin( 1( COR*ORA"E F7NANCE SERC7CES a( =oan syndication: "his is a ty&e of ser%ice offered #y 'erchant #anks hich nor'ally in%ol%es 'any #anks co'ing together to 'ake a large loan for a &eriod of fi%e years( "his ser%ice is ado&ted hen clients re9uire large loans hich one #ank cannot 'ake due to financial or legal constraints( "he #anks ca'e together to for' a consortiu' to 'ake the loan( "he ad%antage to #ankers is that they share the risk hile the client has #een a#le to secure the loan hich otherise ould #e i'&ossi#le in the light of it<s largeness and long &eriod of ti'e( #( E9ui&'ent leasing: E9ui&'ents are leased to industrialists to facilitate &roduction #y #ank( the e$ercise in%ol%es onershi& of e9ui&'ent on one side and control or use of the e9ui&'ent on the other( .enerally ith this+ industries are relie%ed of the financial constraint of &urchasing (outright! e9ui&'ent for their &roducti%e &rocess #y the a%aila#ility this facility( c( Ca&ital issues: As issuing house+ the 'erchant #anks ad%ise in raising ne ca&ital either #y &u#lic issues or &ri%ate &lace'ents and also underrite and 'arket such issues( 6( BAN*IN) S!R$IC!S a( Money 'anage'ent and re'ittances: Merchant #anks are s&ecialists in funds 'anage'ent and %ery often they are called u&on to assist co'&anies in de%elo&ing in%est'ent &rogra''es for e$cess funds( Money 'anage'ent is one of the earlier functions of 'erchant #anks( As for re'ittances the #anks re'it funds arising fro' trade and non/trade transactions ithout delay( "hey also recei%e and deli%er fund re'itted fro' a#road to cor&orate client at ho'e( #( ?ocu'entary and clean creditsIcollections: "he 'erchant #anks &ro%ide docu'entary sight and acce&tance credit ser%ices to their cor&orate clients( ?ocu'entary credits are %ery useful instru'ents in facilitating co''ercial relati%es such as #eteen an i'&orter in one country and a 'erchant a#road+ or in financing or shi&'ent of 'erchandise fro' one country to another( Collection ser%ices co%ering co''odities and ser%ices i'&orted into and e$&orted out of Nigeria constitute another ty&e of ser%ices i'&orted into and e$&orted out of Nigeria constitute another ty&e of ser%ice &ro%ided #y the 'erchant #anks in Nigeria to their cor&orate clients( "he ser%ice also enhances relations in ter's of i'&orts and e$&orts of co''odities and ser%ices( c( ?e&art'ent factoring and &u#lic 'anage'ent : "he #anks carry out de#ts factoring ith or ithout resources( ?e#t factoring ith resources 'eans that the de#t is &ledged #y a cor&orate any other institution for the &ur&ose of collecting funds fro' the #anks for the cor&orations concerned and not to loose anything in the e%ent of default #y the #y the de#tors #ut the oners of the de#ts that 'ay result( ?e#t &etering ithout resources on the other land 'eans that the de#t has #een sold out/right to the #anks of a discount in this case the #ank of a discount in this case the #anks #eco'e the oner of the de#t and ill #ear any loss in the e%ent of default #y the de#tors( Merchant #anks also offer de#t 'anage'ent ser%ices to this clients hich include ad%ising the' or &ro&er ter's for an issue+ guidance or regulations drafting and 'arketing the issues( d( ?irect loans: =oans are directly 'ade a%aila#le to clients for orking ca&ital( "rade finance+ &lant e$&ansion+ e9ui&'ent &urchases outside the leased ones and for 'ost other nor'al cor&orator &ur&oses( "hese loans are often 'ade on short 'ediu' and long ter' #asis in #oth the &referred sectors and su#/sectors of the central #ank credit guidelines hich #eco'e a&&lica#le to 'erchant #anks ser%ice A&ril 1:25( e( *ro)ect finance: "he #anks ha%e in%ol%ed in &ro)ect financing &articularly here ne &ro)ects are a#out to #e esta#lished e$a'&le is the NA= 'erchant #ank =td handled the &ro)ect financing of S"HR Nig ="d( A co'&any esta#lishing a co''ercial %ehicle &lant in Bauchi in &artnershi& ith the federal 'ilitary go%ern'ent and a nu'#er of state go%ern'ent( f( @andling of letters of credit: "he ser%ices of 'erchant #anks in Nigeria include such o&erational ones as 'aintenance of letters of credit for clients( A letter of credit is one issued #y the #uyer<s (i'&orter<s! #ank guaranteeing that the e$&orter ould #e &aid for his ite' (of trade! hen they are shifted( "his letter usually goes fro' the i'&orter<s #ank to the e$&orter<s #ank and 'ost #usiness 'en like this transaction #ecause of it<s si'&licity in o&eration( g( Other ser%ices: Other ser%ices &ro%ided #y 'erchant #anks to it<s custo'er include: feasi#ility studies and ad%ice on ca&ital structure+ 'arketing su&&ort and &ricing securities+ stock #roking and de#enture stock issues+ offering trustee ser%ices and organi8ing se'inars acce&tance of