Loan Syndication Impact On The Economy

BACKGROUND OF THE STUDY
The origin of the syndication loan was traced to the bankers of the middle age who distributing their financial risk among several house to support the trade flow. This system was more on a participating basis, then a formalize syndication as the lender did not adopt one common loan documentation.
In Nigeria loan syndication can be trace to the 60’s. When a consortium of the commercial bank and the acceptance house discounted trade bills for the marketing board under the produce bill financial scheme, formalize loan syndication came into been during the oil boom of 70’s where there was need for adequate capital to finance the industrialization programme.
During the programme, few of the merchant banks have been incorporated.
Loan syndication has assumed international dimension because of he need to provide the capital to finance the fast growing world economy.
An international syndication credit is managed and was under written by one more financial institution normally from access t more than its currencies of domicile

STATEMENT OF THE PROBLEMS
The management of loan syndication in the Nigeria financial market has always been the a problem to the enterprise and that is why I am conducting a research on the topic looking bank as the origin of the syndicate loan which traced back on the bankers of the middle age who distributed their financial risk amongst several house to support the trade flow. This system was more on participating basis than on formalize syndication, as lenders did not adopt one common loan documentation.
The problem mogul comes from the delay in packaging and putting the credit in place before disbursement to the borrowers. Some of the bank is invited by the lead bank to participate in syndication by decline and come up with reasons like loan growth constraint, liquidity problem etc. some syndicated loan takes up to two yeas to conclude. After the loan has been disbursed, another problem can arise in cooperate attitude of the borrowers in meeting and condition stated in the loan agreement such as submission of progress report quarterly management account. The payment of the interest and principle when due occasionally pose some problems. The borrowers may be facing a liquidity problem, low sale and income earn, diversion of working capital into acquisition of fixed asset etc, such problem is not properly handled may lead to rescheduling and restructurings and refinancing the loan.

OBJECTIVE OF THE STUDY
a. To ascertain the adequacy of the syndicated loan provided by the bank to the industrialist.
b. To assertion the effect of long term syndicated loan on the liquidity position of the bank in Nigeria.
c. To ascertain the extent to which management structure has affected loan syndication business in Nigeria.
d. To determine the increase of disagreement between the lead bank and the participating bank in loan syndication business
e. To identify the problem encountered in the documentation process of syndicating loan.
f. To highlight the prospect of loan syndication to both the users of the loan and the bank that extend the credit.

SIGNIFICANCE OF THE STUDY
There are two main parties to loan syndication;
a. The lender
b. The borrowers
The lender bank is appointed and is called the agent bank or the lead bank. It the agent bank of the lenders and its main duty if monitor the disbursement and utilization and repayment of the credit as per the lending agreement.
The borrower consists of the following;
a. Individual customers
b. Operations.
The borrower will usably channels its request to a bank with which it has already establish a relationship or alternatively to a bank it has carefully chosen based on the perception or the easement of its expertise and ability to deliver. It may also channel the request to a number of banks calling for bids of offers with a bid to select the most favorable offer. The bank of the borrowers choice which agree to raise the required amount is known as the lead bank of the syndication

RESEARCH HYPOTHESIS
Ho: Loan syndication has not been applies to a syndication extent by the Nigeria enterprise in project financing
Hi: Loan syndication has been applies to a syndication extent by the Nigeria enterprise in project financing
Ho: Syndicated loan are not adequate to industrialist in Nigeria
Hi: Syndicated loan are adequate to industrialist in Nigeria
Scope and limitation of the study
This study deals with the Nigeria financial market and their impact and contribution to the industrialist and to the economy in general through granting of syndicated loan. This research also dealt briefly on other countries financial market as it relates to loan syndication. One area of militating the financial resources and the time available to carry out the research in the same vain, non-reliability of the relevant data from the bank posed a big problem while the inability of the bank official to release some of the research work also affected the quality of the research.

DEFINITION OF TERM
a. Syndicated loan is normally carried out by merchant bank through the coming together of the financial institution for the purpose of providing large fund to the client who may or may not be a customer to all the different institution participating in the execution of the loan facility. The single idea is that each individual lender is bound by one loan agreement as lender and borrowers.
b. Finical market: this is the market form which large companies and financial enterprise attract long term investment fund through the network of the financial institution and stock brokers licensed to perform capital market function.
c. Loan: this is credit facility granted to a customer which is installmentally repayable over a specified period of time
d. Financial house: a financial house is a financial enterprise, which specialize in providing fund to buy major asset. On the other hand, financial house are non-banking institution, which usually perform some of the function of bank but on a small scale.
e. Lead bank: the bank of the borrowers choice that agrees to raise the required amount either on a best effort base or under written obligation.
f. Agent bank: this an administrator of the loan
g. Capital market: this is market for medium and long-term loans. A merchant bank is a player in this market.