CREDIT MANAGEMENT AND THE INCIDENCE OF BAD DEBT IN NIGERIA MONEY-DEPOSIT BANKS

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

In a modern economy,there is distinction between the surplus economic units and the deficit economic units and inconsequence a separation of the savings investment mechanism.This has necessitated the existence of financial institution whose jobs include the transfer of funds from savers to investors.one of such institution is the money deposits banks,the intermediating roles of the money-deposit banks places them in a position of “trustees´´ of the saving of the widely dispersed surplus economic units as well as the determinant of the rate and shape of the economic development.The techniques employed by bankers in this intermediary function should provide them with perfect knowledge of the outcomes of lending such that funds will be allocated to investments in which the probability of full payment is certain.However,in practise no such tool can be found in the decision of the lending banker.Virtually all lending decisions are made under creditors on uncertainty.The risk and uncertainty associated with lending decision, situation are so great that the concepts of risk and risk analysis need to be employed by lending bankers in order to facilitate sound decision-making and judgement.This statement implies that if risks are to be objectively assessed,lending decisions by the money-deposit banks should be based less on quantitative data and more on principles too subjective to provide sound and unbiased judgement.Furthermore,the banks depend heavily on historical information as a basis for decision making.

Apparently aware of the inadequacies of his decisions base,the lending banker has often sought solace in tangible and marketable assets as security giving the impression that lending against such securities is an insurance against bad debts.this makes the banker complacent with his loan portfolio.The increasing trend of provisions for bad and doubtful debts in most money-deposit banks is a major source of concern not only to management but also to the shareholders who are becoming more aware of the dangers posed by these debts.Bad debts destroy part of the earning assets of banks such as loans and advances which have been described as the main source of earning and also determines the liquidity and solvency which generate two major problems, That is profitability and liquidity, has to earn sufficient income to meet its operating costs and to have adequate return on its investments.

1.2 STATEMENT OF THE PROBLEMS

The problem for this study is to appraise the lending and credit management policies of a typical Money-deposit bank(the first bank of Nigeria Plc) with a view of finding the causes,consequences of bad debts in banks.Year after year,banks suffer much from the part of full loan extended which has for one reason or the other proved unrecoverable.Banks lose millions of Naira in various bad debts yearly and despite efforts by bank management, committee of chief inspectors and the bankers committee on the other hand,the wave of bad debts in banks is still on alarming proportion.This is gathered from a combination of literature reviews on the topic.

On the other hand,many banks experienced a lot of bad debts when the new government abandoned the project awarded to the contractors by civilian government.These contractors borrowed to execute the project awarded to them but could not repay the loan,due to government action on reramping the economy thereby abandoning the project.Other experiences were during the time of draught or poor rainfall and pest.These however led to low harvest which did not give the farmers enough time to repay their debt.

Again, experience may arise in respect of lapses on the part of the banks credit officers.For instance, there may be excesses over approved facility,unformatted facilities and expired facilities not renewed on time.In each of these cases the customer may easily deny even owing the bank all or part of the amount.Money.deposit banks have always borne the burden alone,but this may not continue in future as the banks may be unable to take the risk of lending more but when eventually they do,they would seek the best way they come out of the risk with a realistic reward which they are clearly failing to achieve at present.

1.3 THE MAIN OBJECTIVE OF THIS STUDY

To determine and appraise the lending procedure of banks using first bank of Nigerian plc as a case study-with a view to highlighting the effectiveness and adequacy or otherwise the credit management policy of Nigerian banks in reducing the occurrence and consequences of bad debts.

The other objectives are:

To highlight the rate at which inadequate collateral security provision by borrowers increases the incidences of bad debt in Nigerian.
To determine whether fund diversion has any effect on bad debt of money deposit banks in Nigerian.
To ascertain the extent to which government intervention in lending policies of money deposit banks has influenced bad debts in Nigerian money deposit banks.
To highlight the extent to which improper project evaluation influence bad debt of money deposit banks in Nigerian.
- RESEARCH QUESTIONS

In view of the consequences of bad debt in Nigerian money deposit banks,it is neccessary to formulate some research question which will enable the researcher formulate statistical tables for testing hypothesis.

Does inadequate collateral security provision by borrowers caused bad debt in first bank of Nigeria plc?
Does fund diversion have any effect on bad debt of first bank of Nigeria Plc?
To what extent has government intervention in lending policies of money deposit bank influenced bad debt in first bank of Nigeria Plc?
To what extent does improper project evaluation influenced bad debt of first bank of Nigeria plc?

1.5 RESEARCH HYPOTHESIS

The following hypothesis were drawn as follows.

Ho: inadequate collateral provisions by borrowers does not increase the incidence of bad debt in first bank of Nigeria plc.

Hi: Inadequate collateral provisions by borrowers increases the incidence of bad debt in first Bank of Nigeria.

Ho: Fund diversion does not affect bad debt in first Bank of Nigeria

Plc.

Hi: Fund diversion affects bad debts in first Bank of Nigeria Plc.

Ho: Government intervention in lending policies of money-deposit banks

has no influence on first Bank of Nigeria Plc bad debt.

Hi: Government intervention in lending policies of money-deposit

banks have direct influence on first Bank of Nigeria Plc,bad debt.

