PROJECT TOPIC : APPRAISAL OF THE EFFECT OF ELECTRONIC PAYMENT SYSTEM ON CUSTOMER SATISFACTION IN NIGERIA BANKING SYSTEM
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Keywords:APPRAISAL OF THE EFFECT OF ELECTRONIC PAYMENT SYSTEM ON CUSTOMER SATISFACTION IN NIGERIA BANKING SYSTEM
BACKGROUND OF STUDY
Every country in the world aim at achieving economic growth and development. However, this is only possible if a country has adequate resources. In developing countries, especially those in sub Sahara Africa, the resources to finance the optimal level of economic growth and development are in short supply. This is as a result of the economies ploughed with problems of low domestic savings, low tax revenues, low productivity and meager foreign exchange earnings.
Basically, for these reasons, many developing countries yearning for economic growth inevitably resort to external financing to bridge the gap between their savings and investments. In the process of obtaining finance from abroad, a country may consider several options: grants, foreign investment and loans (concessional and non – concessional) in that order. However, mix of these capital in – flow in varying proportion could be obtained depending on the socio – economic and political situation in a country.
Nigeria like most developing countries borrowed from external sources mainly for investment purposes. The country’s external debt was sustainable up to mid 1970’s. From the late 1970’s because of poor macro – economic management and declining prices of crude oil, the country’s external debt began its upward movement. Thus from an external debt of US $ 557.74 million in 1975. Nigeria debt peaked at US $33.1 billion in 1990 before declining to US $27.1 billion in 1997 and rose to US $ 28.8 billion in 1998. However, one of the greatest problems facing African countries basically classified as the amount of their external indebtedness. The external debt problem is becoming more and more for many reasons. This problem of increasing rate of the external debt is threatening the development programmes embarked upon by these countries: thereby retarding their economic growth and development. The reason being that the size of the debt relative to size of the economy’s GNP is enormous. Also, the current system of debt management has a serious macro – economic impact on an economy’s output: as such, there is an urgent need to reduce Africa’s total outstanding debt service payments as well as accumulating of arrears on payments.
In 1986, the Federal Government introduced the Structural Adjustment Programme (SAP) to address the problem of structural imbalance in the economy and create an atmosphere for the achievement of macro – economic stability. It is obvious that one of the integral part of the SAP is to reduce Nigeria huge debt. It is a fact that if the enormous amount spent on debt service payment could be reduced greatly, the country will be able to finance a large volume of domestic investment which would enhance growth and development.
The problem of the rising external debt of the less developed countries (LDCs) is giving nightmares not only to the debtor nations that is worrying about how to earn enough foreign exchange to at least service their huge external debts but also to the creditors that are worried about the tendency of the debts becoming bad and irrecoverable.
To most debtors nations, the adage “ to go a borrowing is to go assorrowing” is a biting truism. This is not to say that the researcher is against borrowing either internally or externally. In fact, from the on set, the researcher strongly believes that external funds if judiciously utilized will go a long way to help solve or at least alleviate the problems of gross under – development confronting most of the LDCs. Getting out of the “debt trap” is now the major concern of both the creditors and the debt nations. The debtors should not be made to bear the burden of miscalculation of both the creditors ( who were reckless in the approach to lending during this peak of the “ petro dollar boom” for being too short sighted as not to see the strings and traps attached to the loans.
Perhaps, the above cannot be more representative of the Nigeria situation which is likened to an extravagant person who is hosting his friends and associates to an all exercise – paid, no holds barred party, which after the parting found himself unable to settle even a fraction of the bill and all the guest gone, not even a person to be seen to offer moral succor to the lavish host. This vividly describes the Nigeria external debt problem. Having wasted all the borrowed funds and having nothing to show for it, Nigeria is woken up to unending knocks of the creditors.
Unfortunately, ability to pay is close to zero. This is becomes more pathetic when it can be seen that Nigeria is now called upon to pay when the economy is in a depressed mood. More so, the borrowed funds are embarked on ill conceived projects which are equally badly implemented. However, the new international economic order sets out as one of it’s objectives to secure favourable conditions for the transfer of resources to developing countries and to ensure that a country’ resources are fully utilizes for the development of the country concerned. Thus, Nigeria resorted to external borrowing early in her history so as to quicken the pace of economic development. The issue of Nigeria’s external debt generated much public concern at the beginning of 1980.
Actually, Nigeria’s external indebtedness started during the colonial days. The last of colonial borrowing was the World Bank (IBRD) loan of 1958 used to finance Nigeria Railway Corporation extension to Bornu under the guarantee of the United Kingdom Government ( Felagan 1978). It is believed that debt is generated by the gap between domestic savings and investment, and export earning which increases in absolute terms over time. As the gap widens and the debts accumulates, interest charges also accumulate and a country must borrow more to maintain constant flow of net imports and to refinance maturing debt obligations.