de&osit+ #ill discounting and foreign transactions to 'eet the need of co''erce and industry+ 'erger and ac9uisitions+ e$&ort &ro'otion( 6(1- F(NCTIONS OF T-! C!NTRA& BAN* OF NI)!RIA Based on the infor'ation o#tained fro' CBN Enugu( "he central #ank of Nigeria Act is s&ecific as to the ty&e of functions the #ank should &erfor'( "hese functions knon as traditional function are further disenssed #elo: 1( 7ssue of legal tender currency: One of the 'a)or tasks confronting the #ank at ti'e of it<s esta#lish'ent as the need to re&lace the est African currency #oard notes and coins ith it<s on( Conse9uently on Auly 1+ 1:,:( "he #ank issued the first Nigeria country and #egan the &rocess of ithdraing the >ACB currency fro' circulation in the country( Since then se%eral currency changes has #een carried out in the country+ the change as 'eant in each case to underscore so'e &articular o#)ecti%es of the Nigerian go%ern'ent for e$a'&le: there as in 1:5, design to reflect the re&u#lican statues of Nigeria( "he one undertaken in 1:53 during the ci%il ar ai'ed at ensuring the success of the federal go%ern'ents trade e'#arked on the secessionist<s areas and to forceful the use unissued currency notes that had #een illegally re'o%ed fro' the CBN %oults in Enugu+ &ort @arcourt and Benin( 7n Aanuary+ 1:24 deci'al notes ere issued for the first ti'e folloing the authority<s decision to change o%er to the decisional syste' of currency( "his as folloed #y the introduction of N6- notes in 1:22 to honor the assassinated head of state general Mortala Moha''ed( 7n Auly 1:2:( ne designs of N 1+ N , and N 1- notes ere introduced and standardi8ed to #e of the sa'e si8e of the N 6- notes( "hey ere also designed as the N 6- notes to carry the &ortraits of National horses( Another changes ere 'ade in A&ril and 'ay 1:30( hen the la#ours of %arious currency notes (e$&ect ,- ko#o! ere changed in other to forestall the acti%ities of currency traffickers and counterfeit 'ongers( =ater in 1::1+ the hole currency ere changes and another ne one ere added i(e( N ,- note and today e ha%e N 1-- and N 6--+ and the 'ost recent the N ,-- notes in circulation( 6( Manage'ent of e$ternal reser%e: "he #ank has res&onsi#ility for 'aintaining e$ternal reser%e in order to safeguard the international %alue of the Nigeria currency( 7t is legally re9uired to 'aintain e$ternal reser%es e9ual to 6,B of it<s issue and other de'and lia#ilities( "o this end the #ank de'and custodian and 'anager of the country<s foreign e$change reser%es( "he #anks res&onsi#ility for the 'anage'ent of Nigeria<s e$ternal reser%es dates #ack to 1:,: folloing the recei&t of the starting assets #acking of the est African currency #oard( 7n 1:52 as a result of a'end'ent to the e$change control @et 1:5-+ authori8ed foreign e$change dealers ere re9uired fro' that ti'e to surrender all their e$&ort &roceed to the central #ank of Nigeria( "his de%elo&'ent essentially centrali8ed all the reser%e holding of the country in the central #ank hich until 1:24 in%ested the' through it<s to corres&ondents #anks a#road that is the #ank of England and the federal reser%e #ank of Ne Hork ;(S(A( "he grinding consideration in its in%est'ent choices #eing li9uidity security and inco'e( @oe%er+ since 1:24+ as a result of the 'ulti&le increase in reser%es+ &ositi%e ne action as called for hich essentially 'eant that ne inco'e o&&ortunity could #e e$&lored hile at the sa'e ti'e reducing to the 'ini'u' &ossi#le losses fro' &ro#a#ly de%aluation or de&reciation of reser%e currencies as &ossi#le instead of only in ;(S( ?ollar and found starling hich as discussed earlier+ as the case &rior to 1:24+ currently the central #ank 'aintains accounts in %irtually e%ery 'a)or central #ank in the estern orld( An i'&ortant as&ect of the e$ternal reser%e 'anage'ent is the deter'ination of the e$change rate of the Naira( ;ntil early in 1:23+ the e$change rate of the Naria as ties to the 'o%e'ent of the ;( S( ?ollar and &ound starling in the international 'oney 'arkets( Currently hoe%er+ a #asket of currencies a&&roach si'ilar to the 11:e %aluation 'ethod for the S( ?