Ho: improper project evaluation has no significant relationship with bad debt in first Bank of Nigeria plc.

Hi: improper project evaluation has direct relationship with bad debt in first Bank of Nigeria plc.

1.6 SIGNIFICANCE OF THE STUDY

It is hardly an exaggeration that the difference between the success and the failure in the banking industry is in the effective management of the banks loans and advance.Efficient loan management is vital to the protection of assets and the achievements of adequate returns to investment.Though much work abound in the literature of the techique of lending,the methods of securing such lending and the pitfalls that await the unwary banker.By comparison it appears to be very little in point on the subject of loan management and recovery.

A study of this subject will therefore be a welcome addition to the existing volume of banking literature.

Effective loan management recognized that beyond the application of sound banking principles whenever a loan is made,there is need for urgency in appreciating the point when a loan begins to look doubtful,in arriving at a decision as to the appropriate action and in taking that action.This will enable the bank to at least obtain full payment including accrued interest or at worst to mitigate the capital loss in the face of increased competition among banks,future profits are likely to be harder to come by and since bad debts are a charge against profits,it is appropriate that we review the methods,proportions and margins of lending to bad and doubtful debts.

Hence the significance of this study to bankers will enable them to appreciate an appraisal of their lending and control mechanism now that they are expected to lend under tight monetary conditions.The economy as a whole will benefit from the study because if the level of bad debts is reduced,banks will be left with more profits to enable them make the expected contributions to the development of the economy.

1.7 THE SCOPE OF THE STUDY

In the study of credit management in Nigeria, first Bank of Nigeria Plc was used for my analysis.All references therefore relate to first Bank of Nigeria plc.

A Six-year period covering 1988-1993 will be studied.

1.8 THE LIMITATIONS OF THE STUDY

The limitations of this study include some of unavoidable constraints and problems encountered in the process.They are as follows:

i) FINANCE: The problem of finance was not left out in the course of research to this study. This type of study required adequate money and time to enable the researcher visit the necesssary places for collection of data.Insufficient fund hindered an in-depth study of this research since it was financed from meager pocket money of the researcher.
ii) NON-AVAILABILITY OF RECORDS: This is one of the most important limiting factors in the course of the study.This includes the problems of easily getting the appropriate data due to bureaucracy which hinders the information flow in the country.

iii) NON-CHALLANT ATTITUDE OF BANK OFFICIALS: The reluctance of bank officials to reveal information on the need for this study,for fear of breach of duty of secrecy to customers exposure of banks administrative short-comings.

iv) IGNORANCE OF RESPONDENT /BORROWERS: Most bank customers were semi-illiterates and most often it was very difficult to collect adequate data required from them.
v) TIME: Since this study is one of the many courses offered by the researcher,the researcher was constrained by time to carry out an indent research on the study.

1.9 DEFINITION OF TERMS

DEBT: This is what one owes to another person.

LOAN: A Loan is a credit arrangement,a security is pledged and must be repaid with interest over a stipulated period of time.

OVERDRAFT: This is a credit arrangement by banks to their customer to withdraw money over and above that what he has in the account.

DEFAULT: This means failure to pay one´s debt for credit extended which has fallen due.

HYPOTHESIS: This is a tentative statement of conclusion.It is a statement of claim which is to be proved right or wrong having been confirmed with facts.

Ho: Null Hypothesis: the hypothesis that is being tested.

Hi: Alternative Hypothesis: the hypothesis that will be accepted if the null hypothesis is rejected.

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Jun 15

APPRAISAL OF FEDERAL INLAND REVENUE COLLECTION SYSTEM

APPRAISAL OF FEDERAL INLAND REVENUE COLLECTION SYSTEM

ABSTRACT

A tax is a compulsory levy imposed on the income or profit of an individual, partnership and corporate organisations for the financing of government expenditure without recourse to a corresponding benefit from tax payer. Assessments are raised on total profit at the rate of either 30 percent or 20 percent if it is a small company whose turnover is below ₦1million naira. Various types of assessment s are raised on the company. This could be self-assessment, government assessment, back year assessment, best of judgement (BOJ) assessment or jeopardy assessment. Collection is basic necessity to tax revenue after assessment has been raised. This research work is aimed at appraising the tax collection system in Nigeria taking Federal Inland Revenue Service as a case study. It examined the workings both at the local and state levels but focused more on the Federal Inland Revenue Services. It reviewed the old system, the reasons why a new idea muffed. The operations of the new method were also explained and clearly stated. The methodology adopted in this study is the survey research design. There were interactions with staff of Federal Inland Revenue Service of various cadres and a few tax payers and tax consultants with structured questionnaire to know their opinion. 56 questionnaires were administered out of which 35 were duly completed and returned. The findings from research work revealed that appraisal of tax collection system will bring more money to the coffer of the government and all incidents of frauds, cheque diversion and other malpractices will be curbed. Based on the findings of this study, recommendations made are that constant monitoring of the activities of the designated banks is necessary to determine their level of compliance while adequate training should be provided for collection staff to enhance their efficiency and productivity.

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

A tax is a compulsory levy imposed on the income/profits of an individual, partnership and corporate organizations for the financing of government expenditure without recourse to a corresponding benefit from tax payer.

