This document summarizes a study that examines trends in trade credit use among quoted firms in Nigeria from 2000-2009. The key findings are:
1) There was significant variation and inconsistency in how Nigerian quoted firms utilized trade credit over the study period.
2) The low utilization of trade credit and alternative financing sources by most Nigerian firms suggests they have weak financial status.
3) Stakeholders need to encourage greater use of trade credit by firms and develop solid alternative financing options.
Effect of Liquidity Risk on Performance of Deposit Money Banks in Nigeriaijtsrd
This study examines the effect of the credit risk ratio on the financial performance of deposit money banks in Nigeria. Ex Post Facto research design was employed for the study. Sample sizes of five banks were selected from twenty banks quoted on the Nigerian Stock Exchange. Data were extracted from annual reports and accounts of the selected banks from 2010 to 2019. Using E view statistical tool to test the hypothesis, the study found that credit risk ratio significantly influences the financial performance of quoted deposit money banks in Nigeria It was recommended that bank managers should constantly engage in rigorous credit analysis, checking, default rate, the proportion of non performing loans, regularly or at least quarterly to enable them to maintain high asset quality to enhance the financial performance. Oraka, Azubike O | Ebubechukwu, Jacinta O "Effect of Liquidity Risk on Performance of Deposit Money Banks in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-4 , June 2021, URL: https://www.ijtsrd.compapers/ijtsrd42388.pdf Paper URL: https://www.ijtsrd.commanagement/other/42388/effect-of-liquidity-risk-on-performance-of-deposit-money-banks-in-nigeria/oraka-azubike-o
Smooth functioning a bank depends on the stability of stream of returns that it gets from its financing decision. This study is an attempt to showcase the reason for idling or shortage of funds and the factors for the case of Islamic banking. This effort will determine the strategy which can boost the financing in the economy, for this, this study has used the panel data of full-fledged Islamic banks from countries Pakistan and Malaysia, spanning to several years and based on several banks. Based on the analysis of internal and external factors of Islamic banks, it can be seen that increase in the market rate leads to decrease in demand of financing while the increase in deposits and equity do not show a proportional increase in financing which hints that there is excess liquidity available in the Islamic banks. On the positive side, it is evident that increase in the economic activity boosts the demand for Islamic financing.
Effect of Liquidity Risk on Performance of Deposit Money Banks in Nigeriaijtsrd
This study examines the effect of the credit risk ratio on the financial performance of deposit money banks in Nigeria. Ex Post Facto research design was employed for the study. Sample sizes of five banks were selected from twenty banks quoted on the Nigerian Stock Exchange. Data were extracted from annual reports and accounts of the selected banks from 2010 to 2019. Using E view statistical tool to test the hypothesis, the study found that credit risk ratio significantly influences the financial performance of quoted deposit money banks in Nigeria It was recommended that bank managers should constantly engage in rigorous credit analysis, checking, default rate, the proportion of non performing loans, regularly or at least quarterly to enable them to maintain high asset quality to enhance the financial performance. Oraka, Azubike O | Ebubechukwu, Jacinta O "Effect of Liquidity Risk on Performance of Deposit Money Banks in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-4 , June 2021, URL: https://www.ijtsrd.compapers/ijtsrd42388.pdf Paper URL: https://www.ijtsrd.commanagement/other/42388/effect-of-liquidity-risk-on-performance-of-deposit-money-banks-in-nigeria/oraka-azubike-o
Smooth functioning a bank depends on the stability of stream of returns that it gets from its financing decision. This study is an attempt to showcase the reason for idling or shortage of funds and the factors for the case of Islamic banking. This effort will determine the strategy which can boost the financing in the economy, for this, this study has used the panel data of full-fledged Islamic banks from countries Pakistan and Malaysia, spanning to several years and based on several banks. Based on the analysis of internal and external factors of Islamic banks, it can be seen that increase in the market rate leads to decrease in demand of financing while the increase in deposits and equity do not show a proportional increase in financing which hints that there is excess liquidity available in the Islamic banks. On the positive side, it is evident that increase in the economic activity boosts the demand for Islamic financing.