( R is used( 4( Banker and financial ad%iser to the go%ern'ent: "he central #ank of Nigeria as ith 'ost other central #ank is oned #y the federal go%ern'ent hich fully su#scri#ed to the &aid u& ca&ital of N 4(- 'illion sti&ulated in the C(B(N( Act( of 1:,3( "he Act itself+ stated that the #ank shall #e entrusted ith federal go%ern'ent<s #anking and foreign e$change transactions in Nigeria and a#road including &ay'ent to or in res&ect of the international 'onetary fund( "he C(B(N Act s&ecifically assigns the central #ank of Nigeria ith the role of recei%ing and distur#ing federal go%ern'ents 'oney and kee&ing account thereof ithout re'uneration for such ser%ices( Further+ in any &lace here there is no #ranch of the #ank( it 'ay a&&oint another #ank to act as it<s agent for #anking transactions of the go%ern'ent( 7n &ursuance of this statutory re9uire'ent+ the #ank tool o%er fro' other #ank institution 'ost of the federal go%ern'ent #anking transactions in the country+ i''ediately folloing it<s esta#lish'ent in 1:,3( this is the o#ligated to &erfor' those #anking functions for the go%ern'ent that a co''ercial #ank ill nor'ally &ro%ide for its custo'ers( @ence in addition to kee&ing the account of the federal go%ern'ent+ it also grants short and long/ter' loans to the go%ern'ent in the for' of ays and 'eans+ ad%ances+ "reasury hill+ treasury certificate and de%elo&'ent stock( "he central #ank of Nigeria is also a 'a)or &artici&ant in the negotiation of internal loans for the federal go%ern'ent and 'anage this loans on #ehalf of the go%ern'ent( 7n addition to acting as #anker to the federal go%ern'ent+ CBN Act+ also &ro%ide that the #ank 'ay also act as #ank to any financial institution or cor&oration of the federal go%ern'ent or any state go%ern'ent( "he #ank is also a key ad%iser to the federal go%ern'ent on do'estic and international econo'ic affairs( "here is continuous consultation #eteen the federal go%ern'ent and the #ank on 'a)or econo'ic issues and re&resentati%e of the CBN often ser%e in %arious econo'ic ad%isory #odies of the federal go%ern'ent( 0( Relationshi& of the CBN ith the co''ercial #anks: Section 43 of the central #ank Act 1:,3+ s&ecifically states that the CBN E'ay act as #anker to other #anks in Nigeria and A#roadF( "he Act further en)oying the #ank to see the cor&oration of and coo&erate ith other #anks in Nigeria to &ro'ote and 'aintain ade9uate #anking ser%ices for the &u#lic as ell as ensure high standard of conduct and 'anage'ent throughout the #anking syste'( Along ith this+ the Act also direct s that the central #ank after consultation ith the 'inister of finance+ to &rescri#e a 'ini'u' ratio of total loans and ad%ances to #e granted to indigenous &erson as ell as the &ro&ortion of a co''ercial #ank<s total de&osit lia#ilities that 'ust #e held as cash reser%e at the central #ank and as li9uid assets( "o this end+ the #anks are re9uires to su#'it 'onthly returns to the CBN and also allo the CBN to 'onitor their acti%ities+ &articularly ith res&ect to co'&liance ith s&ecific CBN guideline( "he returns are also useful in that they hel& the #ank<s hich 'ight re9uire ad%ice in the 'anage'ent of their affairs( Further'ore+ the reco''endation of the CBN is %ery critical to the esta#lish'ent of any ne co''ercial or 'erchant #anks in Nigeria( 7ndeed the &rocess for granting of a #anking license in Nigeria re9uires that any a&&lication for such a license should in the first &lace #e su#'itted to the central #ank for re%ie and reco''endation u&on the reco''endation of the central #ank the a&&lication is forarded to the 'inistry of finance and through the 'inistry of finance to the go%ern'ent for final a&&ro%al u&on a&&ro%al #y the go%ern'ent+ CBN along ith se%en other #anks inaugurated E"he #anker co''itteeF on the 6:th Se&te'#er 1:,3 a fe 'onths after its esta#lish'ent( "he co''ittee<s 'e'#ershi& is 'ade u& of all licensed #ank<s o&erating in the country and central #ank of Nigeria( One of the 'a)or o#)ecti%e of the co''ittee is to de%elo& a foru' for co/o&eration a'ong all #anks in their o&eration( "he CBN %ery fre9uently uses the foru' to announce so'e of it<s 'a)or &olicies as they affect the #anking syste' as ell as to a&&eal to #ank<s to co/o&erate in the i'&lantation of so'e s&ecific go%ern'ent and central #ank 'easures( "he co''ittee has also designed s&ecific codes of condnet for all 'e'#ers that are ai'ed a'ong others( "o &rotect the #anks against frauds and 'al&ractices and to &ro'ote the efficient o&eration of the #anking syste' in the country( "he chair'an of the co''ittee is the go%ernor or in his a#sent the de&uty go%ernor of the central #ank( the secretary of the co''ittee is also a senior staff of CBN( "he central #ank of Nigeria also &lay an i'&ortant role of lender of last resort to all co''ercial #anks( "he role is %ery i'&ortant and has resulted in significant reduction in #ank failures in the country( As a lender of last resort+ the CBN is o#liged to co'e to the aid of any licensed #ank in the country that 'ight #e in financial crises( ,+ *ro'otion of 'onetary sta#ility: "he central #ank of Nigeria has &ri'ary res&onsi#ility in consultancies ith the federal 'inistry of finance for for'ulation and e$ecuting 'onetary &olicy+ a %ery i'&ortant function of the #ank( @oe%er+ folloing the CBN Act+ (A'end'ent! ?ecree