Nevertheless, external borrowing became a conscious public policy when in 1960, the Government promissory notes ordinance was enacted for the purpose of raising authorized loans. Under the ordinance, a sinking fund was also established for redeeming loans raised. In 1962, the external loans Act was enacted by parliament which provided for the raising of the loan outside Nigeria. Under the Act, external loans were to be used for the purpose of development program and for making loans to regional government.
In 1970, after the civil war “ The External Loan Rehabilitation, Reconstruction and Development” decree was promulgated. The decree authorized Federal Commission to raise loans outside Nigeria for amount not above N1 billion. The loan is for rehabilitation, reconstruction and development programme for making loans to state government. These various regulations on external loans became the policy guidelines not only in magnitude but also in the direction.
Nigeria’s debt crisis could also be traced to the misdirect economic policies pursued since the buoyancy of the oil market which resulted in an outright neglect of the non – oil sector of the economy especially agriculture. Owing to this neglect of other sectors in the economy, the oil sector provided over 905 of the government national revenue, so fluctuations that occurred in the oil market in 1978 and 1980s distorted the projected revenue estimates of the federal government. Hence, the government had to borrow to fill the gaps created by the fluctuation and also meets the increasing expenditures. Thus, Nigeria’s debt as recorded by the Central Bank of Nigeria in 1978 was N1, 265.7 million or US $2.2 billion;N8819.4 million or US $ 13.1 billion in 1982 and N133,956.2 million in 1988. More so, the total outstanding external debt of Nigeria went up to N240, 033.6 million in 1989 in addition, it is said that the debt keeps rising yearly ( defying Newton’s law of gravity) as Nigeria was owning N648,813 million as at 1994 and N3,097,383.8 million as at 2000.
The debt situation was also intensified by large public deficit relatively free capital in – flows, inefficient control over private capital out flows and real over valuation of the exchange rate of Naira to other world currencies. For these reasons and others, debt problem has become one of the most pressing issues in the world’s political and economic relationship for a LDC like Nigeria.
In essence, what matters most is not the amount of the foreign loans but the ways and manner the loans are used in developmental process. If these loans are used for current consumption, they will have minimal impact on future economic growth but if invested rationally in productive ventures, they will contribute positively to real growth and enhance the productive capacity of the economy. The fact is that development depends purely on a sustained increase in real income, which can only be achieved or accumulated from economic growth.
Economic growth however, emphasizes on the changes in economy’s productivity over time. Growth tends to occur when total production increases more rapidly than population. Thus, it is the country’s ability to maintain a strong defense or to pay for some other national project. As a matter of fact, economic growth is an ever increasing quantity of goods and services available to meet the economy’s need over time. As a result, the higher the ratio of debt servicing payments, the lower the level of economic growth. The primary burden of Nigeria’s public debt is indeed shifted to the future, thereby retarding economic growth. The rate of investment tens to be low and unemployment rate become high because of our huge public debt. Furthermore, our reputation is tarnished and the developed nations are no longer confident in our economy. This rise to reductio0n in the flow of foreign investment to Nigeria, which could have profound consequences for the economic development prospect of the nation. With the oil glut and reduced revenue, it is expected that our external debt liabilities will increase and our economy will be unstable. The debt crisis if not well managed will lead to liquidity crisis and foreign exchange crisis, which will retard the rate of economic growth and development in Nigeria.
STATEMENT OF THE PROBLEM
The issue of external debt in Nigeria has become an immense status bestriding the main stream of international economy and politics. Foreign loans and aids are no longer used as instrument of assistance but as a weapon of oppression, suppression and perpetual under development. That the management of external debt has assumed a critical dimension for Nigeria not in doubt. This can be seen in the rising total of external debt outstanding and the cost of servicing the huge debt. From the comfortable position of lending even from the International Monetary Fund (IMF) and Africa Development Bank (ADB). Nigeria became one of the biggest debtor nations in the world and was listed among the biggest debtor nations in the world and was listed among the fifteen most indebted nations in the banker plan list.
At the end of civil war in 1970, the country’s external indebtedness was relatively low and was of little significance till 1974. But by 1977, external debt of Nigeria was N496.9 million and it rose by over 205% to N1,265.7 million or US $ 2.2 billion referred to as the “ Jumbo Loan” and was contracted from the international capital market (ICM) in 1978. This sky rocketed to US $32.6 billion at December end, 1995. With huge debt outstanding, debt service obligations rose astronomically as a result of rising interest rates in the international money market and declining grace period and grant element leaving little of foreign exchange for import of external raw materials and consumers goods.