Volume of Deposits, A determinant of Total Long-term Loans Advanced by Commer...iosrjce
Commercial banks have exponentially increased their total loans advanced over the period 2002-
2013. However commercial banks in Kenya have shown varying long term lending behavior. The main objective
of this study was to establish the effect of determinants of long term lending in the Kenyan banking industry, a
case of Bungoma County. This study was guided by the following specific objective; to determine the effect of
volume of deposit on total loan advanced, of selected commercial banks in Kenya. The target population
comprised 13 commercial banks in Bungoma County with a sample size of 52 respondents. From the findings,
for every unit increase in volume of deposits, a 10.9%, unit increase in total loans advanced is predicted. The
model hypothesizes that there is functional relationship between the dependent variable and the independent
variable. The study then recommends that commercial banks should focus on mobilizing more deposits as this
will enhance their lending performance.
This study investigated loans default (problems loans) and returns on assets in Nigeria banks, employing the data of five banks for a period of five years (2010-2014), using the ordinary least squares (OLS) regression techniques to check the relationship between problem loans and returns on assets (ROA). The findings shows that a positive and significant relationship at 5% level of significance exist between problem loans and returns on assets, and a negative and significant relationship at 10% level of significance exists between loans and advances and returns on assets in Nigerian banks. A major suggestion is that banks in Nigeria should enhance their capacity in credit analysis and loan administration, while the regulatory authority should pay more attention to banks’ compliance to relevant provisions of Bank and other Financial Institutions Act (1991) and prudential guidelines.
The Role of Multilateral Development Banks (MDBs) in the 2030 AgendaMarc-Anton Pruefer
This presentation provides: i) an overview of the 2030 Agenda and the Sustainable Development Goals (SDGs), ii) the order of magnitude of the associated financing needs, iii) the sources of development finance, focusing on iv) Multilateral Development Banks (MDBs) and their financing instruments, and v) a comparison of the major MDBs. It is targeted at both laypeople and professionals and seeks to convey a “big picture” of what Development Finance is, why the SDG period (2016-2030) is different from the MDG period (2000-2015), and what the role of different MDBs could be in achieving the 2030 Agenda.
ASSESSING THE CONDITION OF FINANCIAL DISTRESS W ITH ANALYSIS OF LIQUIDITY, SO...AJHSSR Journal
ABSTRACT : Financial distress is the stage of declining financial conditions that occurred before bankruptcy.
To determine the risk of bankruptcy by knowing the signs of financial distress. Financial distress can analyze
financial statements using financial ratios, namely liquidity, solvency and profitability. The purpose of this study
was to examine the effect of liquidity, solvency and profitability on financial distress conditions. The population
in this study were 30 consumer goods industrial companies. By using purposive sampling technique, 21
companies were obtained. Using 3 (three) years, 63 observations were obtained. Data analysis technique is
logistic regression analysis with SPSS V.23 program. The results of this study indicate that liquidity and
profitability have a negative and significant effect on financial distress conditions so that the hypothesis is
accepted, but solvency has a positive and significant effect on financial distress conditions, this means rejecting
the hypothesis.
A survey of corporate credit risks management in Asia Pacific region was conducted in the fourth quarter of 2012 by Coface, a leading global credit insurance group. The survey revealed that corporate payment experience in the region generally worsened. Companies in Australia, China and India suffered more non-payment. Sectors of building & construction, IT, ISP & data processing, textile, clothing & shoes and household electric & electronic appliances are at higher risk. Companies in the region are less optimistic about recovery of global economy in 2013.
Trade Credit Insurance White Paper December 2008jlebendig
Get our most recent white paper...An Overview of Trade Credit Insurance here. Great reading, insightful and it will answer more of your questions. Don\'t have credit insurance yet? What are you waiting for? Contact me to discuss your options for protecting your company.
Volume of Deposits, A determinant of Total Long-term Loans Advanced by Commer...iosrjce
Commercial banks have exponentially increased their total loans advanced over the period 2002-
2013. However commercial banks in Kenya have shown varying long term lending behavior. The main objective
of this study was to establish the effect of determinants of long term lending in the Kenyan banking industry, a
case of Bungoma County. This study was guided by the following specific objective; to determine the effect of
volume of deposit on total loan advanced, of selected commercial banks in Kenya. The target population
comprised 13 commercial banks in Bungoma County with a sample size of 52 respondents. From the findings,
for every unit increase in volume of deposits, a 10.9%, unit increase in total loans advanced is predicted. The
model hypothesizes that there is functional relationship between the dependent variable and the independent
variable. The study then recommends that commercial banks should focus on mobilizing more deposits as this
will enhance their lending performance.