No 4 of 1:54+ these &oer ere so'ehat curtailed+ hile the CBN is the recogni8ed 'onetary authority ith res&onsi#ilities for 'onetary &olicy+ 'onetary &olicy is actually &ro&osed %ia a 'e'orandu' sent #y the #ank to the go%ern'ent through the honoura#le 'inister for finance( "he a'end'ent to the CBN the #oard of directors of the #ank kee& the honora#le 'inister infor'ed of the 'onetary and #anking &olicy &ursued or intends to #e &ursued #y the #ank( >here the 'inister disagree ith any of the CBN<s &olicy &ro&osal+ he 'ay su#)ect his o#)ections and alternati%e &ro&osals along ith those of the CBN directly to the go%ern'ent( "he final decision of the go%ern'ent is e'#odied in the annual 'onetary &olicy circular issued y the #ank to all co''ercial and 'erchant #anks in a sense+ the federal go%ern'ent is the ulti'ate 'onetary authority and the central #ank &lays #asically an ad%isory role( "he CBN also &rescri#e the ratio of de&osit lia#ilities hich co''ercial #anks 'ust hold in the for' of li9uid assets( "he ratio is ai'ed at &rotecting the interest of de&osit oners and control the o%erall %olu'e of credit( So'e of the ite's included in the co'&utation of #ank li9uid ratio are "reasury #ill+ "reasury certificate and eligi#le de%elo&'ent stock (i(e( go%ern'ent stock 'ini'u' li9uidity ratio &rescri#ed #y the CBN has ne%er #een changed fro' the original 6,B( Banks as a grou& hoe%er constantly e$ceeded his forget #y significant 'argin( Belo it could #e said that Nigeria #ank<s ha%e not regarded this ratio as a 'onetary &olicy tool designed to e$&and or cur# their credit acti%ities if need #e #ut as a )ustifia#le 'eans of lending short+ &articularly to the go%ern'ent sector( 7ndeed co''ercial #anks in Nigeria ha%e #een accused of sitting tight on old age orthodorcy in #ills doctrine of lending short ithout talking so'e risk in 'ediu' and long/ter' in%est'ent( 6(11 T-! RO&! OF T-! M!RC-ANT BAN*S IN FINANCIN) INT!RNATIONA& TRA'! M!RC-ANT BAN*/S AN' INT!RNATIONA& TRANSACTIONS Cron 'erchant #ank has ac9uired a re&utation for fast and efficient &rocessing of international #usiness transactions such as foreign e$change for co'&anies engaged in i'&orting and e$&orting of ca&ital goods and co''odities+ 'erchant #ank<s &ro%ide ser%ices hich include the &rocessing of re'ittances+ ?ocu'entary credits such as ?ocu'entary ?raft for collection (??C! and letters of credit (=C!( a( Re'ittance: Co'&anies hich i'&ort goods fro' o%ersees su&&liers 'ay use 'erchant #ank for the re'ittance of foreign e$change as co''issions for this ser%ices are controlled #y the CBN+( #( ?ocu'entary ?raft For Collection (??C!: 7n order to safeguard his goods until &ay'ent has #een 'ade #y the i'&orter or until the i'&orter has entered into a legal o#ligation to &ay an e$&orter of goods to Nigeria 'ay re9uire that &ay'ent #e 'ade through the use of ??C( "he 'ethodology of this international collection (??C! is as follos( "he e$&orter shi&s his goods and then dra<s a sight or ti'e draft on the i'&orter and deli%ered the draft on the i'&orter together ith the rele%ant docu'ents to his o%ersees #ank( "he e$&orter<s #ank then sends this infor's the i'&orting co'&any that can co'e and collect the docu'ents necessary for release of the goods fro' the &orts+ if it 'eets the ter's of the draft+ the i'&orter ould ha%e to &ay for the goods #efore collecting the docu'ents hilst in the case of a ti'e draft+ the i'&orter ould ha%e to acce&t a legal o#ligation to &ay for the draft of 'aturity( 7n essence the #ank acts as an agent in the transaction and changes fees set #y the CBN for it<s ser%ices( c( O&en account: 7n o&en account transaction+ the #usiness transaction #eteen the i'&orter is #ased on trust i(e( the e$&orter on the send the goods on trust i'&orter on the #elief that the i'&orter ill &ay as soon as he sell the goods( "he e$&orter+ it is no the duty of the i'&orter to sell the goods and &rocess the docu'ents to ena#les &ay'ent to #e 'ade usefully the i'&orter ill a&&ly for foreign e$change to the tone of the a'ount of the goods through his #ank to the CBN( >hen this is a&&ro%ed+ the i'&orter can then &ay the e$&orter through his #ank( d( =etters of credit (confir'ed J unconfir'ed!: 7n 'odern international trade+ the co''ercial letters credit ha%e #eco'e %ery useful instru'ent for facilitating transactions #eteen a #uyer or i'&orter in one country say Nigeria and a seller or e$&orter in another country say Austria( Confir'ed letters of credit 'ay #e used in the folloing ty&ical 'anners( "he #uyer instructs his on #anker here in Nigeria in the fallour of a seller ith a #ank in the sellers country ("he inter'ediary or corres&ondent #ank!