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CHAPTER ONE

INTRODUCTION

1.1    BACKGROUND OF THE STUDY

This project on “The role of Banks in international Trade”, is written to provide a guide sufficiently instructive in scope to meet the need for Banks, Economist in International Trade. Among the important topics examined are if there are various relationship, role that exist between banks and international trade in Nigeria, nature of international economics, international trade, difference between international trade and internal trade, problems facing international trade in the banks sector. Nigeria before and even since the British Colonialist of our country has been engaged in international trade. But it was obviously spelt out during the British Colonialist that was in the 15th century termed legitimate trade. This was until 1960 during which Nigeria got its independence. This means that, Nigeria was no longer controlled solely by the dictates of the British Government Ever since then legitimate trade to the Nigerian was changed to international trade of which Banks has a major role to play in it.

Nigeria since the oil boom in the early 70’s has been enjoying Nigeria and across the country. Diversifying its economy. Apart fro international trade, and as a result of climatic factors, Nigeria needs international trade to diversify, accelerate its economic development in the country. International trade ensures export expansion and import contraction coupled with the fact that it stimulates foreign exchange earnings, international recognition and the provision of employment opportunities for the teeming population. International trade is synonymous with the production of goods and services for the benefit of trade across the country. Thus we have the banking institution, the food processing export/import trade and the sugar, tobacco export/import trade and that of petroleum export trade is not left behind. Therefore, international trade or external trade is a trade between two or more countries.

Example. Trade between Nigeria and USA as well as Ghana, India, Britain, Japan etc. trade between two countries is called bilateral trade, while trade between many countries is called multilateral trade. International trade does not mean the exchange of goods and services within a country. The exchange of goods and services among the people of the same country is called home or internal trade. Example, all trading activities which take place within Nigeria in a home or internal trade. External trade is established for the purpose of stabilizing nation’s economy standard if living. External trade has been proved beyond doubts as very important for a nation’s survival therefore it is prevent that we explicably manifest how the role of banks can be employed for the development of these trade. In doing this, we will limit our study to short and long term scale institutions which are very important to the economy.

Short term scale institutions as defined by the central bank credit guidelines is, any service enterprise whose annual business turnover does not exceed N500,000.00 (five hundred thousand naira). There is no definition for long term scale institutions as these did not attract the direct emphasis of the CBN. The role of banks in international trade development of Nigeria, could be seen through the various services which these banks provide for the sustenance of international trade in the country. These services include the provision of capital for these exporter/importers in the business inform of loans, such as short term loans, medium and long term loans, which the traders could use to finance their business goals.

The banks also provide overdraft facilities, which are necessary to finance the working capital of the business. An overdraft could be defined as an arrangement whereby the banks allow their customers to over-draw his account up to a credit position at the end of the period, while short term loans refer to loans granted for periods between one to five years. Then medium and long term loans are granted for periods between five to ten years, even ten years respectively. Apart from granting loans and over drafts facilities, there are still other roles which banks could play in international trade development in Nigeria. These roles include professional advice, opening of documentary letters of credit (L/CS), bills for collection and negotiation/open account and bills of exchange, foreign exchange example travelers cheques and foreign currencies, information on trade and exchange restrictions, collection and transfer of funds status enquires, etc. above all the determination of the actual external funds required by an export/import borrower. There are accepts of such services which help international trade growth or expansion.

It is not for fetched that the exporters/importers of international trade suffer their own bank problems, which should be analyzed and solved to ensure international trade development. These problems such as the problem of corruption in banking parastatals, obtaining capital from and operational problems which are coursed by the dictates of the Nigeria environment and society.

