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CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND OF THE STUDY

The banking sector has been known for its intermediation role in providing financial assistance needed in the economy. This role is normally carried out in many ways, for example, granting of loans and advances to the customers, which constitute the major part of bank leading (Agu, 2010). In modern society, economic prosperity and progress depend largely on level of savings in the nation. A customer saves his excess funds in the bank for the purpose of realizing interest for future usage which otherwise, is made available to an investor for productive venture. When this happens, a debt is created. A debt has been described as an obligation to make future payment. Often times, borrowers default due to fund diversion, or poor business knowledge. Consequently, the owners of these funds face the risk of not getting their money in good time or lose it entirely. The custodian of these funds may be saddled with challenges of struggling to repay or delay in payment and hence, debt management becomes necessary to guarantee confidence of the individual depositor that his money is safe. Debt management involves arrangement put in place for repayment of these credit facilities (Uremadu, 2004). According to ESCAP, (2006) Debt management encompasses more than the mere mobilization of domestic and external resources, recording this debt and making timely debt service payment. In the same vain it also fulfils a wider role in safe guiding the stability of the individual bank and thus the banking system as a whole. According to Jhingan (2008), the major operational business of commercial banks revolves around financial intermediation. In carrying out this business, the banks would source for funds from various members of the public. The funds of the customers are held in safekeeping of the banks and therefore, such funds must be made available to the depositors whenever they demand for them.

In modern society, economic prosperity and progress depend largely on level of savings in a Nation.  It happens that someone’s savings is made available to an investor for productive venture like what happens in Commercial Banks.  When this happens, a debt is created.  A debt has been described as an obligation to made future payment. 

It is against the borrower’s promise to make future payment. As a result of this, the owners of these funds face the risk of not getting their money in good time or losses it entirely when the custodian of these funds cannot manage them well hence debt management becomes a singvenon to guarantee the confidence of the individual depositor that his money is safe.

management involves arrangement put in place for repayment of these credit facilities. In the same way, it is also fulfilling a wider role in safe guiding the stability of the individual bank and thus the banking system as a whole. At this juncture, the research mentioned that this work is based on the constraints in relation to Debt tagged on the problems of management in Nigeria Financial Institutions. Recently, the Banking sector undergo a traumatic experience whereby some Banks were judged distressed; this, however was a direct manifestation of improper debt management.

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