This study investigated loans default (problems loans) and returns on assets in Nigeria banks, employing the data of five banks for a period of five years (2010-2014), using the ordinary least squares (OLS) regression techniques to check the relationship between problem loans and returns on assets (ROA). The findings shows that a positive and significant relationship at 5% level of significance exist between problem loans and returns on assets, and a negative and significant relationship at 10% level of significance exists between loans and advances and returns on assets in Nigerian banks. A major suggestion is that banks in Nigeria should enhance their capacity in credit analysis and loan administration, while the regulatory authority should pay more attention to banks’ compliance to relevant provisions of Bank and other Financial Institutions Act (1991) and prudential guidelines.
The Role of Multilateral Development Banks (MDBs) in the 2030 AgendaMarc-Anton Pruefer
This presentation provides: i) an overview of the 2030 Agenda and the Sustainable Development Goals (SDGs), ii) the order of magnitude of the associated financing needs, iii) the sources of development finance, focusing on iv) Multilateral Development Banks (MDBs) and their financing instruments, and v) a comparison of the major MDBs. It is targeted at both laypeople and professionals and seeks to convey a “big picture” of what Development Finance is, why the SDG period (2016-2030) is different from the MDG period (2000-2015), and what the role of different MDBs could be in achieving the 2030 Agenda.
ASSESSING THE CONDITION OF FINANCIAL DISTRESS W ITH ANALYSIS OF LIQUIDITY, SO...AJHSSR Journal
ABSTRACT : Financial distress is the stage of declining financial conditions that occurred before bankruptcy.
To determine the risk of bankruptcy by knowing the signs of financial distress. Financial distress can analyze
financial statements using financial ratios, namely liquidity, solvency and profitability. The purpose of this study
was to examine the effect of liquidity, solvency and profitability on financial distress conditions. The population
in this study were 30 consumer goods industrial companies. By using purposive sampling technique, 21
companies were obtained. Using 3 (three) years, 63 observations were obtained. Data analysis technique is
logistic regression analysis with SPSS V.23 program. The results of this study indicate that liquidity and
profitability have a negative and significant effect on financial distress conditions so that the hypothesis is
accepted, but solvency has a positive and significant effect on financial distress conditions, this means rejecting
the hypothesis.
A survey of corporate credit risks management in Asia Pacific region was conducted in the fourth quarter of 2012 by Coface, a leading global credit insurance group. The survey revealed that corporate payment experience in the region generally worsened. Companies in Australia, China and India suffered more non-payment. Sectors of building & construction, IT, ISP & data processing, textile, clothing & shoes and household electric & electronic appliances are at higher risk. Companies in the region are less optimistic about recovery of global economy in 2013.
Trade Credit Insurance White Paper December 2008jlebendig
Get our most recent white paper...An Overview of Trade Credit Insurance here. Great reading, insightful and it will answer more of your questions. Don\'t have credit insurance yet? What are you waiting for? Contact me to discuss your options for protecting your company.
Manage Your Customer's Payment With Speed, Accuracy, Reliability and Savings, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
Trade Credit: the nature of the risk and its implications for SCFIgor Zax (Zaks)
Igor Zax, Managing Director of Tenzor Ltd., will presenting at 6th Annual Supply Chain and Finance Symposium, hosted by IE Business School and Banco Santander in 20-th of June Madrid. This top academic event featured professors from top universities, including Stanford, University of Chicago, University of Washington in St. Louis, Georgetown University, IE, Singapore Management University, Imperial Business School and others, corporates (such as Metro Group and BMW) and banks (Santander and HSBC).
The presentation was focused nature and unique characteristics of trade receivable risk, differences it presents with other risk types, and implications of SCF structures to the risk transformation, distribution and management.
Unfortunately all too often companies default on their payments to vendors or file for bankruptcy protection. Various factors may be the cause: Management deficiencies, financial restructuring, regulatory changes, product liability exposure, legal maneuvering, political upheaval, or even, as recent history has proven, regional natural disasters. No matter how wonderful we feel our customer is, a creditor may never know what future circumstances will diminish the customer’s ability to pay. Accounts Receivables (Credit) Insurance can be an indispensable credit risk management product reducing risk in an unpredictable marketplace. This Webinar will be of value to credit, financial or sales professionals who want to learn the basics of credit insurance and how using credit insurance may help their company. Specifically the speaker will cover: • Protecting Accounts Receivable from bad debt loss • How credit insurance is priced • How claims are settled • How credit insurance can be used to expand sales • Enhancing financing options • Compliance with Sarbanes-Oxley
The anscersX multibureau business trade credit report includes the best elements from business credit reports from Dun and Bradstreet, Equifax and Experian, allowing customers to get the information they need to make a credit decision about their customers.
