ABSTRACT
The role of financial institution is to transfer savings from surplus economic unit to deficit economic unit who will utilize the savings in generating investment. The savings surplus economic unit would in the process have earned income in the form of interest on those funds that wouild have been lying idle, while the saving deficit economic unit would have been in the process of earn profit from the investment attempts. Attempt would now be made in briefly tigate some financial institutions. In terminology, the difference and relationship among four basis concepts which will be used frequently in the discussion must first be explained. These are the financial system, financial system,financial market, financial instrument, rules, conventions and norms that facilitate and regulate the flow of fund s through the macro-economy. The system is controlled by the government through agency of the central bank of which supervise the activities of financial intermediaries and monitors adherence to the government monitory and ficial- policies the major types of financial intermediarie are commercial banks, merchant bank, Development financial institution insurance companies, credit and saving institution, investment trust and mortgage institution. Financial market on the others hand, are simply the various facilities provided by the financial system for the creation of custodianship and distribution of financial assets and liabilities and the market is divided into two major segment, we have the money market and capital market.
CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY
Financial institution occupy a vital position and play a land role in the economy of the nation. Their major purposes are proper mobilization of fund as well as provision of capital for industrial development which is aimed at enhancing economic- growth and development in the early year off banking operation in Nigeria, bank performed their intermediary functious by giving loan mainly on individual basic (ie separately) but as the country entered the threshold of development and more investment opportunities opened up, industrialist started demanding large sum of money which is provide by bank on medium or long term basis. However, baking is a highly regulated industry the world over with restrictive monetary and credit guideline in long growth and reserve requirement, sector of the economy and excess liquidity mop up through the assurance of stabilation securities to the bank to mention few due to these restrictions, it is difficult for a bank to meet up with the huge loan demanded for customers. Also, it is well known that lending is not a risk free and that bank prefer to spread their risk with others in the banking industry.
Against this background, banks came to get her performing what is known as consortium to advance funds is called loan syndication and is sometimes called “consortum” lending can be define as the agreement between two or more lending institution to provide a borrower with credit facility utilizing common loan documentation. Loan syndication is now being practiced in Nigeria starting from 1960’s when a constrium of commercial banks and acceptance houses discounted trade bills for marketing boards under the produced bills finance scheme formalized loan syndication came into beig during the oil boom of the jobs when there was need for adequate capital of finance, the industrialization programmes. During this period, few merchant banks had been incorporated.
Loan syndication has assumed international dimension because it need to provide adequate capital to finance the fast growing of the world economical international syndicated credit is managed and underwritten by one or more finance institution normally from a location other than the domicile of the borrower lenders fromm different countries could provide the borrower with access from their countries or to move than its own currency from other contracts of domide.
1.2 STATEMET OF THE PROBLEM
To investigate why loan syndication is not properly managed given priority attention by monetary authorities Despite strategic place in financing viable project capable of injecting foreign currency creating employment and facilities acting rapid economic development.
I) To examine critically the place of financial institution in the management of loan syndication in the economy. Loan syndication is a child of circumstance airing from legal lending restrictions, risk- sharing and liquidity problem.
RESEARCH QUESTION
The research would like to know the despite these constrains- prevailing it is still a supplementary option for business financing?
OBJECTIVE OF THE STUDY
For an economy to develop, there must be a supplementary source of finance viable investment projects beyond the limits of an individual financial institution it is on this basis that would like to identify those fundamental problems confronting loan syndication and suggest how much problems can be solve.
To ascertain the effect of loan syndication in economic- development.
To highlight the potential of loan syndication in the economy.
To recommend that syndication loan is noted different from other loan rather, it is subjected to conditionalist attracts, high interest rates, subject to default and time lapses in packaging as a result of bureaucracy involved by consortium Banks.
SIGNIFICANCE OF THE STUDY
This study is expected to provide useful information on loan syndication to the following
STUDENTS:- the student by the use of this project make researcher and source information on the role of financial institution in the management of loan syndication.
FINANCIAL INSTITUTION:- financial institution via this projects will learn how to keep to their loan syndication agreements. It will also encourage the financial institution to give financial accommodation through loan syndication because it is more beneficial to them financial institution will also learn how to reduce the time frames in packaging a syndicated loan.
BORROWER: - the borrower, with the aid of this project will know the appropriate- procedures involved in-obtaining loan through syndication. Since loan syndication contributes immensely to the development of our economy both the government the targeted audience will benefit from this project know more about the benefit of loan syndication in our economy.
PROFILE OF LOAN SYNDICATION BENEFICIARIES FLOBE AGRO-VENTURES LTD:- this is an agricultural division of Bhojoson industrial LTD which engage in large scale commercial and industrial activities and employs about 4000 staffs in its effort to support the economy from agricultural sector. The purpose of the syndicated loan facility was to part finance the cost of farm andland development and the acquisition of machinery for cotton and farming project in forme Gongola and Niger state Nnamdi-Azikiwe stadium management corporation. This federal government corporation was formally managed by the former Anambra state sports council. The sports council in October 1980 applied for a N10m loan for the completion of first phase of the sports stadium which comprise the main Bowl with estimated sitting capacity of 50,000 persons, tartan track, field dranje electrical and mechanical equipment and installation turnstile and ticket machines electronic score board-building and vehicle, estimated- labour requirement was put at 79 and total annual gross revenue generation on put at N 627, 000 in the first year of putting the stadium to use (1982 to N1534,000 in 1987 and subsequent year.
.