The irrational problem of manpower requirement and the poor knowledge of trade across these external traders help to compound the general problems of international trade development of which bank services can be gainfully employed for the purpose of solving them. Addition to the problems is lost of trust ship among the members or cooperators of the trade fraudulent acts among members. In all, these problems the worst is the problems of unstable political contradictions. These problems should be totally exterminated by the government, and the society entirely to ensure the steady growth of this important sector of the business of the economy. It has been noticed that the level of banks institutions financing has been vary poor compared with is obtained in developed nations such as America (USA), Germany but few. The central bank of Nigeria (C. B. N) should step up their moral suasion policy so as to make these banks especially the commercial banks to increase the level of their financing of exporter/importers members.

In increasing this level of their financing emphasis should be placed on medium and long term loans to enable these traders concretize their investments for better results in its outputs; though the commercial banks borrow short from their deposits, the commercial banks who also declare excess profits at the end of each year should expand a lending pattern for medium and long terms loans without adversely affecting their liquidity ratios. With the funds available from the banks, international traders should be made to judiciously invest them and with other important a sound, solid firm and concrete foundation must be laid for the international development of the country.

1.2   STATEMENT OF PROBLEM

The Nigerian Banks is a pillar in the roles contributed to international trade in Nigeria. The Nigerian banks have various established institutions that enhance the growth of international trade. Commercial banks, merchant banks, development banks, are one of the banks instruments that hold a vital role in external trade and have been branched all over Nigerian states. The contribution of the above banks to international trade has been a satisfactory type. Most importers and exporters dances to tune of these banks. Why have these very banks so appetizing to the society and the world at large? Is the success as a result of the banks efforts in it’s operations? Why do importers/exporters prefer it to other financing institutions?

1.3   OBJECTIVES OF THE STUDY

1. To find out if commercial banks play any role in international trade in Nigeria.

2. To find out if merchant banks play any role in international trade in Nigeria.

3. To find out if development banks play any role in international trade in Nigeria.

4.  To find out if commercial banks play any role in international trade.

5. And equally to find out if people’s bank play any role in international trade in Nigeria.

1.4    RESEARCH QUESTION

1. What role do commercial banks play in international trade?

2. What role do merchant banks play in international trade?

3. What role do development banks play in international trade?

4. What role do community banks play in international trade?

5. What role do people’s bank play in international trade?

1.5  ASSUMPTION OF THE STUDY

 It is assumed that in this research the secondary data collected is correct and reliable. The procedure and method used is correct and reliable.

1.6  SCOPE OF STUDY

Area of coverage The role of banks in international trade in Nigeria . Banks method of contribution to international trade in Nigeria.

Why international trade in Nigeria?

Advantages of international trade in Nigeria.

1.7  SIGNIFICANCE OF THE STUDY

Today, the government parastatals, banking sectors and the society are all hands on deck to enhance the international trade development and growth of Nigerians economy. The research study will be of high benefit to banking sectors, importers/exporters and to the society in general to embark of the effectiveness of their business, which inturn will change of the society. Also the study will determine the census and problems of banks role in international trade in Nigeria and thereby should be taken as a corrective measure. Through this investigation, therefore, the banks and the society will then know their weak points and willingly adopt measure aimed at enhancing it’s business effectiveness. The government will be in the position to adopt the right strategies to enable the society achieve it’s business expectations or goals.

1.9    DEFINITION OF TERMS.

(a)  International Trade: As described by the Author,

Norbert M Ile in his published test “Economics of business studies” (2015) defines an international trade or external trade as “a trade between two or more countries; it is the exchange of goods and services between two or more countries”.

(b)  Banking Institution:  We can define a bank as

any organization that handles people’s money. It is a dealer in debts, but indebtedness has a correlation to wealth and hence, a bank can be described as a liquefier of wealth.

c) Role: It is defined as “actors in a play; persons

task or duty in undertaking.

(d) Foreign Exchange:    This is a process by which a country exchanges it’s goods/services to another country’s goods/services.

(e) Overdraft: This is a system whereby a customer drawns more money then he has to his credit in a bank.

(f) Economy:It is a system of control and management of the money goods and other resources of a society.

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