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THE ROLES OF CENTRAL BANK OF NIGERIA AND MERCHANT BANKS IN FINANCIAL INTERNATIONAL TRADE IN NIGERIA

  • Department: ACCOUNTING
  • Chapters: 1-5
  • Pages: 81
  • Attributes: Questionnaire, Data Analysis, Abstract
  • Views: 256
  •  :: Methodology: Primary Research
  • PRICE: ₦ 5,000
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THE ROLES OF CENTRAL BANK OF NIGERIA AND MERCHANT BANKS IN FINANCIAL INTERNATIONAL TRADE IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

The role of international in the acceleration of political and socio – economic development of any nation deserves a good study. The term international trade refers to the trading operation conducted beyond national boundaries otherwise called export and import. It enables one country to have access to those commodities they could not possible produce themselves. Thus, a country is able to shift its industry to those products and services for which its resources are most suitable exporting its resources in exchange for the specially of other countries. Currently in Nigeria, the export growth rate is shown and correctly perceived as a major ousted to accelerated development and in other to avert this, virile export oriented strategies should be evolved. The import and export sector of any economy has to be nurtured, protected and promoted to enhance its positive and meaningful contributions to the survival of the economic system. Apart from government incentives, private and public companies, assistance and specialized financial institutional support, banking institutions play vital roles in financing international trade. As a result of this, it becomes necessary to study the roles of merchant banks and central bank of Nigeria in financing this international trade in Nigeria.

The central bank stored as the apex of the banking system of every country. It is the government representatives in the banking sector and acts mainly as banker to the government. It acts as banker and adviser to the federal government banks, merchant banks and other financial institutions. It also has the monopoly of issuing legal tender currency in Nigeria and materials external reserves in order to safeguard the international value of the currency, promote monetary stability and sound financial structure. In relation to international trade the central bank determines what and how much to approve in the areas within its justification such as payment for visible and invisible imports and controls in inflow of foreign exchange earnings from export. It processes exchange control application and makes foreign exchange allocation to qualifying applicants, assist in the monitoring and in the formulation of policies designed to ensure the optimum employment and conservation of the country’s foreign exchange earnings.

Apart from the rules played by the central bank in the international trade, there are two other licensed banks that supplement its rates. The commercial bank and the merchant banks. The commercial banks are referred to as retail banks because of the nature of their operations. They operate through a network of branches throughout the country and have board deposit base. That is the commercial banks accepts deposits from all and not from a particular sources (The deposits are usually called demand deposits). The second category of the licensed banks is the merchant banks, which are wholesale bankers in the sense that their deposits are usually in very large blocks. They operated from few branches in the commercial centers of this country. They also accept deposits from the public and private co-operations as well as wealthy individuals; their functions include medium and long-term financing, investment. Management, management of unit trust, debt factories equipment leasing and issuing and acceptance of bills of exchange.

As regards international trade the merchant banks have acquired a reputation for fast and efficient processing of international business transactions such as foreign exchange for companies engaged in importing and exporting of capital goods, the merchant banks provide services which include the processing of remittance and documentary draft for collection and letters of credit. From the foregoing, the central bank and the merchant banks are indispensable as for as international trade is concerned and as such deserved a good study.

2.2 a. DEFINITION OF INTERNATIONAL TRADE

International trade is the movement of goods and services between countries such that one country is able to shift its industry to those products and services for which its resources are most suitable, exporting its resources in exchange for the specialty of other countries.

b. CENTRAL BANK

It is defined by functions it performs, it is the nations bank charged with the issuing of legal tender, maintaining external reserves, supervisor of other banks, promoting of monetary stability, adviser to the government on financial matters and maintaining sound financial structure.

c. MERCHANT BANK

A merchant bank is any financial institution that engages in wholesale banking, median and long-term financing, investment management, management of unit trust, debt fractioning, equipment leasing and issue and acceptance of bills of exchange.

1.2  AIM OF THE STUDY

The purpose of this study is to give an overview of the activities of merchant banks and the central bank, particularly their roles in financing international trade in Nigeria. In international trade the roles being played by both banks are complementary in the sense that one cannot function without the “acquit of the other”. Suffice it to say that international trade financing activities of one bank is complemented by the other hence the topic “the role of central bank of Nigeria and merchant banks in financing international trade in Nigeria. Merchant banks are recent occurrence in the country’s banking industry. Not much is known by the public about their activities. The aim of this research work therefore is to highlight the roles of central bank and merchant banks in international trade financing.

1.3  STATEMENT OF THE PROBLEM

International trade is a trade between nations of the world and this trade arises from two basic reasons. One of this reason is that most countries find themselves in need of commodities they could not possible produce. Another basic reason for international trade is that countries different in their efficiencies in the use of national resources. In Nigeria, international trade has contributed a lot to the country’s infrastructure and manpower development. Promoting international trade requires the assistance and financial support of specialized financial institutions like the central bank and merchant banks. This study attempts to identify the roles these banks play in financing international trade in Nigeria, these include:

i. Knowing their roles in terms of borrowing and lending.

II. Evaluating the extent of their financial investment in financing the trade in Nigeria.

III. To appraise the performance of these banks to know as far as possible the remote causes of adverse balance of trade.

IV. To know how the banks have been encourage in playing the roles.

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