THE ROLE OF DEPOSIT MONEY BANKS ON THE

PERFORMANCE OF SMALL SCALE ENTERPRISES IN NIGERIA

(A CASE STUDY OF FIRST BANK OF NIGERIA PLC)

BY
ADESUA OLASUNKANMI FANCIS

HND/21/BFN/FT/379

BEING A PROJECT WORK SUBMITTED TO THE DEPARTMENTS

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

MAY, 2023

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 CERTIFICATION
This project has been read and approved on meeting the requirements of the
Department of Banking and Finance, Institute of Finance and Management
Studies, (IFMS) Kwara State Polytechnic Ilorin for the Award of her Higher
National Diploma (HND) in Banking and Finance

____________________ ___________________
MR. SAFURA A.S DATE
(Project Supervisor)

________________________ _________________
MRS. OTAYOKHE E.Y DATE
(Project Coordinator)

________________________ _________________
MR. AJIBOYE W.T DATE
(Head of Department)

________________________ _________________
(External Examiner) DATE

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 DEDICATION
This project is dedicated to Almighty God that gives knowledge and wisdom.

iii
 ACKNOWLEDGEMENT
My gratitude goes to Almighty God without him all this would have been
impossible, I acknowledge you for the beginning and completion of this course.
All glory, honor and power belongs to your holy name.
My sincere appreciation goes to my supervisor, MR. SAFURA A.S whose
wisdom, intelligence and constant constructive criticism helped in the completion
of this project work. I also appreciate my lecturers in the department who acted as
mother and father figure for me throughout my stay on campus.
My appreciation goes to my parents ADESUA who fulfilled their parental duties
all through my stay in this institution and tried their best to make sure that i didn't
lack anything, their support kept me going all through.
My gratitude goes to my siblings the entire FAMILY and friends to their
extremely support and whose door was always open to me, may Almighty God
continue to reward you with more success.
I appreciate the efforts of every other person who one way or the other contributed
to the success of this project may Almighty God continue to bless you all Amen.

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 TABLE OF CONTENTS
TITLE PAGE i
CERTIFICATION ii
DEDICATION iii
ACKNOWLEDGMENT iv
TABLE OF CONTENTS v
CHAPTER ONE 1
1.0 Introduction 1
1.1 Background of the Study 2-4
1.2 Statement of the Research Problem 4-5
1.3 Research Questions 5
1.4 Objective of the Study 6
1.5 Significance of the Study 6
1.6 Scope of the Study 6-7
1.7 Definition of Terms 7-8
1.8 Plan of the Study 8
CHAPTER TWO
2.0 Literature Review 9
2.1 Conceptual Framework 9-12
2.2 Theoretical Framework 12-29
2.3 Empirical Review 29-30
CHAPTER THREE
3.0 Research Methodology 31
3.1 Research Design 31
3.2 Sources of Data 31-32
3.3 Population of the Study 32-33
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3.4 Sampling Size and Sampling Techniques 33-34
3.5 Method of Data Collection 34
3.6 Method of Data Analysis 34-35
3.7 Limitation of Study 35-36
CHAPTER FOUR
4.0 Data Analysis, Findings and Discussion 37
4.1 Demographic Characteristics 37-44
4.2 Test of Hypothesis 44-47
4.3 Discussion of Findings 48
CHAPTER FIVE
5.0 Summary, Conclusions and Recommendations 49
5.1 Summary 49
5.2 Conclusion 49-50
5.3 Recommendations 50-52
References 53-56

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 CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Small and medium scale enterprises (SMEs) are seen as instruments for reducing
the poverty level affecting the country and improving the economy of Nigeria. Therefore
the need for SMEs growth in Nigeria is beyond question. Studies by the International
Finance Corporation (IFC) show that approximately 96% of Nigerian businesses are
SMEs compared to 53% in the US and 65% in Europe, they contribute approximately 1%
of GDP compared to 40% in Asian countries and 50% in the US or Europe (Oyelaran -
Oyeyinka, 2012). The question as to why the SMEs in Nigeria, are not contributing to the
growth of the economy as they should like in other countries now arises. Small and
medium scale enterprises earn their funds from various sources like personal savings,
family and friends, loans and professional money lender such as deposit money banks
and institutions like National Directorate of Employment, National Economic
Reconstruction Fund and other Small and medium scale enterprise schemes. Despite all
the above mentioned sources of finance, financial constraint is still put as the major
problem of SMEs.
For both developing and developed countries, small and medium scale firms play
important roles in the process of industrialization and economic growth. Apart from
increasing per capita income and output, SMEs create employment opportunities,
enhance regional economic balance through industrial dispersal and generally promote
effective resource utilization considered critical to engineering economic development
and growth. However, the seminal role played by SMEs notwithstanding its development
is everywhere constrained by inadequate funding and poor management. The advantages
claimed for Small and Medium Enterprises (SMEs) are various, including: the
encouragement of entrepreneurship (Safiriyu and Njogo, 2017; Ayozie and Latinwo,
2015; Ayesha, 2012); the greater likelihood that SMEs will utilize labour intensive
technologies and thus have an immediate impact on employment generation theycan