Every tax imposed on Nigerian companies or organisations needs continual interpretation of its specific application and effect on the various transaction of the organisation. The field of taxation changes every moment or every day as announced by the new ruling courts and also as are being made by new government.

Tax is paid only on the profit of the company after all other deductions and allowances such as capital allowance, investment allowances. The rate of tax levied and payable for each year of assessment in respect of the total profit of every company is thirty kobo for every naira as contained in section 29 of Companies Income Tax Act 2007 as amended. A company which is yet to commence business after at least 6 months of incorporation shall for each year it obtains a tax clearance certificate pay a levy of (a) ₦20,000 for the first year and (b) ₦25,000 for every subsequent year before a tax clearance certificate is issued.

Where in any of the basis period for the year of assessment in which a company commenced business and the next following four years of assessment as determined under the provision of section 29 of the Act, a Nigerian company engaged in manufacturing or agricultural production, mining of solid minerals or wholly export trade, earns a total gross sales (turnover) of below one million naira, there shall be levied and paid by the company, tax at the rate of twenty kobo on every naira of the total profits.

Section 28A of Companies Income Tax Act 2007 states that where in any year of assessment the ascertainment of total assessable profits from all sources of a company results in a loss or where a company’s ascertained total profits results in no tax payable or tax payable which is less than the minimum tax then shall be levied and paid by the company the minimum tax as prescribed in subsection (2) of the Act.

(a) If the turnover of the company is ₦500,000 or below and the company has been in business for at least few calendar years, be;

(i) 0.5 percent of gross profits or

(ii) 0.5 percent of net assets or

(iii) 0.25 percent of paid up capital or

(iv) 0.25 percent of turnover of the years, whichever is higher.

If the turnover is higher 500,000 be whatever is payable in paragraph (a) of this subsection plus such addition tax on the amount by which the turnover is in excess of ₦500,000 at a rate which shall be 0.125 percent.

The provision shall not apply to a company carrying on agriculture trade or business or the company with at least 25 percent imported equity capital and lastly, any company for the first four calendar years of its commencement of business.

Collection is basic necessity to tax revenue after assessment has been raised. The tax payer is expected to pay the assessed tax liabilities to any of the collecting banks in his or her region with the assessment notices indicating the tax type being paid. This could be company income tax, Education tax, Capital gains tax, Personal Income Tax for resident of Abuja, and non resident individuals, Value Added Tax.

After the payment, the tax payer will be issued an electronically generated receipt from the bank (e-ticket), then, the collecting bank is expected to remit the funds same day to lead bank via Inter Switch net work. The lead bank remits to Central Bank of Nigeria after two days. The e-receipt and on line schedule of remittance by lead banks are forwarded to Federal Inland Revenue Service office and checked before receipts are issued.

The FIRS taxes are being collected by agents. These agents are the collecting banks. These are twenty four in number (24). The Lead banks are four (4), Ministry Departments and Agencies, Nigerian Customs Services, The medium of collection are cash, cheque and electronic transfers.

Accounting for revenue collected is mandatory for FIRS to all relevant government agencies and stake holders. The accounting procedure is as follows:

Firstly, all revenues collected through the web portal/pay direct, KP Morgan statement of account, Auto Swift are generated.

Secondly, the receipts of schedule of VAT on import from Nigerian Customs Service are collated. Then reconciliation of receipt of remittances with collecting banks, CBN and others are carried out to ensure proper accountability of the revenues.

There is proper monitoring to ensure that all revenues collected are remitted to the appropriate account to CBN as at when due. The types of monitoring include:

On-line monitoring via PEACT
Daily monitoring of remittances to CBN
On-line viewing of foreign payments
Data base on incorporated companies and Enterprises in Abuja
Auto swift viewing on line FIRS transactions in CBN
Tax payer enumeration database
Introduction of TIN (Tax Identification Numbers)
Monitoring of business to ensure, remittances of taxes deducted from customers and staff.

There are challenges for collecting Agents. These include delayed or non remittance of taxes.

Non remittance of Taxes:

It has been observed that some of these collecting agents deliberately delayed the remittance of taxes paid and in most cases these payments are not remitted at all to the coffer of Federal Inland Revenue Services.

Delayed Posting: This is a situation whereby banks collect cash or cheques for FIRS and refuse to post as and when due, this can be deliberate or not. This can be noticed when posting is made as huge cash deposit, extended numbers of days, cheque value date, non stamping of deposit slips, deposit slip date being different on date of posting on web portal especially on VAT and WHT collecting agents.

On discovery of this type of practice, the Integrated Tax Office (ITO) usually charge appropriate penalties and interest as follows:

Steps to deal with Delayed Postings

Identify the period of delay
Impose 1% penalty on the principal amount delayed
For delayed below 30 days impose interest at NIBOR rate + 3% i.e
Amount x (NBOR +3%) x No Days Delayed

No of days in year

Where the Number of days is above 30days
Penalty is charged at 1% flat of the principal sum

Non-remittance: This comes about when a bank collects FIRS cheques/cash and refuses to remit out rightly. Here the money is diverted for use by the bank forever. The situation is aggregated by the tax payer not demanding for his e-ticket or receipt.