( the #uyer instructs the issuing #ank the seller should only #e alloed to dra on the credit on &resenting to the corres&ondent #ank+ docu'ents shoing that the goods su#)ect to the contract ha%e already #een shi&&ed to the #uyer in accordance ith the contract re9uire'ent( *AHMEN": "his docu'ents ould nor'ally consists of the seller<s in%oice+ the #ill of lading and the insurance &olicy or certificate es&ecially in C(7(F contracts( >here these docu'ents are &resented #y the seller to the corres&ondent #ank and this #ank is satisfied that they are in order+ they ill &er'it the seller to dra against the credit e%en though issuing #ank has not yet 'ade a%aila#le the necessary funds( "his &ay'ent #y 'eans of #anker<s confir'ed letter of credit o&erates not 'erely as a 'ethod of &ay'ent #ut as a 'eans of guaranteeing &ay'ent( Co''ercial letters of credit co'e in %arious for's( "here are to 'ain ty&es: Re%ocation and 7rre%ocation letters of credit( "he letter 'ay #e confir'ed or unconfir'ed( AN IRR!$OCATION &!TT!R OF CR!'IT 7s a definite undertaking #y the issuing #ank that the credit ill #e 'ade a%aila#le to the seller on his co'&liance ith the sti&ulated conditions+ that e$&ort of goods to the #uyer and tender of the in%oice and issuance &olicy as the case 'ay #e to the inter'ediary or corres&ondent #ank( A R!$OCAB&! CR!'IT does not constitute a definite co''it'ent #y the issuing #ank and 'ay #e ithdraing at any ti'e( A co''ercial letter of credit is confir' of the corres&ondent #ank acce&ts a direct o#)ecti%e to the seller to honour the credit hether or not funds ha%e #een 'ade a%aila#le to it #y the issuing #ank( Nor'ally+ this ould #e done for on e$tra co''ission &aya#le #y the seller+ here the credit is unconfir'ed the seller can only #e &aid if funds are 'ade a%aila#le #y the issuing #ank( otherise the sellers has a recourses against the corres&ondent #ank for &ay'ent( An irre%oca#le letters of credit i'&oses an a#solute o#ligation on the corres&ondent #ank to &ay u&on the lender of the necessary docu'ents ithin the &eriod alloed( No su#se9uent instructions fro' the #uyers and no dis&utes #eteen the #uyer and the sellers as to ether the #ank fro' its o#ligation here an irre%oca#le letter of credit is a%aila#le+ the #uyer cannot for e$a'&le order the corres&ondent #ank to sto& &ay'ent #ecause the goods su&&lied are not satisfactory &ro%ided the docu'ents &resented #y the seller ere in accordance ith the conditions laid don #y the issuing #ank( 7t is this characteristic that a&&eals to foreign e$&orters( "he 'ade of &ay'ent a%oid any o#stacle hich the #uyer 'ight raise after the goods ha%e #een &ut in transit( 6(16 RO&! OF T-! C!NTRA& BAN* OF NI)!RIA IN FINANCIN) INT!RNATIONA& TRA'! 7nfor'ation o#tained fro' CBN Enugu re%eals that the central #ank of Nigeria like 'ost other central #ank<s in the orld o%er &erfor's certain national and other international functions( "he 'ain functions of the central #ank to international trade has #een in ter's of e$ecution of foreign e$change in 'ost de%elo&ing countries like Nigeria+ recei&ts of foreign e$change is usually inade9uate to 'eet current or &erha&s future de'and for foreign &ay'ent( 7n addition+ a nation needs to conser%e or hold foreign e$change resources at a le%el that her trading &artners do not ha%e dou#ts as her a#ility to 'eet her international o#ligations( "he federal go%ern'ent of Nigeria in effort to see to the &ro&er e$ecution of the foreign e$change &olicy to &rotect the country<s #alance of &ay'ent and to 'aintain sta#ility in the do'estic econo'y+ she ado&ts so'e fiscal and 'onetary &olicies to introduce e$change control 'easures( "hese change fro' ti'e to ti'e de&ending on the state of the econo'y( "here as on oil #oo' in Nigeria in the 1:2-<s during hich ti'e the country found itself ith 'assi%e oil re%enue( At the ti'e the nation did not ha%e &ro#le' ith its foreign e$change and #alance of &ay'ent( Conse9uently+ although the fiscal &olicy of the go%ern'ent at the ti'e as to use the huge oil re%enue to di%ersify the econo'y and in &articular to de%elo& the agricultural sector( >ide s&read un#alances and distortion in the Nigeria econo'y e'erged during the &eriod of oil #oo'+ the country as transfor'ed fro' one de&endent on agriculture to one hea%ily de&endent on oil( "o 'ake 'atters orse the country &ersuade restricti%e trade and e$change control &olicies hich an retros&ect ere counter &roducti%e( As a result of the oil ghit hich started early in 1:31+ the country<s #alance of &ay'ent deter'ined( By A&ril 1:36+ the situation #eca'e so serious that the hardly finance foru 'onths i'&ort (a resources le%el hich is con%entionally! regarded as inade9uate #y the international 'onetary fund (7MF!