1
usually be established rapidly and put into operation to produce quick returns (Salami,
2008);Finance has been viewed as a critical element for the development of SMEs. Firms
depend on a variety of sources for their finance which includes internal and external;
formal and informal. However, the relationships among these sources and their effects on
investment remain unclear in the literature. But in Nigerian context, this crucial source of
finance for Small and Medium Scale Enterprises is apparently non -functional (Kadiri,
2017).
Typically, SMEs face higher transactions costs than larger enterprises in
obtaining credit. Lee (2009) further argues that poor management and accounting
practices have hampered the ability of SMEs to raise finance. Information asymmetries
associated with lending to small-scale borrowers have restricted the flow of finance to
SMEs (Berger and Udell, 2009).
1.2 STATEMENT OF THE RESEARCH PROBLEM
Small and medium enterprises have not made the desired impact on the Nigerian
economy in-spite of all the efforts and support of succeeding administrations and
governments gives a cause for concern. The expectation has been that, after the initial
take off of the small scale enterprises, the business should be able to raise funds from the
formal sector especially MFIs or banking industries to expand its operations.
This has not been the case for a number of reasons (Sule, 2006; Inang and
Ukpong, 2006; Iniodu and Udomesiet, 2009);
 The perception of small and medium enterprises as high risks;
 Inability of the SMEs to prepare acceptable or viable banking business plans;
 Poor record keeping, especially of financial operations which at times make the
entrepreneur draw money than expected from the business either for personal or
family use;
 Discriminatory cultural practices which at times make it impossible or difficult for
women to borrow or own assets or land titles;

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  Weak capacity on the part of banks to down-scale their lending to SMEs; and
 High transaction cost of small and often segmented loans.
The study will examine problems associated with the role of deposit money bank sin
financing small scale industry in Nigeria. It will give information on the possible areas
for in provident.
Furthermore, the study will help deposit money banks to assess and appraisal their role in
financing small scale industry in Nigeria.
Moreover, suggestions and recommendations made in this paper will help policy
makers formulate new economic policies maintain or modify the existing one. It will
equally serve as guidelines to researchers who may wish to decide with this study in the
future. It will also help small scale entrepreneurs to make sufficient preparation in their
request for credit assistance. It will guide the entrepreneurs in making credits demands
that are compliance with government monetary policy.
1.4 RESEARCH QUESTIONS
a) What are the different sources of finance available to small scale enterprises?
b) What are the roles of deposit money banks in satisfying the financial needs of
SMEs in Nigeria?
c) What are the methods to reduce formality needed for financing the entrepreneurs by
deposit money bank?
1.4 OBJECTIVE OF THE STUDY
The main objective of the study is to examine the role of deposit money banks in
the performance of small scale enterprises in Nigeria. Other specific objectives are:
i. To highlight the different sources of finance available to small scale enterprises;
ii. To examine the role of deposit money banks in satisfying the financial needs of
SMEs in Nigeria;
iii. To examine method to reduce formality needed for financing the entrepreneurs by
deposit money banks.

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1.5 SIGNIFICANCE OF THE STUDY
In the modern times, industrial production requires the procurement of equipment,
machineries and other inputs. The capital required in procuring the requirements in
limited in supply and very few industrialists have access to it.
Considering the type of collateral security required by the banks which must be
fulfilled before granting loans. Since Deposit Money Banks act as intermediaries between
surplus and deficitor as a bridge between scattered pockets of savers and the business
community desirous of loans for investment, at the end of this research work the
following will be attained;
 SMEs industrialist will be able to know some sources of finance and choose amongst
them the best.
 Deposit Money Banks will know how effective and efficient they have been towards
economic development.
 Deposit Money Banks will be able to make some adjustments in their lending
processes.
1.6 SCOPE OF THE STUDY
The scope of the study is an appraisal of Deposit Money banks in the performance
of small scale enterprises in Nigeria, a case study of First Bank Nigeria.
Deposit Money banks adhere strictly to the rule of secret; in banking thus they refused to
release information. It will guide the entrepreneurs in making credit demand that are
compliance with government monetary policy.
Finally it will help the entrepreneurs to display competence in preparing
justification for their project; it is rear to see most of them coming up with cash
projections, projected balance sheets.
1.7 DEFINITION OF TERMS
1. Small scale enterprises or industries: Any enterprises with a minimum assets base
of N200 million excluding the land and working capital and with the number of staff
employed not less than 10 or more than 300.
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2. Deposit Money banks: Banks are financial firms or division of larger firms that
accepted deposit subject to withdrawer on demand and invest part of these deposits in
interest bearing loans and investments. They are profit making, banks organized on a
joint stock basis that is the purpose of their establishments to make profits for their
owners the shareholders
3. Industrial Development Center: Provide management, technical, consultancy and
extension services for the small scale.
4. Indigenization Decree: A decree that stipulates that most business become, at least
60 percent owned by Nigerians.
5. Merchant banks: Merchant banks on like deposit money banks are whole banks
owned by individuals are grouped of individuals their customers are mainly corporate
bodies and deposits corporate bodies sums of N50,000 and above, they accept
medium and long term deposits and give medium long term loan and advances.
6. Performance: Is not a single technique, rather it is the term used for a variety of
technique by which supervisors, peers, sub-ordinates, and the individual employee
themselves rate, rank or describe the employees work effectiveness. It is a process in
which bosses regularly volute and report on the performance attainments, abilities,
potentials, for future development and other qualities of their development and other
qualities of their organization sub-ordinate.
7. Sole Proprietorship: Is a business owned and conducted by one person presumably
assisted by one or more persons for intakes wife and children.SS/CS small scale
industry credit scheme.
1.8 PLAN OF THE STUDY
The study is organized in five chapters as follows. Chapter one provides general
background to the study. It also provides the statement of the problem in terms of
research hypothesis. Again, it sets out the objectives of the study and provides the
justification of the study. Chapter two reviews pertinent literature on the study from both
theoretical and empirical issues reviewed in the literature and then attempt to link it to the

5
current study. Chapter three discusses the methodological issues of the study, while
chapter four discusses the analysis of the empirical results and the final chapter, chapter
five, summarizes the main findings of the study and provides suggestions and policy
recommendations.