The detection of the above shoddy deals can be made by the adoption of the following methods:

Know your customers (tax payers)
Visit tax payers to enquire of their payments
And obtain evidence
Check payment made against web portal
Reconcile with the receiving banks and request for posting immediately

When payment is posted, calculate appropriate penalties and interests.

1.2 STATEMENT OF THE PROBLEM

Tax collection is an important function of the Federal Inland Revenue Service. However, there are some teething problems that inhibit effective and efficient collection system. They are as follows:

Inadequate government regulation on collection system
Lack of total commitment and adequate tax policies.
Lack of transparency on the part of the tax administrators.
Frauds committed by both F.R.S staff and collecting agents.
Delay in remitting taxes collected and in some cases outright diversion of taxes collected.
Lacking adequate remuneration for collection staff of F.R.S.
Lack of functional equipments to detect frauds.
Lack of proper monitoring
Lack of shift penalty for erring
There is no proper accountability of the amount collected by various agents by the government and this brings about apathy among the tax payers.

1.3 AIMS AND OBJECTIVES:

The aim and objective of this research work is to appraise the systems of tax collection generally with special emphasis on the Federal Inland Revenue Services and the possibility of improving it. To do that the following objectives are set:

To investigate whether the subject of every state or community pays tax to support the legitimate authority within the requirement of the social contact.
To investigate whether the tax to be paid is certain in relation to the amount to be paid the authority to collect it, the time or period when it is to be collected.
To investigate whether the tax is simple to understand and administer.
To investigate whether the tax system is flexible in federal and democratic country where there are always changes of government.
To investigate whether the request for payment of taxes is done at a time when it is most convenient for the tax payers.

1.4 RESEARCH QUESTION

Based on the objectives stated, the research questions are as follows;

Is every subject of every state or community pays tax to support the legitimate authority within the requirement of the social contact.
Is the tax paid certain in relation to the amount to be paid, the authority to collect it, the time or period is to be collected?.
Is the tax system simple to understand and administer?
Is the tax system flexible in Federal and democratic country where there are always changes of government?
Is the request for payment of tax done at a convenient time for the tax payer?

1.5 RESEARCH HYPOTHESIS

In line with the problem statement and the objectives of the study, the following hypotheses are formulated.

H₁: Every subject of every state or community pays tax to support the legitimate authority within the requirement of the social contact.

H₂: The tax paid is certain in relation to the amount to be paid; the authority to collect it, the time or period is to be collected.

H₃: The tax system is simple to understand and administer.

H₄: The tax system is flexible in federal and democratic country where there are always changes of government.

H₅: The request for payment of tax is done at a convenient time for the tax payer.

1.6 SIGNIFICANCE OF THE STUDY

The need for efficient and effective tax collection system makes it imperative that a research of this nature be carried out.

Over the years, citizens have been subjected to harsh and intimidating processes with a view to making money for government especially state level where consultants were hired to do the job of state Internal Revenue Departments. The same harassment threats of tax payers both individuals and corporate bodies were also used during collection of revenue.

Equally too, by undertaking this research, one is privileged to see if the present facilities on the ground are adequate for efficient tax collection or whether there is the need for review. These facilities are in terms of human and material resources. On the whole, research work in this area is justified in the light of the above for the defects or anomalies in the process are detected and solutions preferred.

1.7 SCOPE OF THE STUDY

Several methods of collecting taxes will employed by different states. However, this research dwells mainly on the collections system in Federal Inland Revenue Services.

1.8 LIMITATION OF THE STUDY

It must also be noted that non-availability of materials on this topic can limit the extent of which one can go in this exercise. While an attempt will be made to review what the topic is all about at the first two levels of governments, our central focus will be the Federal Inland Revenue. This will entail discussing with the various relevant units, within the service, the means of collecting the taxes, relationship between the designated banks and the service.

1.9 DEFINITION OF TERMS

BALANCING ALLOWANCES:- Where in any accounting period of a company, the company owing any asset in respect of which it has incurred qualifying expenditure wholly and exclusively for the purposes of operations carried on by it, disposes of that asset an allowance shall be due to that company for that accountancy period of the excess of the residue of that expenditure of the date such asset is disposed of was the value of that asset of that date.

BEST OF JUDGEMENT ASSESSMENT – This is the assessment raised on the company when returns are not submitted to the Board or where a company has delivered audited accounts and returns, the Board may refuse to accept the return and to the best of the judgement, determine the amount of the total profits of the company and make an assessment accordingly.

DEMAND NOTE: It is a notice asking a tax payer to pay after interest and penalty might have been computed.

DESIGNATED BANK – It is a branch of a selected bank zoned to a particular area for the collection of taxes.

F.I.R.S – Federal Inland Revenue Service.

I.T.M.A- Income Tax Management Act

JTB – Joint Tax Board

LEDGER CARD – This is the card where assessments received from assessing section or department are recorded.

OFFSHORE COMPANY – A company doing business in Nigeria, deriving income from it but not resident in Nigeria.

