PROPOSAL
Before going into the details of the
topic loan syndication, it will be wise to know the actual meaning of this
topic.
Loan is an
agreement between the render and leader in terms of monetary consideration to
pay back either with interest in a specified period of time. Syndication in its own little definition has
to deal with any financial institution that is assigned with the work of giving
loans to the beneficiaries.
Now loan syndication, as a source of
business financing in Nigeria
has to do with the agreement between two or more lending financial institution
to provide a borrower with a credit facility using common loan documentation.
In the country before any body has to
invest in any capital project that acquires big amount of outlay. The cost of these investments have made it
possible for one financial institution to finance such investment requiring
such huge amount because he cannot foot the bill along. Loan syndication has become an attractive
credit delivery technique aimed at spreading risks and redialing the impact of
the restricting laws and regulation.
There are problems also associated with loan syndication in Nigeria
economy which include people argue that loan syndication is very expensive and
involves much administrative work because the effective cost of capital exceeds
the interest paid. Secondly, loan
syndication is time consuming because of the documentation requirements.
In the area of problems there would
also be some advantages incurred through loan syndication, loan syndication
lowers the cost of capital to the firm because tax deductibility of interest
payments. Also it saves the borrow palms
of raising equivalent loan independently from different financial institution.
The
repayment schedule is usually geared to the borrowers cash flow ability to
service the debt. Also the borrower
deals directly with the loan and can be tailored to the borrower need through
direct negotiation.
In spite of many advantages of
syndication loan financing, it is definitely not a business for the
unprepared. A firm that wishes to borrow
by these techniques must do its home work thoroughly.
Finally, given the limit development
of the capital market and the preferences for loadable funds in form of bank
credit, the practice of loan syndication is bound to become more popular in Nigeria
and remain an important technique of credit delivery by financial institutions.
TABLE
OF CONTENTS
TITLE PAGE II
APPROVAL
PAGE III
DEDICATION IV
ACKNOWLEDGEMENT V
PROPOSAL VII
CHAPTER
ONE
1.1 INTRODUCTION
1.2 PROBLEMS IDENTIFICATION 1
1.3 STATEMENT OF OBJECTIVES 4
1.4 LIMITATIONS OF THE STUDY 5
1.5 SIGNIFICANCE OF THE STUDY 6
1.6 SCOPE OF THE STUDY 6
1.7 DEFINITION OF TERMS 6
CHAPTER
TWO
LITERATURE
REVIEW 8
2.1 LOAN SYNDICATION AS A SUBJECT 9
2.2 EVALUATION OF LOAN SYNDICATION 10
2.3 LOAN SYNDICATION AS A LIQUIDITY
SQUEEZE11
2.4 EVALUATION OF SYNDICATION LOAN
FINANCING13
2.5 FORMS OF SYNDICATED CREDIT FINANCING16
2.6 ELIGIBILITY ISSUE IN LOAN SYNDICATION 17
2.7 PROCEDURE FOR SYNDICATED LOAN 17
REFERENCES 19
CHAPTER
THREE
3.1 RESEARCH DESIGN 20
3.2 TYPE OF DATA USED 20
3.3 LOCATION DATA 20
3.4 SOURCES OF DATA 21
REFERENCES 23
CHAPTER
FOUR
FINDINGS 24
4.1 INTRODUCTION AND STATISTICAL METHODS 25
4.2 FINDINGS OF SYNDICATED LOAN FINANCING
REFERENCES 27
CHAPTER
FIVE
SUMMARY,
RECOMMENDATION AND
CONCLUSIONS
5.1 SUMMARY OF RESEARCH FINDINGS 28
5.2 CONCLUSION 29
5.3 RECOMMENDATIONS 30
BIBLIOGRAPHY 33
CHAPTER
ONE
1.1 INTRODUCTION ANALYSIS
INTRODUCTION
The relative insufficiency of funds
for capital investment is a common factor in every economy especially in developing
countries of the ward, like Nigeria.
Finding a
solution to these problems of providing funds for capital investment has been a
major pre-occupation of financial institutions in Nigeria one of the solution
that come up is syndicated loan, which h is aimed at spreading risks and
weakening the impact of restricting laws and regulations lending by financial
institutions.
Loan syndication is basically defined
as an agreement between two or more lending financial institution to provide a
borrower with credit facility using common roan documentation.
The
spectacular growth of Loan syndication as source of financial instruments for
business organization occurred as response to several economic factors in Nigeria. Notable among these were:
-
Restrictions
on credit expansion of government and monitoring authorities to minimize.
-
The
scraping of import licence requires which enables more users of imported
equipment and machineries to source and warning some into the country.
-
Deregulation
of interest rates made Loan syndication attractive to both business
organization and financial institutions.
In
addition there are/certain legal and regulatory limitations on lending
activities of commercial and merchant banks such as the statutory lending limit
as provided in banking Act of 1969 section 13 (1), the liquidity requirements
etc.
In order to surmount these legal and
regulation, limitations on lending activities of commercial and merchant
banks. Loan syndication has become an
attractive credit delivery technique aimed at spending risks and reducing the
impact of the restricting laws and regulations.
Currently, there exist a comprehensive
enacted law on Loan syndication in the country as to regulate the activities of
the financial, institution who lead and participate in the syndication.
What
is not the rapid growth of financial institution involved in Loan syndication
but their activities, which have been quite remarkable over the years.
1.2 PROBLEMS IDENTIFICATION
There are conflicting views as to
whether business organization shold be financed by syndicate loan or not. The opposition to theuse of alternative and
involve much administrative work
Also,
there is need to point out in very clear terms the advantages inherent in syndicate loan as medium and long-term financing.
1.3 STATEMENT
OF OBJECTIVE
The purpose of this study includes:
-
To
examine the general terms of the various issue involved in Loan syndication
-
To find out
whether Loan syndication is really a new approach to or another Loan
syndication can help in industrial development of the country.
-
To
examine the extent of penetration of syndicated loan financing among business
organization in the country.
1.4 LIMITATION
TO THE STUDY
This
work would have been more comprehensive and perfect if not for the constrains
imposed on the researcher by the following factors.
Death
of statistical data:
Lack of statistical data from our
financial institutions like the central bank of Nigeria (CBN).
Ministry and Economic Development
posed as constraints to the researcher.
Cost:
The researcher would have extended the survey but for the enormous cost
of transportation, it was impossible.
1.5 SIGNIFICANCE
OF THE STUDY
Lender: The lender bank is appointed and it is called
the agent bank it is an agent of the lender and its main duty is to monitor the
syndicated growth loans. This has
contributed to the economic growth of the nation.
1.6 SCOPE
OF THE STUDY
SCOPE: The scope of the study dealt with Loan
syndication as a source of business financing in Nigeria and its important to the
industrialists and economy in Nigeria.
1.7 DEFINITION
OF TERMS
LOAN: This is a credit facility granted to a
customers which is install mentally repayable over a period of time.
SYNDICATION: This is an association of Industiralists or banking
customer formed to carry out industrial project.
LOAN
SYNDICATION: This is basically defined
as an agreement between two or more lending financial institution to provide a
borrower with credit facility utilizing loan documentation. utilizing loan
documentation.
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