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 CHAPTER TWO
3.0 LITERATURE REVIEW
INTRODUCTION
This chapter is the review of related literature; this is where the researcher review
concepts and theories to give clear understanding of the subject and to see through the
tested results.
2.1 CONCEPTUAL FRAMEWORK
2.1.1 Concept of SMEs
The term Small and Medium Scale Enterprises (SMEs) has no generally
established definition. Musa (2013) noted that definition and criteria for classification of
an enterprise as small, medium or large varies from one country to another, depending on
whether it is developed or developing country. A small business for example to one
country may be a large-scale business to another. SMEs in Nigeria, as defined by Small
and Medium Industries Equity Investment Scheme (SMIEIS), are enterprises with a total
capital employed not less than N1.5 million, but not exceeding N200 million, including
working capital, but excluding cost of land and/or with a staff strength of not less than 10
and not more than 300.
The 1992 Review by the National Council on Industrial Standards have defined
Small and SMEs as enterprises with total cost of (including working capital but
excluding cost of land) above 31 million but not exceeding 50 million with a labour size
of between 11 and 100 employees. Bamidele (2012) postulated that SMEs are usually
small own or family managed business with its goods and services being basic and also
SMEs also tend to lack the organization and management structure, which characterize
large-scale entrepreneur (LSE) and Urban SMEs tend to be more structured than their
rural counterpart. Aluko (2007) defines SMEs as those enterprises employing up to fifty
(50) workers or less than excluding household enterprise. Small business is a business
that is privately owned and operated with a small number of employees and relatively
low volume of sales. Small-scale businesses are normally owned corporation,

7
partnerships or sole proprietorship. The legal definition of ''small'' varies historically, by
country and by industry but generally has fewer than 100 employees.
Kadiri (2012) established that SMEs serves as a catalyst for employment
generation, national growth, poverty reduction and economic development. SMEs world
over can boast of being the major employers of labour if compared to the major
industries including the multinationals. Oluba (2014) summarized the contribution of
SMEs to an economy, especially developing ones as: Greater utilization of raw materials,
employment generation, encourage of rural development, development of
entrepreneurship, mobilization of local savings, linkages with bigger industries, provision
of regional balance by spreading investments more evenly, provision of avenue for self-
employment and provision of opportunity for training managers and semi-skilled
workers.
Ayyagari, Beck and Demirguc-Kunt, (2013) recognized SMEs as instruments of
economic growth and development. The growing recognition of this fact has led the
World Bank group on SME’s sector to ensure that it is the core element in its strategy to
foster economic growth, employment generation and poverty alleviation. At the 13th
Council meeting of the National Council on Industry held in July, 2001 Micro, Small and
Medium Enterprises (MSMEs) were defined by the Council as follows:
i. Micro/Cottage Industry
An industry with a labour size of not more than 10 workers, or total cost of not
more than N1.50 million, including working capital but excluding cost of land.
ii. Small-Scale Industry
An industry with a labour size of 11-100 workers or a total cost of not more
thanN50 million, including working capital but excluding cost of land.
iii. Medium Scale Industry:
An industry with a labour size of between 101-300 workers or a total cost of over
N50 million but not more than N200 million, including working capital but excluding
cost of land.

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iv. Large Scale
An industry with a labour size of over 300 workers or a total cost of over N200
million, including working capital but excluding cost of land.
2.2 THEORETICAL FRAMEWORK
The theoretical framework adopted for the paper involved the bank capital
channel model and the capital constraint model. Also adopted in this work, is the
Lifecycle approach and the Pecking-order theory that attempts to explain small-firm
financial structuring.
Bank Capital Channel Model
The lending behaviors of bankers to entrepreneurs are greatly highlighted by this
model as it concerns capital adequacy requirement. The model looks at interest rate
volatility as a determining factor to their financial treatment, particularly when their
credit offer is shrinked down by the strength of their capital-base. The implication is that,
often, as interest rates increases, the funding cost of banks’ external funding also
increase, thereby reducing profit tendencies. When this happens the bankers are forced to
reduce their credit issue, especially when there is capital-base constraint.
The Lifecycle Approach
This approach according to Weston and Brigham (1991) was conceived around
the platform of speedy growth and poor access to capital market. SMEs are perceived to
be starting out by exploring only the owners’ resources. Whether or not the firms could
make it subsequently, the threat of insufficient capital would later surface, and then the
tendency to resort to other sources of funds would emerge.
The dynamic small firm prefer to choose between curtailing its growth to keep in
line with its minimally generated funds, get an expensive stock market quotation, or
desires an almost impossible volume venture capital according to Weston, J and E.
Brigham, Mgt Finance, Hindgale: Dryden Press, 1991).
The Pecking Order Theory