Effect of Liquidity Risk on the Profitability of Mortgage Banks in Nigeriaijtsrd
The study was inspired by the liquidity risk that the Nigerian mortgage banking business faces in terms of profitability. As a result, the study investigates the impact of liquidity risk on the profitability of Nigerian mortgage banks. This research effort was carried out using secondary data and an ex post facto research design. The regression statistical technique in the Statistical Package for Social Sciences SPSS Version 22.0 was used to assess data derived from the financial statements of listed mortgage banks on the Nigerian Stock Exchange NSE . The results of the analysis demonstrate that Loan to Deposit has a substantial impact on mortgage banks net interest margins in Nigeria, and that Current Ratio has a significant impact on mortgage banks net interest margins in Nigeria. It was so recommended, among other things, that bank management adopt sound lending policies and maintain a sufficient balance between loans and deposits, because bank profit is largely dependent on deposits mobilized and liquidity created through loans given. Ekwueme, Chizoba M | Onakeke, Newman "Effect of Liquidity Risk on the Profitability of Mortgage Banks in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-5 , August 2021, URL: https://www.ijtsrd.com/papers/ijtsrd46349.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/46349/effect-of-liquidity-risk-on-the-profitability-of-mortgage-banks-in-nigeria/ekwueme-chizoba-m
Funding Sme – The Challenges And Risk Within - Alternative financing sources ...Resurgent India
Securitization of Trade Credit: Trade credit is an important source of financing for MSMEs, as they sell on credit to their large customers and then wait for long periods for payment. If these receivables (trade credit) could be packaged as a securitized asset, which would essentially be a commercial paper with the credit rating of the large firm, it could help MSMEs reduce their investment in working capital and their need for finance significantly. The credit worthiness of a typical MSME would also improve, qualifying it for greater bank funding. Though the securitization process which is similar to factoring, could be more cost-effective than bank funding, factoring, and letters of credit.
Mercer Capital's Investment Management Industry Newsletter | Q2 2022 | Segmen...Mercer Capital
Mercer Capital’s Investment Management Industry newsletter is a quarterly publication providing perspective on valuation issues pertinent to asset managers, trust companies, and investment consultants.
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
Latino Buying Power - May 2024 Presentation for Latino CaucusDanay Escanaverino
Unlock the potential of Latino Buying Power with this in-depth SlideShare presentation. Explore how the Latino consumer market is transforming the American economy, driven by their significant buying power, entrepreneurial contributions, and growing influence across various sectors.
**Key Sections Covered:**
1. **Economic Impact:** Understand the profound economic impact of Latino consumers on the U.S. economy. Discover how their increasing purchasing power is fueling growth in key industries and contributing to national economic prosperity.
2. **Buying Power:** Dive into detailed analyses of Latino buying power, including its growth trends, key drivers, and projections for the future. Learn how this influential group’s spending habits are shaping market dynamics and creating opportunities for businesses.
3. **Entrepreneurial Contributions:** Explore the entrepreneurial spirit within the Latino community. Examine how Latino-owned businesses are thriving and contributing to job creation, innovation, and economic diversification.
4. **Workforce Statistics:** Gain insights into the role of Latino workers in the American labor market. Review statistics on employment rates, occupational distribution, and the economic contributions of Latino professionals across various industries.
5. **Media Consumption:** Understand the media consumption habits of Latino audiences. Discover their preferences for digital platforms, television, radio, and social media. Learn how these consumption patterns are influencing advertising strategies and media content.
6. **Education:** Examine the educational achievements and challenges within the Latino community. Review statistics on enrollment, graduation rates, and fields of study. Understand the implications of education on economic mobility and workforce readiness.
7. **Home Ownership:** Explore trends in Latino home ownership. Understand the factors driving home buying decisions, the challenges faced by Latino homeowners, and the impact of home ownership on community stability and economic growth.
This SlideShare provides valuable insights for marketers, business owners, policymakers, and anyone interested in the economic influence of the Latino community. By understanding the various facets of Latino buying power, you can effectively engage with this dynamic and growing market segment.
Equip yourself with the knowledge to leverage Latino buying power, tap into their entrepreneurial spirit, and connect with their unique cultural and consumer preferences. Drive your business success by embracing the economic potential of Latino consumers.
**Keywords:** Latino buying power, economic impact, entrepreneurial contributions, workforce statistics, media consumption, education, home ownership, Latino market, Hispanic buying power, Latino purchasing power.
