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THE ROLES OF NON-BANKING FINANCIAL INSTITUTIONS IN NIGERIA

CHAPTER ONE

1.0     INTRODUCTION:

Nigerian financial institution are regarded as the part of financial industries that deals with exploitation, exploration and sourcing funds, investment and sharing of funds to individuals.  However, the Nigerian financial system can be said to consist of the following subsystems:

1.     The banking system

2.     The non-banking financial institution

3.    The regulatory financial institution

4.    The traditional financial institution.

In practice, the growth of most of these financial institution has become that of “Survival of the fittest” due to the lukewarm attitude of the Nigerian citizens in exposing their business interest to organizations incorporated under this system.

This is very bad for the economy considering the role non-banking financial institutions (NBFIS) play in supporting and sustaining the welfare of the small scale business and thrifty motivation given to low any high incomers in our present economy still developing.

1.1 STATEMENT OF THE PROBLEM

At present the main concern of NBFIs is collecting fund for investment at a lower cost. Due to current liquidity crisis of banks, it became difficult for them to have funds at a reasonable cost. Other issues stem from severe competition from banks, volatile stock market, and lack of trained human resource and absence of secondary market for loan products. It is suggested that NBFIs have to search for alternative and low cost source of funds, find appropriate way to diversify their product in a manner attractive to people and restrict their investment in low-risk project.

1.2     PURPOSE OF THE STUDY:

The purpose of the study as concerned in this topic is undertaken with the following objectives in mind.

(i)    To identify the types of non-banking financial organization in Nigeria;

(ii)    To find out whether or not this various non-banking institutions have any difference and similarities to the banking system.

(iii)    To also find out their various sources of fund and respective functions.

(iv)     To find out if there is any principles and loss guiding the firms and the parties that transact business with them.

1.3            SIGNIFICANCE OF THE STUDY:

The study is very important mostly now that our economy is gradually developing with the current government policies on corruption.  We shall also see how non-banking financial institution helps in the upliftment of national economy thus:

(i)    They offer grant assistance in borrowing of funds for the establishment of small and large-scale business enterprises. 

(ii)    They provide intermediary services to facilitate prompt and safer transaction.

(iii)    They reduce the risk that is being faced in attempting to earn a return on their saving.

1.4            LIMITATION OF THE STUDY:

It is imperative that the study of this magnitude will on call visits to almost the 36 States in the country to bring information from numerous non-banking financial institutions.  But this idea was not possible due to lack of time and enough money resources.  As a result of these constraints, the study was limited to only five firms of non-banking financial institution in Enugu and Anambra State with the hope that conclusions gotten in the course of study world averagely apply to other States and non-banking financial sectors.

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