P.A.Y.E – Pay As You Earn

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Jul 28

BUDGETING AND SERVICE DELIVERY IN NIGERIA

BUDGETING AND SERVICE DELIVERY IN PLATEAU STATE: A CASE STUDY OF PLATEAU STATE MINISTRY OF FINANCE

ABSTRACT

The researcher’s intention in this research was to find out the extent of the impact of budgeting and service delivery in Plateau State, using the Ministry of Finance as case study. Out of 200 questionnaires that were administered to the respondents, 195 questionnaires were filled and returned. The researcher made used of simple percentage and chi-square methods in data presentation and analysis. The discovery made through the research shows that the problems associated with budgeting and service delivery in Plateau State include poor funding, corruption, lack of continuity, poor planning and lopsidedness of projects. It was recommended that the above problems can be tackled through adequate audit function and check mechanisms, inter-agency collaboration and the recruitment of employees with proven integrity and good stewardship.

CHAPTER ONE: INTRODUCTION

Background to the Study

The responsibility of every government to its people, to its citizens is the provision of essential goods and services (Felix, 2012:11). Government regulates the public sector as part of the economy that provides services such as employment, roads, electricity, water, health, education, security and a host of other public services. These services that the government needs to provide are so enormous due to increase population. As economist would put it, “human wants are unlimited” (Akor, 2002:46), but the means to satisfy them are limited; this therefore call for an efficient management tools that will harness the limited resources for optimal use. One of the key tools of government for efficient management of resources for service delivery is the budget.

Budget is the single most important policy vehicle of government for giving effect to a country’s economic and social priorities. According to Aremo (2000:2) it is a management tool for the formulation and implementation of policy objectives in concrete terms. As an integral part of planning, budget plays a significant role in the development process, as it is through budget that goals and targets for the effective mobilization of resources both human and material for the attainment of given organizational objectives are realized.

According to Bendlebury (2005:72), budget making and budget implementation involve the process of identification of public needs and the determination of the quality of goods and services to satisfy these needs through the political process by economic analysis with the overall development plan objectives. This indicates that government prepares budget in form of public policy to serve as a driver through which its mission could be achieved. The budget often specifies in financial terms, the projects and programmes that the government intends to pursue within a year. Budget is thus viewed as the plan of dominant individuals in an organisation expressed in monetary terms and subject to the constraints imposed by other participants and the environment indicating how the available resources may be utilized to achieve whatever the dominant individual agreed to be the organisation’s proprieties (Omolehinwa, 2003:12). As a comprehensive financial plan, budget is expected to set forth the expected route for achieving the financial and operational goals of the government. At an early stage of its evolution, budgeting was primarily concerned with serving the purpose of legislative accountability and extends further to executive actions for the provision of social services.

The practice of budgeting, as it is now understand, originated in the central government of Great Britain (Felix, 2012:12). It later developed gradually as a result of parliament’s struggle to obtain control over the finance of the crown. In 1217, it was declared in Magna Charta that “no cottage or aid shall be imposed in the kingdom unless by the Common Council of realm.” After the revolution of 1688, parliament now approved the right to authorized expenditure by the Crown as well as taxation apart from items in the sovereign’s civil list, which was gradually reduced until it covered only the personal expenses of royal family (Bendlebury, 2005:73). Parliament now began to fix government total expenditure and to prescribe or appropriate the amount to be spent for parliamentary purposes (California Department of Finance, 1998:2). Since then, budget became a framework for revenue and expenditure outlays over a specified period usually a year, for most nations of the world.

In Nigeria, budget is adjudged as an instrument stipulating policies and programmes aimed at realizing the development objectives of a government. The government’s responsibility to provide services thus lies on how effective its budgets are implemented whether at the local, state or federal level (Uzoma, 1994:3). As good as most budgets are in Nigeria, the actual performance level is often determined by the public services that the government is able to deliver to its people within the stipulated time frame.

However, budget accomplishment by government is far from reality and the disparity between budget and accomplishment are usually wide and kept on abating as years passes by. On the other hand, public service delivery by the government has continued to deteriorate despite huge budgetary and supplementary budgetary expenditures. There is now a huge concern about government’s inability to effectively execute budgets to meet public utility demands either due to intergovernmental fiscal challenges or corruption (Romanus, 2012:27). The most frequent concern has been the partial or total disregard of procurement regulations and procedures, where they exist. Procurement procedures and regulations according to Nigeria’s Financial Regulations (2000:62) specify the price and quality of goods and services that are authorized in the budget including obligations and authorization to incur expenditures. They also emphasize on authorization before ministries and spending agencies can incur an obligation to make expenditures for public services. The other ministries and parastatals must thus secure spending authorization from the ministry of finance through the use of warrants in order to control expenditure. The question that comes to mind is: to what extent have budgets implementation delivered services to the people of Plateau State?

This study intends to investigate into the contributions of budgeting in enhancing service delivery in Plateau State.

Statement of the Problem

The overall goal budgeting is to enhance the judicious use of public funds in order to ensure adequate services delivery (Ogba, 2009:4); hence reduction of poverty, increased the level of accountability and transparency; reduction in unemployment; and equitable redistribution of resources depends on efficient service delivery.

It is undeniable that despite the efforts by various government institutions and organs to deliver services to the people, incidences of water shortages; dilapidated road networks; erratic power supply, poorly equipped schools and health centres have persists. In their submission, Kabir & Bustani (2013:55) said despite high profile programmes, policies and projects encapsulated in budgets of Nigeria, the level of service delivery and living conditions of the people are degenerating and worsening.