OBJECTIVES OF THE STUDY
The broad objectives of the study are mainly:
- To critically examine the external debt problem in Nigeria between 1993 to 2004
- To assess the problems of external debt and their implications on the economies of the debtors countries.
- To analyze the factors affecting debt servicing capacity of nations.
- To analyze the impact of external debt problem on he level of money supply in an economy.
- To suggest and recommend ways of improving on the debt management policies in Nigeria.
- To determine external debt problem on level of employment.
- To determine factors affecting economic growth.
- What is the causes of external debt problems in Nigeria between 1992 – 2004?
- To what extent has the external debt problem risen and what impact do it have on economies of debtor countries?
- What are the factors affecting the debt servicing capacity of nations?
- To what extent is the impact of external debt on the level of money supply in an economy?
- In what ways can debt management policies in Nigeria be improved?
- What is the state of external debt problem on the level of employment?
- What is the state of economic growth in Nigeria?
For the purpose of evaluating or in order to efficiently and objectively analyze or achieve the above objective, the hypotheses is formulated thus:
1A. Ho: External debt has no significant impact on the GOP of economic growth in Nigeria.
- Hi: External debt has significant impact on the GOP of economic growth in Nigeria.
2A.Ho: External borrowing has no significant impact on the level of money supply in the economy.
Hi: External borrowing has significant impact on the level of money supply in the economy.
3A. Ho: The level of external debt does not have any significant impact on employment.
- Hi: The level of external debt has significant impact on employment.
SIGNIFICANCE OF THE STUDY
The nature of Nigeria economy has made it to be vulnerable to external shocks. Over the years, Nigerian economy is having adverse balance of payment which could be easily financed from domestic sources and hence external borrowing becomes inevitable .The adverse effect of external debt and economic growth related problems on the Nigerian economy are becoming unbearable. So the study will be of importance to educate Nigerians by revealing to them one of the major reasons why Nigerian economy is growing at a very slow rate, which could be traced back to the huge amount of foreign earning s spent on the external debt services instead of spending it on domestic investment. Thus an unchecked growth in foreign exchange outflows to service accumulating debt, which will only further entrench under development of Nigeria economy. This means increasing poverty ,ignorance ,disease and other conceivable socio political maladies.
Furthermore, this study will be of a good help to the Nigerian government, especially the present government to know the effectiveness of the external debt and economic growth polices implemented in the previous years and know exactly the next step to follow now in curtailing the total outstanding external debt because it is very obvious that the Nigeria external debt is now growing at alarming rate yearly. It must be added that this study is of relevance not only to Nigeria but to almost all the countries classified as LDCs especially as a result of various common features.
SCOPE, LIMITATIONS AND DELIMITATIONS
SCOPE – The study is designed to cover the period of 1992 – 2004 and concentrates only on the external debt in Nigeria and also economic growth.
LIMITATIONS – In the course of carrying out this study, some problems were encountered which ranges from non- availability of relevant recent data to the paucity of available ones. This display of uncooperative attitude by those who are supposed to be the custodian of the data, also affected this in many ways. To this extent a considerable exercise and judgments s was necessitated in dealing with the data. Time and fund also are included in the limiting factors to the collection of adequate data. Enough time is needed in order to travel to other financial institutions and other federal and state ministries of finance in order to get adequate information needed. This also posses a problem of finance due to transportation cost and the present economic situation in the country.
DELIMITATION – Due to the above limitations, the researcher therefore had to restrict the collection of data within Enugu only especially as a result of financial constraint.
DEFINITION OF TERMS
EXTERNAL DEBT – External debts are debts incurred when the government of a country borrows from a foreign banks ,Government and International institutions like IMF,WORLD BANK, PARIS CLUB etc. Also it can be seen as unpaid portion of external resources required for developmental purposes and balance of payment support which could not repaid when they fell due.
BALANCE OF PAYMENT – A systematic record of all transactions between residents of one country and the rest of the world .It is a statement of all the financial and economic transactions between one country and the rest of the world over a given period of time. It becomes unfavorable or adverse when there is excess importation over exportation.
ECONOMIC GROWTH – I s a long term rise I capacity to supply increasingly diverse economic goods to its populations. This growing capacity is based on advancing technology ,the institutional and ideological adjustment that it demands. It refers to increasing real output or real per capital output of economy.
ECONOMIC DEVELOPMENT – A multidimensional process involving the reorganization and re orientation of entire economic and social system
Keywords:APPRAISAL OF THE EFFECT OF ELECTRONIC PAYMENT SYSTEM ON CUSTOMER SATISFACTION IN NIGERIA BANKING SYSTEM