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 This theory stipulated by S.Myer (1994), asserts that most firms met their
financial needs in an order of hierarchy, firstly by the use of internally generated funds,
secondly borrowing in form of debt and thirdly by generating funds through equity.
Commonly, this practice is predominant in Small Firms and implies the inverse link
between profitability and borrowings.
2.3 EMPIRICAL REVIEW
Adebiyi (2004) empirically investigated the impact of interest rates and other
macroeconomic factors on manufacturing performance in Nigeria using vector
autoregression and an error correction mechanism (ECM) technique with quarterly time
series spanning 1986:1 to 2002:4. Unit root test and Johansen cointegration tests were
performed. Result of the error correction model revealed that real deposit rate had a
positive impact on the growth of the manufacturing sub-sector while the impact of
inflation rate in the second quarter was negative. He therefore recommended that
government must create an enabling environment to promote savings and pursue
institutional reforms that encourage savings mobilization. He also recommended that the
CBN adopt a number of measures to lower interest rate such as giving government
deposits to banks that offer lower rates to the manufacturers and lend to the real sector of
the economy. He cited the case in the United States of America, where the ‘Community
Reinvestment Act’ (CRA), provided for targeted lending (to underdeveloped
communities), that Nigerian Government could adopt similar measures to promote
lending to the manufacturing sub-sector.
Ukeje and Akpan (2007) carried out an empirical investigation of the relationship
between financial development and economic growth in Nigeria. They specified a model
with the annual growth rate of the gross domestic product as the dependent variable and
the independent variables were; real interest rate, ratio of gross domestic savings to GDP,
the ratio of domestic credit to private sector to GDP (which have been widely used as
prime indicators of financial development). The other variables adopted include; the ratio
of liquidity liabilities to GDP, the ratio of gross fixed capital formation to GDP and trade

10
openness as a ratio of GDP. The empirical results showed that there is substantial
positive relationship between financial development and economic growth in Nigeria.
The ratio of credit to the private sector to GDP was said to be significant and rightly
signed.
Finally, Akpokodje (1998) explored the association between private investment
and macroeconomic policies (including fiscal policy, exchange rate policy, monetary
policy, etc.) with particular reference to Nigeria. His results confirmed that
macroeconomic policy variables do actually affect private investment in Nigeria.
Government’s monetary policy, as gauged by credit to the private sector was said to have
strong positive and significant impact on private investment. Furthermore, the paper
confirmed the negative impact of real exchange rates and high domestic inflation rates on
private investment in Nigeria and highlighted the adverse impact of large budget deficits
on private capital accumulation. He however cautioned that in view of the
complementarities between private and public investment reducing the budget deficit
through contraction in public investment may be counterproductive. The paper also
brought to focus the macroeconomic uncertainty associated with a high debt service ratio.

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 CHAPTER THREE
4.0 RESEARCH METHODOGY
3.1 RESEARCH DESIGN
The research design permits the study to meet the purpose of the research. It
refers to the overall plan employed by the researcher to obtain answers to the research
questions (Hakim, 2000). The research design may be that of an assessment, evaluation,
descriptive or experimental study. The current study is more of evaluative, descriptive
and experimental studies. According to Robson, (2002) the purpose of evaluation is to
make judgment about the effectiveness, relevance, efficiency or desirability of a product,
process or programme.
3.2 SOURCES OF DATA
Both primary and secondary sources of data were adhered to on the course of this
study and the attitude and responses of those interviewed were noted.
Primary Sources of Data
The primary sources of data are the sampling or study unit from which
information is obtained on a first hand basis. It is very important to note here that the
researcher did not adopt any rigid method in the collection of data; rather the data for the
research were collected in response to the requirements of the research problem.
Creativity and judgment also played a vital role at this stage of the project, bearing in
mind the final judgment will be partly constrained be the type and value of information
collected. The primary data were gathered from the following sources:
a. Oral interview: Personal interviews were conducted in addition to the questionnaires
which were duly administered. The information obtained through the oral interview
was use in cross checking the responses to the questionnaire. It either affirmed or
disproved the data collected.
b. Unstructured interviews: Unstructured interviews were also collected out through
informal discussions with various staff members at different levels of operations.

12
c. Actual field investigation: The researcher was privileged to see the annual reports in
order to fully comprehend their performance as well as its reporting style.
Secondary Sources of Data
Library and internet materials provided the bulk of the secondary research data
collected by the researcher. These resource materials were used to review extensively the
facts and the reporting components of First Bank Nigeria Plc. For the purpose of
obtaining these secondary data the following academic libraries and website were used:
1. Wikipedia.com
2. Google.com
3. The Library
In summary these sets of data gathered which includes:
- Data from and interview, internet and library materials
- Data from the compilation of other related research work previously conducted
The data gathered was used at three different stages as follows:
- In anticipation of these data, the question on the questionnaires were design in order
to ensure that the respondents will confirm these data
- The data also formed the basis upon which the review of related literature was carried
out
- They also formed part of the analysis that will be carried out in chapter four which
led to conclusion which was later arrived at in chapter five.
3.3 POPULATION OF THE STUDY
First Bank of Nigeria, sometimes referred to as First Bank, is a
Nigerian multinational bank and financial services company headquartered in Lagos It is
the biggest bank in Nigeria by total deposits and gross earnings. It operates a network of
over 750 business locations across Africa, the United Kingdom and representative offices
in Abu Dhabi, Beijing and Johannesburg set up to capture trade-related business between
geographies. The bank specialises in retail banking and has the largest retail client base in