Nigeria is a country that is blessed with vast human and natural resources. Government particularly, at the States and Local Government levels often make projections and allocate resources through budgeting to meet service delivery. But despite government investments via budgeting, poverty, inequality, infrastructures and other public services have continued to be key concerns in Nigeria.

It is to this effect that the following research questions were raised, to shape the direction of this study.

To what extent have budgeting implementation delivered services to the people of Plateau State?
What are the critical problems associated with budgeting and service delivery in Plateau State?
To what extent does budgeting stimulate inclusive governance in Plateau State?
To what extent does the implementation of budget influence security and health care delivery in Plateau State?

Research Hypotheses

This research work has the following hypotheses:

H_o: That the implementation of budgets have not significantly delivered services in Plateau State.

H₁: That the implementation of budgets have significantly delivered services in Plateau State.

H_o: Budget discontinuity does not significantly affect service delivery in Plateau State.

H₁: Budget discontinuity significantly affects service delivery in Plateau State.

Objectives of the Study

The major objective of this study is to access the impact of budget implementation in service delivery in Plateau State. Other specific objective includes:

To determine the extent budget implementation has responded to service delivery in areas of education, water and infrastructures in Plateau State.
To ascertain at least the level of successes and lapses in interaction between budget implementation and service delivery in Plateau State.
To examine the extent to which budgeting stimulate inclusive governance in Plateau State.
To propose and make recommendations for effective budget implementation and service delivery in Plateau State.
To determine the extent of the improvement in health care delivery and security as a result of budget implementation in Plateau State.

Significance of the Study

* This research on budgeting and service delivery in Plateau State is significant because it would contribute to existing literature in the area of development studies.

* The piece of work will highlight areas of improvement in formulating effective strategies for implementing budgets in service delivery in Plateau State. This will help policy makers to design the strategy for effective monitoring of budget its implementation and role in service delivery hence useful to benefiting communities.

* Possibly, the research work will be a viable reference material to stakeholders and help to solve difficulties of other interest groups who might be faced with similar problems.

* It will thus be a viable asset as it will add to existing academic knowledge in development studies.

Again, the study will be significant to both the legislature and the executive organ of organisation in Plateau State in managing and channeling public funds within specific areas of jurisdiction such as capital and recurrent expenditures. This will help towards improving accountability, transparency and probity in the disbursement of funds to provide services.

Scope of the Study

The scope of this study is limited to the assessment of the impact of budget implementation and service delivery in focal communities of Jos South, Kanke and Quan’Pan Local Government Areas which span between 2007 – 2011.

Limitation of the Study

The study is limited by the time frame provided to carry out this research. The restricted time limit makes it difficult to assess all budgets implementation and service delivery in all local government areas of the State.

Inadequate financial resources at my disposal has also constrained the researcher to conduct a more comprehensive study of government budgets implementation and service delivery in all sectors of development in the State.

Methodology of the Study

This study has the following research methodology:

Source of Data

The sources of data for this research are derived from primary and secondary sources. The primary data would be generated through oral interviews and questionnaires that would be administered to focal communities that are beneficiaries of service delivery, while oral interviews would be directed to officials of the Local Government Councils such as directors, supervisory councillors of finance, revenue collectors, desk officers, councillors alongside village heads and community leaders.

The researcher adopts primary data in this study because it will provide first hand and undiluted information drawn from questionnaire and oral interviews.

Secondly, primary data is considered appropriate in this study because of its flexibility, objectivity and it gives a wider range of expression. Besides, it is easier to administer and it saves cost.

Similarly, gathering secondary data will rest extensively on document such as textbooks on budgets and development administration; official government reports, records of events obtained from internet, journals, articles in magazines and newspapers about budget implementation.

Exploring secondary source of data will afford the researcher the privilege to re-analyse re-interpret, counter analyse and proffer new insights to data on budget implementation and service delivery.

Population of the Study

For the purpose of this research, a population size of 200 people, consisting of focal communities of Jos South, Kanke and Quan Pan Local Government Areas of Plateau State shall constitute the target population of study.

Sample Size and Sampling Technique

For the purpose of this research, a sample size of 200 population drawn from the focal communities of Jos South, Kanam and Quan’ Pan Local Government Areas. Jos South with the general population of 306,716 will be allocated a total of 101 questionnaires; Kanke Local Government Area with the population of 124,218 will gulp 41 questionnaires, Qua’an Pan LGA will have 58 questionnaires because of population figure of 179,276 (National Population Commission Census, 2006).

We derived our sample size in each Local Government Area using the formular:

Sample Size x Population of Local Government Area

Total Population of Study Areas

Techniques of Data Collection

This study intends to use both primary and secondary techniques of data collection. The process of obtaining primary data includes administration of 200 questionnaires and conducting interviews within the focal areas of the target population of Jos South, Kanke and Quan’Pan Local Government Areas of Plateau State. Meanwhile, out of the 200 questionnaires distributed only 195 were returned.

On the other hand, the technique to be used in collecting secondary data will be through the inspection of documentaries on budget and service delivery, legislative oversight reports, journals, newspapers, articles and magazines related to budgets and services delivered by government.

