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CHAPTER ONE

1.1    INTRODUCTION

In recent years, loan recovery problems have been of the main problems that the Nigerian commercial banks has had to face. Those problems have been main target of policy measures all these years, though at a time it become main focus of policy on which was retarded as more pressing and serious each time. Today the situation in Nigerian have become very serious and seemingly intractable. The problems of loan recovery in the pigovain sense refers to a situation in which there is a major break down in the repayment agreement resulting in an on due delay in recovery or collection and in which it appears that legal action may be required to effect recovery for in which there appears to be a potential loss. Such a loan there fore requires special attention on the part of the lender if it is to be collected in full within a reasonable period of time after maturity.

A truism in a commercial bank lending situation is that unless the commercial bank accesses lending risk and devices and effective way of lending against risk related to the borrowers, industry, management or operation in the qualify of the loan portfolio might survive from an increase in past due debt, non accruals and charged off loans. Thus, even if the borrowers have not met the initial criteria for a desirable borrowing customers through interview and credit investigations, the rest point of emphasis in credit risk analysis is in the borrowers financial statement (specially incase of business firm). The later assists the lender to determine whether the firms operations will be able to generate sufficient cash flow to repay debt and whether its asset will be available as collaterals of course the degree of reliance on financial statement analysis is directly related to how they are prepared. Therefore deductions about credit risk levels from the analysis should necessarily be tempered with additional information from the borrower.

Commercial Banks lending objectives is to make loans that can be repaid. While minimizing her exposure to loans with poor credit quality. However every lending institution finds itself from time to time with loan for which the risk of loss is greater than anticipated, when the loan was made or in which the risk is greater than a lender would ordinarily willingly assume. This is because in the lending environment, there are basically two types of borrowers, the good and bad. It is the category of borrowers that carries a risk of default on loan repayment.

HISTORICAL DEVELOPMENT OF COMMERCIAL BANKS IN NIGERIA  Commercial bank is defined as an institution that carries out the business of recoving money and collecting drafts from customers subject to the obligation of honouring cheques drawn upon them from time to time by the customers to the extent of the amount available on their current account. Based on this definition, the commercial bank carries out such functions as:

· Acceptance of deposit

· Providing loans and overdrafts

· Drawing of cheques

· Transferring of money

Commercial banking in Nigeria started in the 1892 with the establishment of the African Banking corporation (ABC) through the instrumentality of Elder Dempster and co a shipping company based on rive pool. Due to initial difficulties, the bank did not exist beyond 1893. in 1894 (BBNA) was incorporated in London and opened a branch in Lagos the same year C.N. Asuzu, Elements of banks with the establishment of industrial an commercial bank. The establishment of this bank was promoted by the nationalist dissatisfaction with the existing foreign banks who discrimed against Nigerian in granting of loans. How ever, indigenous banking era had some failures in the sense that most commercial banks established in that ere collapsed due to the granted loan to Nigerian indiscriminately. The first surviving indigenous bank survived because of the support they get form the regional government (western government) another successful indigenous bank was Agbomagbe established in 1945.

The third expartriate bank British and French bank (currently) (UBA) was established in 1949, this joined the two other expartriate banks to dominate the banking business in Nigeria, the expartriate bank still neglect the indigenous entrepreneurs and concentrated in international trade and dealing with government. Since the inception of the first banking legislation there had been other banking legislating, for instance the banking legislation o 1952 that vested the power of control of banking on the financial secretary. Others are the 1958  banking ordinance and subsequence amendment 1961, 1962,1964 and the banking act of 1990. According to Mr. C.N Asuzu in his book element of banking in Nigeria, the first bank emerged in Nigeria was British bank of west African 1894 now first bank of Nigeria followed by Bardays bank Dco 1917 now known as union of Nigeria etc.

1.2    STATEMENT OF THE PROBLEMS

The problems of loan recovering not only in commercial bank but all the banks as a whole is unable to pay back loan as at when due. It is true that before a loan is been given to a customer especially customer of a bank collateral is suppose to be present but some time the collateral presented may or may not be able to pay back the loan that is been collected from the banks. Again is over trusted some managers, due to because the customer always due to because the customer always put or deposit a very amount of money in their bank amy ro may not came to ask them for collateral and at last the whole money will be lost.

1.3    OBJECTIVES OF THE STUDY

The objectives is to find out the remote cause of the problem which is given out loan and feeling less concern that is not be kan about collateral

1.4    SIGNIFICANCE

The significance is that before any customer should be given loan he or she should be ask to present collateral and the collateral is not suppose to be cumbersome. Whether person is your child, wife or mother collateral should be presented.

1.5    DEFINITION OF TERMS

BANKS: These means an institution where people or business can keep their money. Banks also offers services such as lending exchanging or transferring money, they also grant overdraft to their customers

CUSTOMERS: An individual or household that purchases a particular produces for personal or household or industrial use.

COLLATERAL: These refers to money or property which is used a guarantee that some will repay a loan.

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