( "he central #ank as &art of go%ern'ent 'achinery for for'ulating and i'&le'enting econo'ic &olicies &artici&ated in the design of 'easures to re%a'& the econo'y in the circu'stances it as i'&erati%e to design short ter' drastic 'easure to address the unhealthy de%elo&'ent( "his therefore led the federal go%ern'ent to introduce so'e econo'ic sta#ili8ation 'easure ai'ed at drastically curtailing i'&orts and conse9uently reducing foreign e$change dis#ar'ent( "he 'easures include reduction of "ra%el alloances &egging the annual nu'#er of &ilgri's &erfor'ing the ha)) &rescri&tion of co'&ulsory ad%ance de&osits against in&ut ith &ercentage ranging #eteen 1-B and 1,B for ra 'aterial and s&are &arts res&ecti%ely the 6,B for &assenger cars and re/introduction of &reshi'ent ins&ection for industrial ra 'aterials( "he a#o%e 'easures notithstanding the 'eager inflo of foreign ere rationed ith &riority gi%en to &ay'ent for ser%ices such as ho'e re'ihance+ Education+ Medical+ interest on a&&ro%ed loan+ Re&ay'ent of loan+ "ra%els etc( "hese 'easures ere 'ade 'ore straight and &er%asi%e #eteen 1:36 and 1:3,( Further'ore+ in kee&ing the regi'e of controls the naira as su#stantially o%er %alued through canlious ad'inistrati%e action( Moreo%er+ the restricti%e 'easures( For fro' dealing effecti%ely ith the funda'ental econo'ic &ro#le's confronting the econo'y 'ade 'atters orse( .i%en those &re%ailing circu'stances+ hich 'any &eo&le ha%e no con%eniently forgotten+ the &ressure for radical econo'ic refor' could the longer #e resisted( "his is a #rief #ackground to the introduction of the structural Ad)ust'ent &rogra''e #y the Ba#angida Ad'inistration in 1:35( "he #road o#)ecti%e of the SA* ere to restricti%e and di%ersify the &roducti%e #ase of the Nigeria econo'y in order to reduce de&endence on oil sector and i'&orts and also to foster self reliance and enhance efficiency in the &u#lic and &ri%ate sector of the econo'y( "he central Bank as the 'a)or ad'inistrator of e$change control has the res&onsi#ility of allocating foreign e$change to &ri%ate sector i'&ort+ freight and insurance &assengers fares+ &ilgri' charter fees and s&ecial transfer on e$ternal account( "he 'erchant #anks e$ercise so'e a&&ro%ing functions too in the folloing areas: &ri%ate sector i'&orts+ #asic tra%el alloance( @o'e re'ittance+ corres&ondence courses and education( All a&&lication for hich e$change control a&&ro%al has #een gi%en one &assed to the CBN for checking and %erification of a'ount and the conse9uent a&&lication of foreign e$change( Shi&&ing docu'ents as collateral security for the ad%ances( STOC* !,C-AN)! MAR*!T "his is a #ody of hich the central #ank of Nigeria is a 'e'#er+ as a 'atter of destination+ stock e$change 'arket in%ol%es the esta#lish'ent of a centrali8ed clearing syste' in order to &ro%ide for a s&ecific 'echanis' of settle'ent for transaction( R!MITTANC! All a&&lications e$ce&t those that #order on the federal 'inistry of finance<s schedules are &rocessed a&&ro%al( "he a&&ro%ed a&&lication are sent to the central Bank of Nigeria for checking+ hen checking is co'&lete and a&&lication found satisfactory+ a letter of ad%ice on release of foreign e$change ill #e forarded to the authorised dealers( 7n this ay+ the CBN effects &ay'ent of foreign e$change for all a&&ro%als eather #y the federal 'inistry of finance+ CBN or the authorised dealers( 6(10 S;MMARH OF "@E =7"ERA";RE REC7E> 7n this literature re%ie+ 7 ha%e #een a#le to ha%e a look on the #anking syste' in the country and it<s i'&act on this role of central #ank and 'erchant #anks in financing international trade in Nigeria+ further'ore 7 as a#le to recei%e #riefly the #asic conce&ts of international trade in Nigeria+ the la of co'&arati%e cost and the #asic conce&ts of #alance of &ay'ent and it<s de%elo&'ent in Nigeria since inde&endence in 1:5-( "he discussion re%eals that the role of Bank to international trade is #eing deter'ined #y changes and de%elo&'ent in the #anking syste'+ there has #een a continuing e%olution of #anking syste' 'ade &ossi#le #y se%eral factors like huge &rofit+ #eing 'ade #y #anks+ introduction of co'&uter technology and autono'y hich the central #ank has recently on fro' 'inistry of finance( So'e #anks in effort to 'ake huge &rofit &la'ount the central #ank of Nigeria 'onetary &olicies+ hich are ai'ed at i'&ro%ing our econo'y( 7 suggest that the CBN should ensure strict co'&liance ith these &olicies #y the co''ercial and 'erchant #anks( Banks 'ust ac9uire sufficient international and entre&reneurial outlook to su&&ort not only e$&ort of Nigeria<s &roducts and ser%ices #ut also co'&any<s technology( "he e$&ort led groth strategy ado&ted through the structural Ad)ust'ent &rogra''e (SA*! de'and the ser%ices of #ankers ith strong 