CHAPTER ONE

1.1 Background of the Study

Okehi LGA is a growing region with strong agricultural potential, small-

scale businesses, and trade activities. However, the lack of a financial

institution has forced residents and business owners to travel long

distance to access banking services. This inconvenience discourages

savings, increases transaction costs, and makes business operations

difficult. Therefore, establishing commercial bank in Okehi LGA is

necessary to enhance financial inclusion, boost local business and support

economic growth

Okehi local government is strategically located at Kogi central part.

Enabulu (2010), stated that the banking industry is the hub of productive

activity as it performs the vital role of financial provision and effective payment

system as well as assisting in monetary policy implementation. Banking occupies

one of the most important positions in modern economic world. Hence, it is one

of the great agencies of commerce, although, banking in one form or another has

been in existence from early times, modern banking is of recent origin. It is one

of the result of the industrial revolution and the child of economic necessity.

Banking is very helpful to the economic activity and industrial progress of a

country.

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 The banking system is a catalyst and engine of growth that is responsible

for growth of every sector of the economy. It is evident that no sector in the

economy can flourish without the support and service of the banking sector even

services sector. Hence economic development is accelerated by banking industry.

Okpara (2009) supports the above ideas when he noted that banks represent the

nerve centre of the payment system, the vessel endowed with the ability of

money creation and allocation of financial resources and through which monetary

and credit policies are implemented. There are basically two types of banks.

These are the regulatory and participatory banks. The regulatory banks are the

central banks, while the commercial banks, merchant banks, development banks,

other specialized banking institutions and micro-finance banks are the

participatory banks.

Commercial bank is a financial institution that is authorized by law to

receive money from business and individuals and lend money to them. According

to Anyaele (2002), commercial banks are institution set up purposely for

safekeeping of money, valuable goods and documents like wills and others. They

offer employment opportunities to many citizen thereby contributing to

manpower development. He said the existence of banks has been a big boost to

business activities and speed up the process of economic development through

making more funds available from resources mobilized. They are involved in the

process of increasing the wealth of the economy particularly the capital goods

needed for raising productivity. The availability of financial capital is a

Commercial banks help to enhance development of international trade and

promote the relationship between nations. They are transmitters of monetary

policy and they provide some value added from transferring funds from savers to

borrowers and providing liquidity.

The First Bank of Nigeria Plc is one of the Nigeria top three commercial

banks. Founded in 1894 as bank of British West Africa renamed First Bank of

Nigeria in 1979. It is the biggest bank in Nigeria by total deposits and gross

earning with assets totaling N3.9 trillion and over 750 business locations across

Africa. First Bank operates along four key, strategic Business Units (SBUs).

Retail Banking, Corporate Banking, Commercial Banking and Public Sector

Banking. One of the economic functions performed by First Bank is transferring

of funds from surplus units of the economy to the deficits units of the economy

for investment purposes through their 790 branches spread all over Nigeria which

brought an impressive growth. Some economist believe that the economic status

of any nation depends to a large extent on how effective their banking industries

are. The study is meant to discuss the need for the establishment of commercial

bank in rural areas (Okehi Local Government Area of Kogi State).

1.2 Statement of the Problem

In this modern economic development across the world, commercial bank

plays a major role in the economic growth and development. The commercial

bank offers credit to entrepreneur to develop and expand their businesses. Most
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businesses are conducted through banking system. The safe keeping of money

and other valuables is a great concern for average Nigerians. Moving of huge

cash from one point to the other is a very dangers venture because of the rampant

armed robbery cases in Nigeria. Many Nigerians meet their untimely death on the

road in search of going to the urban areas to deposit or withdraw their money.

From the experience of the researchers dwelling in communities around

Okehi local government are, for the past three years one of the major problem of

the community dwellers is lack of commercial bank in the community to aid them

in their day to day business. A larger portion of the community depended on the

commercial banks in Okene town. Most cases, the dwellers where faced with

various challenges ranging from carrying huge amount of money to travel to

Okene and were waylayed by arm robbers, killed by accident and lost of many

hour in their business.

Much as the situation described causes for concern, the researchers’

interaction with the dwellers showed that everybody has a complaint against the

commercial banks why one commercial bank is not cited in Okehi local

government area. It is therefore clear from the foregoing that there is need for

establishing a commercial bank at one or two community in Okehi Local

Government area . Therefore the researcher decided to carry out a research titled

the Needs for the Establishment of the Commercial Bank in Okehi local

government area of Kogi State.

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1.3 Purpose of the Study

The general objective of the study is to assess the Needs for the

Establishment of a Commercial Bank in Okehi Local Government Area of Kogi

State. The specific objectives are:

1. To examine the need for the establishment of commercial in Okehi local

government area, Kogi State

2. To examine the contribution of commercial banks to economic growth

and wealth creation of dweller in the community in Okehi Local

Government area

3. To examine problems experienced by Okehi local government dwellers as

a result of lack of commercial banks.

1.4 Research Questions

The research work will provide answers to the following research

question:

1. What are the needs for the establishment of commercial in Okehi Local

Government Area of Kogi State?

2. What are the contributions of commercial banks to the economic growth

and wealth creation of Okehi Local Government Area dwellers?

3. What are the problems of experienced by the Okehi Local Government

Area dwellers as a result of lack of commercial banks?

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1.5 Significance of Study

This study will provide an opportunity for any person who may read it to

appreciate what the need of commercial bank in the rural development means.

The findings of this project will help to bring to the limelight the actual

contributions and operations of commercials banks in Nigeria. It will also

sensitize the society on the important of commercial banks to the economic

development of a community through the use of branch banking system.

The study will be important to the policy makers and the Federal

government in order to adopt and implement policy measures that will boost the

economy through the financial institution. Also, it will enable the government to

issue guidelines to bank management to be having branches in communities

especially community in Okehi Local Government Area of Kogi State.

It will encourage investors to set up commercial banks in a community.

Also, it will help researchers to know the people view towards banking.

It will also depict the negative and positive side of the activities of the

general public and bankers, for some correction and changes in order to boost the

economy.

1.6 Scope of the Study

The study focuses on okehi local government area in kogi state. It

examine the economic activities in the region, the challenges posed by the

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absence of a commercial bank, and the possible benefits of establishing

commercial bank in okehi local government area for the benefit of the citizens

1.7 Definitional Operational Terms

Commercial bank: a financial institution that offers services such as accepting

deposits, providing loans, and facilitating transaction for individuals and

businesses. Commercial banks play a vital role in economic development by

promoting financial inclusion and business growth