Sampling Technique

In selecting the sampling technique for this research work, the random sampling method will be used to administer 200 questionnaires in focal communities of Jos South, Kanke and Quan’ Pan Local Government Areas of Plateau State. While a purposive interview shall be directed to the local government officials such as the Directors, Supervisory Councillors, Revenue Collectors, Desk Officers alongside village heads and community leaders.

1.8.4 Method of Data Presentation and Analysis

For the purpose of this research work, a simple descriptive statistical tool would be applied. We shall adopt a chi-square method where the responses would be categorized and tested using the following formulars:

X = ∑(O – E)²

Where:

∑ = Summation

O = Observed frequency

E = Expected frequency.

Operational Definitions

Operational definition of this work includes some concepts that are repeatedly used in the course of this study. They include concepts such as budgeting, budget implementation, service delivery, public sector and budgetary control.

1.9.1 Budget

Budget in this study is defined in line with the view of Aremo (2000:11) that budget is a financial quantitative strategy prepared and approved prior to a defined period of time of the policy to be pursued during that period for the purpose of attaining a given objective.

1.9.2 Budget Implementation

This is the stage of budget concerned with the actual execution of policies and programmes identified in a budget. This definition corresponds with the view of Egonmwan (2001:162) who sees budget implementation as the action stage in the overall budgeting process whereby institutions of government direct resources and efforts towards the translation of goals into concrete results in terms of services such as roads, water, electricity amongst others.

1.9.3 Service Delivery

The definition of service delivery given by Oshishami (1994:126) will be adopted in this study. Oshishami sees service delivery as the act of ensuring that services such as sanitation, education, health, roads, water, employment, electricity amongst others are delivered to the beneficiaries.

1.9.4 Public Sector

The definition of public sector in this study is similar to the one given by CIMA (1990:5). According to the Chartered Institute of Management Accountants, the Nigerian public sector consists of the three separate levels of government (i.e. Federal, State and Local Government) whose powers and relationships are not only defined but are also guaranteed by the constitution. They conduct their activities via ministries and/or extra-ministerial departments and parastatals.

1.9.5 Budgetary Control

Budgetary control in this research is defined as the establishment of budgets relating to the responsibility of executives to the requirement of a policy and continuous comparison of actual with the budgeted results either to secure by individual action the objective of that policy or to provide a basis for its reason (CIMA, 1990:89).

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Aug 06

THE IMPACT OF MICROFINANCE ON ENTEREPRENEURIAL DEVELOPMENT (CASE STUDY OF UMUAHIA ABIA STATE)

ABSTRACT

This work investigated the relationship between micro finance and entrepreneurial development aimed at reducing poverty in the economy.

The primary method of data collected from small and medium enterprise were used for their study. In the analysis table and simple percentage were used.

Major findings of this work reveals that there is a strong positive relationship between micro financing and entrepreneurial development further findings shows that provision of long term loans and equity capital by micro finance bank for enterprise are factors that militated against micro finance in the economy.

This work recommended that guidelines for micro finance institutions to finance SME’s need to be flexible to accommodate the SME’s in terms of granting them long-term loans and quality capital participation.

This will be of immense benefit to SME’s micro finance banks authority and the students of body and firms who may be interested in further research on this topic.

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

The issue of sustainable development in the third world countries like Nigeria has been a growing concern to both the government and the private sector. The huge amount of money the government has been investing on this platform over the years have not yielded any meaningful result. Poverty is a characteristic OF Nigeria households or individuals. It has been realized in the recent years that there are limits to which government can single promote development. Most of the traditional functions being carried out by the government in most countries ranging from the provision of economic development are becoming increasingly difficult to accomplish. Nigeria as an nation has her own administration, corruption, infrastructural decay, insecurity of lives and properties, unstable macroeconomic regime and unpredictable fiscal policies by successive administration (Fasug, 2006).

Thus, both the public and the private sector of the economy and every segment of the society process of the country. It is on this basis that government begins to engage in privatization policy with the view of allowing the private sector to participate in the economic development of the nation, consequently, various government process of the country’s economy.

One of the response to the challenges of development in the developing countries is the encouragement of the entrepreneurial development sachem. Nigeria had even taken more robust step by including entrepreneur studies in the academic curriculum of her educational system. the believe of such policy makes is that such decision will inculcate entrepreneur spirit in the mind of people so as to prepare them for wealth creation through small enterprises (Fasua, 2006).

A small scale enterprise is very crucial to the development, a

Of a country’s economy, especially countries like Nigeria. Entrepreneurship is sine qua non to national development, poverty eradication and employment general. It is the bedrock of any nations industrialization. A number of studies have been carried out on the impact of microfinance on entrepreneurial development. In fact, academic interest shows the impact of microfinance on entrepreneurial development is evidenced by the fact that some academic journals have devoted special issues to research establishing this linkage.

According to Amin, Rai and Topa (2003) focus their article on the ability of microfinance to reach the poor and vulnerable. They focus their article in such a manner because of concerns that microfinance is only serving people slightly below or above the line of poverty, however the really poor and destitute are being systematically excluded.

Thus, the question of whether microfinance improves or worsens entrepreneurial development is still worthy of further research such as the one being undertaken in this study.