13
Nigeria. In 2015, The Asian Banker awarded First Bank the Best Retail Bank in Nigeria
award for the fifth consecutive year.
The Nigerian banking business operates nationally, with an active customer base
of over 10 million, and employs over 7,000 staff. First Bank operates along four key
Strategic Business Units (SBUs) – Retail Banking, Corporate Banking, Commercial
Banking and Public Sector Banking. It was previously structured as an operating holding
company before the implementation of a non-operating Holding Company structure
(FBN Holdings) in 2011/2012.
3.4 SAMPLING SIZE AND SAMPLING TECHNIQUES
A sample is a portion of the population selected for study. It is very important to
select sample size that will give sufficient fair representation of the population.
There are two basic way of making the sample size decision, one is by rule of thumb and
the other one is by calculated method. In this research work, the rule of the thumb was
used for this research where 90 employees of total population were selected as the sample
size.
Simple random sampling was used to select target individual from each stratum. The
complete questionnaires were collected serially, coded and analyzed sequentially a
cording to the research questions. Tables were used to present information to facilitate
analysis, simple percentages where used while Chi -square was used to test the
hypothesis. The responses were of five-point scale which range from "strong agreed to
the undecided ". Thus; Strongly Agreed = 5 Agreed = 4 Undecided = 3 Disagreed = 2
Strongly Disagreed = 1
The model specification for this analysis is a Chi-square, is a sample of statistic. It is
computed as follows:
X2 = S (O-E) E
Where O= Observed Frequency
E =Expected frequency
A degree of freedom (df) is obtained using the formula

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D.F. = (r -1) (c-1) a =0.05
Where r = number of rows in the contingency table.
Throughout this work the level of significance adopted is 0.05.
Decision Rule: Reject if X 2c > X2a otherwise accept Hi.
3.5 METHOD OF DATA COLLECTION
Collection of data refers to the research instruments used by the researcher to
collect whatever data needed. The research instruments used in this research include:
questionnaires, internet, interviews and library research. Questionnaires were employed
by the researcher because it is most practical, economical and easiest way of obtaining
information about events. They also helped in collecting information that are valid
interview schedule was made use of by the researcher because of its usefulness in
following up on unexpected result in order to validate other method or problem
motivation of respondents and their reasons for responding the way they did. The primary
data gathered were effectively and extensively employed in the next chapter to test the
formulated hypothesis.
3.6 METHOD OF DATA ANALYSIS
The chi-square (X2) statistical was employed in testing hypothesis. The chi-square
(X2) is a sample statistical measure used in testing hypothesis concerning the signification
of any difference between a set of observed frequency (o) of a sample and a
corresponding set of expected of theoretical frequency (E).
Osuala (1982) Observed that it is repented by the following formula.
X2 = (O-E)
E
Data in which the chi-square test is to be applied are arranged in a contingency table.
To calculate the theoretical or expected each of the observed frequency the procedure is
as follows, the row total multiplied by the corresponding column total all divided by the
overall number of cases (N)
E.g. a = Na X Ni

15
 N
Where Na = row total
Ni = column total
N = total number of cases
The chi-square formula is represented by
X2 = (O-E)2
E
If the computed X2 value is greater than the critical value obtained from the X 2 table at a
particular degree of freedom (df) and level of confidence or significance, the null
hypothesis being tested is rejected and the alternative is accepted. It would then be held
that the relationship or association being in target is statistically significant at that degree
of freedom and level of significance.
3.7 LIMITATION OF STUDY
However, there are constraint imposed on the researcher this includes the
following.
a. Time: a study of this nature needs a relatively long time during which information
for accurate or at least near accurate inferences could be drawn. The period of the
study was short, hence time posed as a constraint to the researcher.
b. Cost: The researcher would have extent the survey to areas. But limitations here
included cost of transportation to source for materials and cost of typesetting the
already completed work.
c. Dearth (Scarcity) of statistical data: Lack of statistical data from our financial
institutions like central bank of Nigeria (CBN) ministry of financial and economic
development, commercial and merchant bank posed constraints. Deposit money
banks adhere strictly to the rule of secret; in banking thus they refused to release
information.

