FINANCING PUBLIC AND PRIVATE PROJECTS IN SOUTH WEST, NIGERIA: A CASE OF ZENITH BANK PLC

Abstract

In Nigeria, projects are mostly faced by inadequate funding across all sectors. This study assessed the investigation and appraisal parameters used by Deposit money bank (Zenith Bank) in determining the viability of credit request by customers. The study aimed to test and confirm the effectiveness of the studied variable viz; Borrowers’ character, collateral, economic conditions and corporate governance of the borrowing entity on credit investigation and appraisal. Data were collected using structured questionnaire administered on one hundred and fifty eight respondents comprising seventy two bank’s staff and eighty six customers. Responses were presented in tables, frequencies and percentages. Regression analysis was used to validate objectives and hypotheses, and also to determine the extent to which independent variables contribute to the dependent variable. The opinion of staff and customers of the bank were analyzed separately and later compared for better understanding. Findings show that borrowers’ character has a significant positive effective on appraisal of credit requests but with a weak R-squared value of 17% and 33% for bank and customer respectively. Collateral, economic conditions and corporate governance are found not to be significant in appraisal and investigation of credit request. However, multiple regression analysis of the variables combined resulted into an R-squared value of 40% and 38% for bank and customer respectively. Conclusively, the study revealed the importance of borrower’s character as estimated by length and strength of lenders-borrower’s relationship as an important tool for investigating and appraising credit request as it helps to reduce problems associated with asymmetric information. Collateral is observed to be more important at the point of loan recovery due to default and could serve as incentives to both the lender and the borrower. Therefore, credit rating tools should focus more on borrowers’ character as it is a key success factor in credit appraisal.