STATEMENT OF THE PROBLEM

In any country of the world, microfinance helps in the development of the country by granting loans to low income earners. According to copestake, halotra and Johnson (2001) analyza the impact of microfinance on firms and individual welling. Copestake at all focus on business performance and household income to establish a link between the availability of the time, it appeared that microfinance are not financing to the poor and business client. The research went forward to research the problems of this study which are:

Inability to encourage the development of new business.
Inability to help existing business grow or diversity their activities
Low rate of employment
Inability to create employment and income opportunities through the creation and expansion of micro enterprises.
Inability to increase the productivity and income of vulnerable group especially and the poor.
High rate of poverty
Economic dependence on foreign countries.

I.3 OBJECTIVE OF THE STUDY

The objective of micro-finance to entrepreneurial development made the central bank of Nigeria adopted it as the main source of financing entrepreurship in Nigeria.

Despite this, however, finance is still considered as one of the major hindrance to entrepreneurial development in Nigeria. While government and non government organization (NGOS) have been engaging a number of programmes in the county. They specific objectives of this study is,

Examine the importance of entrepreneurial activates to the sustainable development of entrepreneurship in Nigeria.
Examine the impact of microfinance institution on entrepreneurial.

Examine the challenges of accessibility to capital for the development of entrepreneurship in Nigeria.

Create the awareness of the importance of microfinance institution to entrepreneurship development in Nigeria.

RESEARCH QUESTIONS

In order to achieve the above stated objectives, the following research questions are advanced

Does microfinance contribute to entrepreneurial activities that can lead to sustainable development in Nigeria.

B: Do entrepreneurs have access to capital for the development of small and medium size entrepreneurship in Nigeria?

C: What are the prospects of microfinance in the development of entrepreneurship in Nigeria?

RESEARCH HYPOTHESIS

Do entrepreneurial development have any implication on the in development of Nigeria? The following null hypothesis are proposed and tested in the cause of this study.
There is no significant difference between entrepreneurs who use microfinance and those who do not.
There is no significant effect of microfinance institution activities in predicting entrepreneurial productivity.
There is no significant effect of microfinance institutions activities in predicting entrepreneurial development.
- SIGNIFICANCE OF THE STUDY

The important of microfinance to the entrepreneurial development made the central bank of Nigeria adopted it as main source of financing entrepreneurship in Nigeria.

The significance of this study is to:

Microfinance help in the provision of financial service to low-income, poor and very poor self employed people (Otero 2000).
Microfinance has the ability to strengthen micro enterprise best practice among operators of small and medium scale enterprise.

The microfinance help to provide financial service to low income client including the self employed.

SCOPE / DELIMATION OF THE STUDY

The study would focus extensively on the impact of banks on entrepreneurial development of small, medium and large scale enterprises but focuses on small scale enterprises but focuses on growth and development in a stiffened economy of Nigeria.

The spread between the parallel and official of microfinance banks shall also be examined with the view of identifying the factors, responsibilities for the difference. And how it’s contributed to the growth of the country.

This study covers commercial places, sites, business environments, towns and cities in different states but focus extensively in Lagos state.

LIMITATION OF THE STUDY

Limitation is said to be the potential weakness if the study, that is to said, those attributed and difficult circumstance or challenges you find uneasy when writing up the project.

The weakness of the study arises as a result of certain factors encountered at several level of the exercise, such limitation includes

FINANCIAL AND MATERIAL LIMITATION: This limitation arises due to insufficient finances to going to some micro finance banks in Lagos state, in other to get vital information from our respondents.
THE SMALLNESS OF THE SAMPLE AS COMPARED TO THE ENTIRE POPULATION: It should be pointed out that limited resources to carry out the researchers disposal could not permit or allow for a greater sample size.
LACK OF CO-OPERATION FROM OUR RESPONDENTS: This limitation arises because of insufficient information from our respondents due to lack of co-operation from them.
UNNECESSARY BOTTLEVENECK MATTERS: for we to get to the bank for the materials, we had to pass through procedure that are not necessary, like signing of a document, going to one counter the other, please we are busy the management doesn’t want to see anybody. This becomes cumbersome.

DEFINITION OF TERMS

Microfinance has evolved as a economic development approach intended to benefits low income men and women. The term refers to the provision of financial services generally includes savings and credit. However, some microfinance institutions also provide insurance and employment services.

ENTREPRENEUR: An entrepreneur is people sho owns an enterprise or organization and also control and manage the affairs and activities of the business.

An entrepreneur can be said to be sole trader or sole proprietorship of a business. He or she runs the day to day activities of the business.

LOAN: Loans are said to be long term debit issued to business client by the financial institution to be paid back with interest at the specific period using collateral as security.

COLLATERAL: This is the property a borrower is willing to pledge to the banks as a secondary source of payment, should the first source (income and profit) dry up securities for bank lending according to Nzoha (1999). Security in this direction is a right or interest in property given to a creditor by a debtors so that is event of the debtor fairing to pay its is event of the debtor as when due, the creditor may reimburse himself for the debt out of the property changed.

PLEADING :Pleading entitles the creditor exclusive possession of (the property until the pledge repays a debt white ownership risk with the debtor subject to the exercise of his right.

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CREDIT MANAGEMENT AND THE INCIDENCE OF BAD DEBT IN NIGERIA MONEY-DEPOSIT BANKS

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