16
 CHAPTER FOUR
DATA ANALYSIS, FINDINGS AND DISCUSSION
4.0 DATA ANALYSIS, FINDINGS AND DISCUSSION
In this chapter, the data collected from questionnaire are presented, analysed and
tabulated. Ninety questionnaires were prepared and distributed to the respondent drawn
from lower, senior and management staff of First Bank of Nigeria.
The analysis were carried out using simple percentage method, the hypothesis will be
analyse using the chi-square based on the analysis of the relevant questions.
4.1 DEMOGRAPHIC CHARACTERISTICS
Table 4.1.1: Demographic Characteristics of Respondents based on Sex
Options No of Response Percentage (%)
Male 41 45.6
Female 49 54.4
Total 90 100
Source: Fieldwork, 2023
Table 4.1.1 above shows that 41 representing 45.6% of the respondents were male
while 49 representing 54.4% of the respondents were female.
Table 4.1.2: Demographic Characteristics of Respondents based on Marital Status
Options No of Response Percentage (%)
Single 52 57.8
Married 38 42.2
Total 90 100
Source: Fieldwork, 2023
Table 4.1.2 above shows that a total number of 52 staffs representing (57.8%) are
single while the total numbers of 38 staffs representing (42.2%) are married.
Table 4.1.3: Demographic Characteristics of Respondents based on Age
Options No of Response Percentage (%)

17
Below 30 42 46.7
31 – 40 30 33.3
41 and above 18 20
Total 90 100
Source: Fieldwork, 2023
The Table 4.1.3 above shows that 42, (46.7%) of the respondents fall within the
age range of below 30 years, 30, (33.3) fall within the age range of 31 – 40 years while
18 (20%) fall within the age range of 41 and above.
Table 4.1.4: Demographic Characteristics of Respondents based on Educational
Qualifications
Options No of Response Percentage (%)
HND, B.Sc. B.A. 35 38.9
OND/NCE 40 44.4
SSCE, GCE 15 16.7
Total 90 100
Source: Fieldwork, 2023
The above Table 4.1.4 shows the total numbers of 35 respondents representing
(38.9%) are B.Sc., B.A. and HND holders, 40 respondents representing (44.4%) are OND
and NCE holders while 15 respondents representing (16.7%) of the educational
qualifications are WASC and GCE holders.
Table 4.1.5: Demographic Characteristics of Respondents based on Working Experience
Options No of Response Percentage (%)
Below 5 39 43.3
5 – 9 years 43 47.8
10 years and above 8 8.9
Total 90 100
Source: Fieldwork, 2023

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 The Table 4.1.6 above shows that total of 39 respondents representing (43.3%)
has put in less than 5 years in working experience, 43 of the respondents representing
(47.8%) have put in between 5 and 9 years while 8 respondents representing (8.9%) have
put in more than 10 years of working experience.
Section B
Table 4.1.6: How would you rate the performance of deposit money banks in financing small
and medium scale enterprises in Nigeria?
Options No of Response Percentage %
Good 37 41.1
Satisfactory 28 31.1
Poor 15 16.7
Very Poor 10 11.1
Total 90 100%
Source: Fieldwork, 2023
From the above table it was shown that 37 of the respondent representing 41.1%
agreed that the rate of performance of deposit money banks in financing small and
medium scale enterprises in Nigeria is good while others have different options.
Table 4.1.7: Have you ever needed advice on certain issues or information
concerning your organization?
Options No of Response Percentage %
Yes 40 44.4
No 50 55.6
Total 90 100%
Source: Fieldwork, 2023
The above table shows that 40 respondents representing (44.4%) agreed that they
have needed advice on certain issues or information concerning your organization why
the rest disagreed.

19
Table 4.1.8: What sources do you obtain fund to run your business?
Options No of Response Percentage %
Personal savings 40 44.4
Retained earnings 20 22.2
Relations and friends 15 16.7
Loans from banks 10 11.1
Government 5 5.6
Total 90 100%
Source: Fieldwork, 2023
From the above table it was shown that 40 of the respondent representing 44.4%
say that personal savings is the sources they do obtain fund from to run their business
while others have different options.
Table 4.1.9: Are there significant relationship between financing of small and
medium scale enterprises and deposit money banks?
Options No of Response Percentage %
Yes 46 51.1
No 44 48.9
Total 90 100%
Source: Fieldwork, 2023
The above table shows that 46 respondents representing (51.1%) agreed that there
are significant relationship between financing of small and medium scale enterprises and
deposit money banks why the rest disagreed.
Table 4.1.10: Do you have accounts into which business receipts are paid?
Options No of Response Percentage %
Yes 40 44.4
No 50 55.6
Total 90 100%

20
Source: Fieldwork, 2023
The above table shows that 40 respondents representing (44.4%) agreed that they
do have accounts into which business receipts are paid why the rest disagreed.
Table 4.1.11: Do you keep daily or weekly records of business transactions?
Options No of Response Percentage %
Yes 80 88.9
No 10 11.1
Total 90 100%
Source: Fieldwork, 2023
The above table shows that 80 respondents representing (88.9%) agreed that they
keep daily or weekly records of business transactions why the rest disagreed.
Table 4.1.12: Are there significant relationship between deposit money banks and
lending to small scale industries and also in meeting the needs of small and medium
scale enterprises?
Options No of Response Percentage %
Yes 63 70
No 27 30
Total 90 100%
Source: Fieldwork, 2023
The above table shows that 63 respondents representing (70%) agreed that there
significant relationship between deposit money banks and lending to small scale
industries and also in meeting the needs of small and medium scale enterprises why the
rest disagreed.
Table 4.1.13: Would you say that the CBN also influence the bank lending policies?
Options No of Response Percentage %
Yes 70 77.8
No 20 22.2