'arketing skill like the central #ank and 'erchant #anks to co'&ete and &enetrating in the acceleration of &olitical and social econo'ic de%elo&'ent of our country( "he study re%eals that Nigeria as a country ith an agro/#ased econo'y #efore 1:2-( "he later turned to de&end 'uch as oil+ this as found to #e the cause of our &resent econo'ic &redica'ent+ 7 suggest that Nigeria should encourage the 'anufacturing and e$&ortation of other non/oil &roduct and increase the e$&ort of her agricultural &roducts( On the #alance of &ay'ent &osition of the country the study re%eals that the #eha%iour of the #alance of &ay'ent as erratic &articularly since 1:2-( 7 suggest that the federal go%ern'ent should de%elo& a long/ter' solution to the #alance of &ay'ent in %ie of a future &ros&ect of di'inishing %olu'e of oil e$&orts( 6(1, S;MMARH OF *ROCE?;RE 7N 7N"ERNA"7ONA= "RA?E "he #uyer and seller conclude a sale contractly &ro%iding for &ay'ent usually #e docu'entary credit( "he #uyer instructed his #ank E the issuingF #ank to issue a credit in fa%or of the seller (#eneficiary!( "he issuing #ank asks another #ank usually in the country of the seller to ad%ice or confir' the credit+ the ad%ising or confir'ing #ank the seller that the credit has #een issued( As soon as the seller recei%es the credit and is satisfied that he can 'eet its ter's and conditions he is in a &osition to load the gods and dis&atch the'( "he sellers then sender the docu'ents to the #anks here the credit is a%aila#le i(e( the no'inated #ank( "his 'ay #e the issuing of #ank+ or the confir'ing #ank or #ank na'ed in the credit as the &aying acce&ting or negotiating #ank( "he checks the docu'ents against the credit( 7f the docu'ents 'eets the re9uire'ent of the ter's of the credit( "he #ank of other than the issuing #ank sends the docu'ents to the issuing #ank( "he issuing #ank checks the docu'ents and if they 'eet the credit re9uire'ent+ either effects &ay'ent in accordance ith the ter's of credit or rei'#urses is the &re/agreed 'anner the confir'ing #ank or any #ank that has &aid acce&ted or negotiated under the credit( >hen the docu'ents ha%e #een checked #y the issuing #ank and found to 'eet the credit re9uire'ent+ they are released to the #uyer u&on &ay'ent of the a'ount due or u&on other ter's agreed #eteen hi' and the issuing #ank( "he #uyer sends the trans&orts docu'ent not to the carrier ho ill then &roceed to deli%er the goods( !,.ORT .ROC!'(R!S 1( R!C!I.T OF OR'!R: An agent recei%es an order (indent! fro' o%erseas #uyers( "he indent 'ust #e 'ade out as 'uch details as &ossi#le in order to &resent 'istakes and 'isunderstanding( "he indent re9uired: a( "he a&&ro$i'ate &rice #( ?ate of deli%ery c( 7nstruction on &acking and shi&&ing d( ?ate of shi&'ents e( A'ount of co''ission &aya#le to the agent( 6( .&ACIN) T-! OR'!R: 7f the agent recei%es a close indent he contact the na'ed fir' gi%ing instructions regarding his foreign &rinci&al agent( "he agent o#tains 9uotations fro' different su&&liers and then &laces on order ith the one he has chosen if it is an o&en one( 4( .AC*IN): @e sends instructions to the su&&liers on ho to get the goods deli%ered( "he si8e of any &ocket or &acking case should #e suita#le for acce&tance into container ith 'ini'u' loss or s&ace( 0( FOR%AR'IN) TO T-! S-I.: "he su&&lier deli%ers the goods to the agent ho send ad%ice note of shi&'ent to the ducks instructing the' to &lace the goods on #oard a certain shi& of no #ill of lading is a%aila#le+ a 'aster recei&t is issued( 7t is signed authori8ed officer of the shi& and stakes that the goods ha%e #een recei%ed in good condition( 7f any of the &ackage are da'aged in anyone not 'ade on 'ates recei&ts if the if the officer of the shi&&ing co'&any is different fro' shi&&ing yard( ,( S-I.M!NT OF T-! )OO'S: Shi&&ing docu'ents are &re&ared #y the agents+ they include+ #ill of lading+ insurance certificate+ e$&ort in%oice+ consular in%oice+ certificate of origin( "he shi&&ing docu'ents are sent to the #ank of the i'&orter fro' trans'ission to the o%erseas #uyer( 5( C(STOMS S.!CIFICATION: "he agents su#'it e$&ort &articulars to the custo' authority( "his re9uire'ent 'ust #e co'&leted #efore the clearance of the shi&( 7t ena#les the go%ern'ent to co'&ile trade statistics during any gi%en &eriod( 0(1 ANA=HS7S OF ?A"A *RESEN"A"7ON Further findings as regards to this ork ha%e that fro' the study so far conducted on the roles of central and 'erchant #ank in financing international trade in Nigeria+ a lot of o#ser%ation ha%e #een 'ade( As far as #anking function is concerned 'erchant #anks are not so i'&ortant as &ro&osed #y other riters( "hey a&&ears to #e indis&ensa#le yet their roles in financing international trade #anks+ other #anks and financial institutions( "o ha%e 'erchant #anks 'ay roles ger'ane to our econo'ic de%elo&'ent( So'e s&ecific roles and o#)ecti%es e$&ected of the' should #e e$&ressly stated and closely 'onitored( "he central #ank su#stantially failed in so'e res&ect es&ecially in the 'aintenance of our foreign reser%es( "his is due to erosion of its autono'y #y the go%ern'ent ad its agencies( "he Nigeria #anking industry is su#stantially facing the &ro#le' of lack of #anking ha#its in 'a)ority of the &o&ulace( *eo&le are #eginning to loose confidence in the #anking syste'( ,(4 RECOMMEN?A"7ONS After conducting the research so'e reco''endations are under listed hich ill hel& the hich ill hel& the #ank in discharging their international ser%ices 'ore efficiently( 1( *u#lic relation: Not 'uch is kno a#out the functions of the 'erchant #anks #y the &u#lic( "hey ha%e a res&onsi#ility to the &u#lic( "hey cannot )ust kee& 9uit since they are e$&ected to #e in%ol%ed in 'atters of &u#lic concern( 7f they are 'is/re&resented or their roles 'isunderstanding+ their usefulness to the econo'y ill #e little or nothing( 6( =iterature: "here are still fe literature on 'erchant #anking in Nigeria+ so it is the researcher<s ith that our e'inent scholars in the area of #anking to rite #ooks on this as&ect of #anking the i'age of the 'erchant #anks in the country( 4( Nu'#er of 'erchant #anks and #ranches: More 'erchant #anks should #e esta#lished hile the e$isting one increase their nu'#er of #ranches to take care of the large &o&ulace( 0( "he CBN su&er%isory roles: Also in the area of i'&ort su&er%ision the central #ank should ensure strict su&er%ision in order to control the %olu'e of i'&orts( ,( Manage'ent of e$ternal reser%e: "he central #ank should tighten/u& it<s #elt to ensure that our resources are ade9uately 'aintained( 5( 7'&le'entation of incenti%es sche'es: "he central #ank should encourage e$&ort trade #y i'&le'entation of it<s e$&ort incenti%es sche'es( @a%ing K/rayed the acti%ities of the 'erchant #anks and the central #ank in foreign trade financing( 7t can #e seen that they #oth 'ade so'e co''enda#le achie%e'ent( @oe%er+ it is the researcher<s o&inion that if the a#o%e reco''endation are adhered to strictly+ it ill go a long ay in 'aking 'erchant #anks 'uch #etter agents in foreign trade financing and ill hel& the central #ank to carry out it<s su&er%isory roles 'ore effecti%ely( ,(4 CONC=;S7ON "his &ro)ect has not only tries to identify the roles of 'erchant #anks and the central #ank in financing foreign trade #ut also seeing the #ank as agents for the &ro'otion of a #alanced and sustaina#le de%elo&'ent of the national econo'y( Fro' the foregoing+ it can #e seen that the #anks do contri#ute trade and the si8e of its e$ternal reser%e de&end largely on the strength or &urchasing &oer of the Naria( "he 1:,3 Act of &arlia'ent hich esta#lished the CBN changed if ith the res&onsi#ility of the country<s e$ternal reser%es 'anage'ent and it<s &olicies on this ha%e #een dictated #y the e$igencies of the &eriod( @oe%er+ the CBN #y 'aking the use of this su&er%isory roles and so'e instru'ents as letters of credit+ draft+ docu'entary credit e(t(c( has 'ade a great contri#ution( "heir roles in the 'anage'ent of foreign reser%es and e$ecution of foreign &ay'ent are #y no 'eans or si'&le one( 7t is ho&ed therefore+ that they should continue to 'aintain these roles to ensure ade9uate 'anage'ent of our foreign reser%es( Merchant #anking is a recent occurrence in Nigeria<s #anking industry and the to&ic E"he roles of central #ank and the 'erchant #anks in financing international tradeF (A case study of CBN Enugu and cron 'erchant #ank Benin! is an atte'&t to create an aareness on the duties of these #anks toards financing international trade in Nigeria( 7t also ai's at assessing ho far these #ank ha%e constituted toards the reali8ation of this o#)ecti%e( Based on the foreign+ data for this ork ere #oth &ri'ary and secondary( "he &ri'ary data as o#tained through oral inter%ie and 9uestionnaires ith the staff of the central #ank Enugu and cron 'erchant #ank Benin( "he secondary data as fro' te$t#ook+ )ournal &u#lication+ central #ank of Nigeria+ Econo'ics and financial re%ies of 'oney years(
Abtracredit risk management strategies and capital requirement variables affect banks’ profitability in Nigeria. Panel data model was used to estimate the relationship that exists among loan loss provisions (LLP), loans and advances (LA), non-performing loans (NPL), capital adequacy (CA)ct for Project One
(Problem Books in Mathematics) Antonio Caminha Muniz Neto - An Excursion Through Elementary Mathematics, Volume III - Discrete Mathematics and Polynomial Algebra (2018, Springer)