Resume
• Real GDP growth slowed down due to problems with access to electricity caused by the destruction of manoeuvrable electricity generation by Russian drones and missiles.
• Exports and imports continued growing due to better logistics through the Ukrainian sea corridor and road. Polish farmers and drivers stopped blocking borders at the end of April.
• In April, both the Tax and Customs Services over-executed the revenue plan. Moreover, the NBU transferred twice the planned profit to the budget.
• The European side approved the Ukraine Plan, which the government adopted to determine indicators for the Ukraine Facility. That approval will allow Ukraine to receive a EUR 1.9 bn loan from the EU in May. At the same time, the EU provided Ukraine with a EUR 1.5 bn loan in April, as the government fulfilled five indicators under the Ukraine Plan.
• The USA has finally approved an aid package for Ukraine, which includes USD 7.8 bn of budget support; however, the conditions and timing of the assistance are still unknown.
• As in March, annual consumer inflation amounted to 3.2% yoy in April.
• At the April monetary policy meeting, the NBU again reduced the key policy rate from 14.5% to 13.5% per annum.
• Over the past four weeks, the hryvnia exchange rate has stabilized in the UAH 39-40 per USD range.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
11.[49 61]trends of trade credit use among quoted firms in nigeria
1. Journal of Economics and Sustainable Development www.iiste.org
ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online)
Vol.3, No.5, 2012
Trends of Trade Credit Use among Quoted Firms in Nigeria
Ojenike, Joseph Olusola* Olowoniyi Adeyemi Olusola
Obafemi Awolowo University, Ile-Ife, Osun State, Nigeria
*E-mail of corresponding author: jojenike@gmail.com
Abstract
Use of trade credit is considered an essential part of successful businesses all over the world. This study
examines the trends of trade credit use by quoted firms in Nigeria for the sample period 2000-2009. The
results reveal a variation and gross inconsistency in the use of trade credit by Nigeria quoted firms. The
finding suggests the possible reason for low financial status of most Nigeria firms as indicated by their low
utilization of alternative source of financing. The study indicates a need for overall motivational drive by
stakeholders to encourage the use of trade credit by firms and establish a concrete alternative source of
financing.
Key words: Trade credit, Trends, Quoted firms, Nigeria
1. Introduction
Trade credit is an essential element of business life for most firms in the world, so important that it even
has macroeconomic repercussions. In countries where financial markets malfunction, contract enforcement
is insecure, and information is scarce, unreliable and asymmetric, trade credit is even more important
(Ojenike & Olowoniyi, 2012). For instance, Fisman & Love (2001) find that firms in industries with higher
rates of trade credit grow faster in countries with relatively weak financial institutions. Many Sub-Saharan
African (SSA) economies may be described in such a way.
In the face of companies experiencing tight financial constraints from the conventional and specialized
financial institutions, companies have devised alternative ways and means of accessing finance to either
shore up their working capital, acquiring inventory and/or expanding their productive capacity to meet their
delivery targets. For most firms in this category, trade credit is an essential element of their finance
sourcing strategies. As a result, lack of bank credit induces companies in developing economies to rely on
trade credit as a significant source of financing. Indeed, trade credit has been observed to play an important
role in the external financing of companies in developed countries (Elliehausen &Wolken, 1993; Ng et al.,
1999; Summers &Wilson, 2002). In particular, trade credit appears as a substitute to bank credit for
companies credit-rationed by banks (Nilsen, 2002; Marotta, 1997). Therefore, in developing economies,
the current limited access to institutional finance may favour the generalized use of trade credit to mitigate
problems of financing.
In developed countries, majority of firms rely heavily on trade credit extension as a source of finance. In a
Federal Reserve Board study, Ellienhausen & Wolken (1993) noted that in 1987, accounts payable
constituted 20% of all non-banks, non-farm small business liabilities and 15% of all large firms’ liabilities.
On the other hand, accounts receivable represent one of the main assets on most corporate balance sheets.
Therefore, an important aspect of trade credit is the two-way nature of the transaction. Many companies,
particularly those at the intermediate points in the value chain use trade credit as customers and provide it
as suppliers. Thus trade credit represents a substantial component of both corporate liabilities and assets.
In a financially inefficient working environment, and tightened credit and monetary policies, firms may
have to seek alternative sources of external financing and, trade credit constitutes one of such alternative
sources. But despite the potential importance of trade credit, limited attention has been paid to its role, the
clarity of which is expressed by its trend especially in developing countries such as Nigeria.