21
Total 90 100%
Source: Fieldwork, 2018
The above table shows that 70 respondents representing (77.8%) agreed that the CBN
also influence the bank lending policies why the rest disagreed.
Table 4.1.14: Do SMEs help to reduce incidence of
unemployment in Nigeria?
Options No of Response Percentage %
Yes 65 72.2
No 25 27.8
Total 90 100%
Source: Fieldwork, 2023
The above table shows that 65 respondents representing (72.2%) agreed that
SMEs help to reduce incidence of unemployment in Nigeria why the rest disagreed.
Table 4.1.15: Do you have lending program for small and medium scale enterprises
in your bank?
Options No of Response Percentage %
Yes 58 64.4
No 32 35.6
Total 90 100%
Source: Fieldwork, 2023
The above table shows that 58 respondents representing (64.4%) agreed that they
do have lending program for small and medium scale enterprises in their bank why the
rest disagreed.
4.2 TEST OF HYPOTHESIS
With special reference to the purpose of this study, the following shall be tested
using the chi-square.
HYPOTHESIS ONE

22
H0: There is no significant relationship between financing of small and medium scale
enterprises and deposit money banks.
H1: There is significant relationship between financing of small and medium scale
enterprise and deposit money banks.
The hypothesis can be tested by using table 4.1.9 where a total of 46 respondents
representing (51.1%) agreed that there are significant relationship between financing of
small and medium scale enterprises and deposit money banks why the rest disagreed.
Test Statistics:
Formula X2 = ∑ (oi – ei)2
ei
Where X2 = Chi-Square
Oi = Observed frequency
Ei = Expected frequency
ASSUMPTION:
The level of significance used is 5%. That is 0.05
Degree of Freedom:
The degree of freedom is given as thus;
DF = (R – 1) (C – 1)
Where,R = Rows
C = Columns
DF = (2 – 1) (2 – 1)
DF = 1x1
= 1
NOTE: The value of 1 at 0.05 significant level is 3.841 using the chi-square table.
Thus: The critical value is given as X2 is 3.841.
Table 4.2.1: Testing of the 1st Hypothesis
o E o–e (o – e)2 (o – e)2

23
 e
46 45 1 1 0.02
44 45 -1 1 0.02
90 0.04
Comparing the test statistics with critical value 0.04 < 3.841
DECISION RULE: Since the calculated value of X 2 is lesser than the critical value
3.841, the null hypothesis which states that there is no significant relationship between
financing of small and medium scale enterprises and deposit money banks is accepted
and the alternative hypothesis which states that there is significant relationship between
financing of small and medium scale enterprise and deposit money banks is rejected.
CONCLUSION: There is no significant relationship between financing of small and
medium scale enterprises and deposit money banks.
HYPOTHESIS TWO:
H0: There is no significant relationship between deposit money banks and lending to
small scale industries and also in meeting the needs of small and medium scale
enterprises
H1: There is significant relationship between deposit money banks and lending to
small scale industries and also in meeting the needs of small and medium scale
enterprises
The hypothesis can be tested by using table 4.1.12 where a total of 63 respondents
representing (70%) agreed that there significant relationship between deposit money
banks and lending to small scale industries and also in meeting the needs of small and
medium scale enterprises why the rest disagreed.
TEST STATISTICS:
Formula X2 = ∑ (oi – ei)2
ei
Where X2 = Chi-Square
Oi = Observed frequency
24
 Ei = Expected frequency

ASSUMPTION:
The level of significance used is 5%. That is 0.05
Degree of Freedom:
The degree of freedom is given as thus;

DF = (R – 1) (C – 1)
Where,R = Rows
C = Columns
DF = (2 – 1) (2 – 1)
DF = 1x1
= 1

NOTE: The value of 1 at 0.05 significant level is 3.841 using the chi-square table.
Thus: The critical value is given as X2 is 3.841.
Table 4.2.2: Testing of the 2nd Hypothesis
O E o–e (o – e)2 (o – e)2
e
63 45 18 324 7.2
27 45 -18 324 7.2
90 14.4
Comparing the test statistics with critical value 14.4 > 3.841
Decision Rule: Since the calculated value of X2 is greater than the critical value 3.841,
the null hypothesis which states that there is no significant relationship between deposit
money banks and lending to small scale industries and also in meeting the needs of small
and medium scale enterprises is rejected and the alternative hypothesis which states that

25
there is significant relationship between deposit money banks and lending to small scale
industries and also in meeting the needs of small and medium scale enterprises is
accepted.
Conclusion: There is significant relationship between deposit money banks and lending
to small scale industries and also in meeting the needs of small and medium scale
enterprises.
4.3 DISCUSSION OF FINDINGS
The company employed more female workers than the male workers, also the
company considered single workers than that of married workers. The company
considered higher level of qualifications more than lower level of qualifications. From
the information gathered 41.1% agreed that the rate of performance of deposit money
banks in financing small and medium scale enterprises in Nigeria is good. However,
44.4% say that personal savings is the sources they do obtain fund from to run their
business. Also (88.9%) agreed that they keep daily or weekly records of business
transactions. Findings show that there is no significant relationship between financing of
small and medium scale enterprises and deposit money banks. And finally, findings show
that there is significant relationship between deposit money banks and lending to small
scale industries and also in meeting the needs of small and medium scale enterprises.

26
 CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 SUMMARY
The general objective of this study was to analyze the role of deposit money
banks in the performance of small scale enterprises in Nigeria a case study of First Bank
Nigeria. Other specific objectives were to; highlight the different sources of finance
available to small scale enterprises, examine the role of deposit money banks in
satisfying the financial needs of SMEs in Nigeria and examine method to reduce
formality needed for financing the entrepreneurs by deposit money banks.
Simple random sampling was used to select target individual from each stratum.
The complete questionnaires were collected serially, coded and analyzed sequentially a
cording to the research questions. In this research work, the rule of the thumb was used
for this research where 90 employees of total population were selected as the sample size.
The chi-square (X2) statistical was employed in testing hypothesis. The chi-square (X 2) is
a sample statistical measure used in testing hypothesis concerning the signification of any
difference between a set of observed frequency (o) of a sample and a corresponding set
of expected of theoretical frequency (e).
The study reveals that they have needed advice on certain issues or information
concerning your organization. It was also revealed that they keep daily or weekly records
of business transactions. Also findings show that CBN also influence the bank lending
policies. The research also reveals that there is no significant relationship between
financing of small and medium scale enterprises and deposit money banks. Finally
findings shows that there is significant relationship between deposit money banks and
lending to small scale industries and also in meeting the needs of small and medium scale
enterprises.
5.2 CONCLUSION
The economic rationale for credit to small and medium scale enterprises (SMEs)
is indisputable as earlier views of small and medium scale enterprises was seen to have

27
progressively become a major factor in economic development of many countries of the
world. This study has empirically brought to light pivotal role of deposit money banks’
credit to growth of small and medium scale enterprises, which in turn accelerate
economic growth and development. In addition, the finance led growth postulation for
growth and development of an economy through mobilization and allocation of financial
resources to deficit economic unit is valid in Nigeria. Although studies have assessed this
subject matter, this study should be not an ultimate result on the nexus between banks’
credit and small and medium scale enterprises growth, rather a motivation for the
development new ideas by scholars to emphatically and unambiguously assist banks to
improving credit to the private sector as a way of achieving the vision of Nigeria to be
among the top twenty economy in the world..
Conclusively, this research work makes useful contribution to knowledge by
appraising the various means of deposit money banks in the performance of small scale
enterprises in Nigeria. It explicates the importance of SMEs performance of banking
sector. It gives a proper insight of what the banking sector entails of the economy.
Banking sector globally are identified to be major key players in the financial
industry that have positively affected individuals, business organization, other financial
institution, the government and the economy at large through services they offer and the
function they perform in the economy. Finally, despite the effectiveness of the sector, it
still suffers some setbacks. This means that the banking sector and their activities still
have a long way to go in providing new services for good customer relationship, better
financing schemes and development in the Nigerian economy.
5.3 RECOMMENDATIONS
There is no way Nigeria can achieve sustainable funding of small and medium
scale enterprises by commercial banks and other agencies such as NERFUND, NIDB etc
established for the funding purposes until both the external and internal problems of
SMEs are solved. Banks react to the stimulus of the macroeconomic environment and as
long as the environment remains conducive, banks will continue to exhibit risk-averse

28
behavior irrespective of the programs put in place to address this problem including the
SMIEIS program that was already highlighted. The following recommendations in my
opinion will help improve the growth and development of the SMEs:
1. The government should be consistent in its industrial policies so as to enable
manufacturing firms to factor tariff measures into their trade decisions.
2. The government should provide adequate infrastructural facilities like electricity,
roads and water supply for the SMEs as this will reduce the high cost of doing
business. This will encourage banks to fund the SMEs as their investment will be
recouped.
3. The government should regard SMEs should regard SMEs as the ‘eggs’ that hatch big
businesses. Apart from the adequate incentives in (2) above, the government should
support SMEs by bulk purchasing their products and retailing them both for the
domestic market and for exports.
4. To facilitate their access to bank credits, the government should be issuing LPOs to
the SMEs and payment should be made promptly to the SMEs as this will encourage
their growth and the banks can also accept such contract papers as collateral.
5. On the issue of the internal problems of the SMEs like poor management practices,
high rate of business failure, poor account standards, shortage of skilled manpower
and financial indiscipline, the government should set up small business management
assistance agencies manned by highly skilled and dedicated workers with the view of
tackling these problems. The agencies should complement the provision of credit by
insuring its efficient use through training and counseling of the small and medium
scale entrepreneurs.
6. The banks should target potential borrowers for its core operations and form them
into groups. Then soft loans should be made available to these SMEs, repayable
within a specified period before others in that strategic group can benefit from the
scheme. The idea is that with this system, a subtle pressure from other SMEs that are
members of this strategic core is mounted on the benefiting group to repay so that

29
 others can benefit from the scheme. This will no doubt introduce healthy
capitalization among SMEs through factoring the credibility of the borrowers.
7. The need for capitalization of the banks cannot be overemphasized as capitalization
influences the way banks react to GDP shocks. Also, the credit supply of well
capitalized banks is less pro-cyclical. This indicates that well capitalized banks are
not risk-averse. Moreover, well capitalized banks can better absorb temporarily
financial difficulties on their borrowers and preserve long term lending relationships.
8. If (7) above is achieved, the mega banks such as Union Bank should play a more
active role in actualizing the objectives of SMIEIs by setting up separate desks to
manage the funds and vigorously pursue the idea as with any other bank product and
undertaking studies aimed at attracting foreign investors scanning overseas markets
and monitoring developments that have implications for the sector.

30
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