Financing decision becomes more difficult when the economic conditions of the country where the firm
operates are typically uncertain. Specifically, in the Nigerian case, the presence of two aggravating factors
is observed. They are the high interest rates practised in the financial institutions and the instability of the
economy. The effects of high interest rates on the firms take various forms. On one side, the rising cost of
financing and, on the other hand, inhibiting sales, thus resulting in fall in the economy’s activities,
producing a combined effect of aggravating the degree of uncertainty (Salawu, 2007).
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Lending rate in many industrialised nations is firmly below 2%. In Nigeria in particular, it is as high as
30% which is one of the problems bedevilling the Nigeria oil dependent economy. The soaring interest
rates either at 30% or 24%, which Soludo (2009) claimed will subsist till December, 2009 still remain a
major obstacle to doing business in Nigeria till today. All previous efforts to keep the interest rate low has
been futile. The failure has not supported the growth of the real sector. There has been no prospect of
progress in the productive sector with the current rates of interest charged by financial institutions
(commercial banks). For firms and companies that find the borrowing facilities available from financial
institutions unaccessible or insufficient or tied with stringent terms to provide the necessary margin of
working capital resources, there is the alternative possibility of trade credit.
2. Literature Review
2.1. The Concept of Credit in Business Finance
In finance, the word ‘credit’, ‘ loan’, ‘ borrow’ are often used interchangeably in referring to the process of
obtaining control over the use of money, goods and services. In the present, it is an exchange for a promise
to repay at a future date (Olagunju, 2003). Credit and loan are frequently used as synonymous, however,
Rosenzweig et al (1993) made a clear distinction between the two words. He defined credit as an asset or a
financial reserve, which the firm (business) can call upon when needed, and provided it has not used its
credit “asset” by exchanging it for another loan.
Furthermore, the term credit is frequently used similarly in commercial circle or trade, as ‘trade credit’ to
refer to the approval for delayed payment for purchased goods. Sometimes, credit is granted to a person or
firm who has financial instability or difficulty, hence companies frequently offer credit to their customers
as part of the terms of a purchase agreement. Credit is often denominated by a unit of account. Unlike
money, credit itself cannot act as a unit of account; however, many forms of credit can readily act as a
medium of exchange. As such various forms of credit are frequently referred to as money and are included
in estimates of the money supply. Credit is also traded in the market. The purest form is the credit default
swap market which is essentially a traded market in credit insurance.
A credit default swap represents the price at which two parties exchange this risk – the protection “seller”
takes the risk of default of the credit in return for a payment, commonly denoted in basis points (one basis
point is 1/100 of a percent) of the notional amount to be referenced, while the protection “buyer” pays this
premium and in the case of default of the underlying (a loan, bond or other receivable), delivers this
receivable to the protection seller and receives from the seller the par amount (that is, is made whole).
Credit as a form of short-term financing is a source of up to one year duration which are flexible in nature
and usually used in financing short-term working capital needs. They include borrowing from friends and
relatives, borrowing from cooperatives, trade credits, accruals, bank borrowing, factoring of debts,
acceptance of credit etc. Of particular importance to this study is trade credit as a source of short-term
business financing.
Atanasova (2007) argues that trade credit is a more expensive financing alternative to conventional loans
because suppliers have a high direct cost of funds. For example, for suppliers, these higher costs can take
the form of inefficiencies in the collection of payments, but financial intermediaries enjoy cost advantages
due to specialization. A firm should always be on the lookout for suppliers who offer not only the lowest
prices, but also fast, dependable delivery. Care should be taken not to be too committed to one vendor
because they offer credit term to your firms. Such trade credit is best used as a short-term solution for
managing cash flow and should not be used for long term.
However, if the use of trade credit for an extended period becomes inevitable, plan to avoid unnecessary
costs through forfeiture of cash discounts or delinquency penalties should be put in place. Usually, late
payment penalties run between 1 to 2% on a monthly basis. This means that missing the net payment date
for an entire year can cost as much as 12 to 24% in penalty interest. Other costs associated with trade
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credits can be identified as pressures from suppliers, reduction in credit rating if payment is delayed till the
final due date.
One of the best tools for delaying cash outflow of any cash-trapped or new retail business is the trade credit
available from suppliers. Trade credit is one part of the process to build up business credit worthiness. It is
an open account with a vendor who lets a retailer buy now and pay later. Many suppliers may require the
first order to be paid by credit card or COD (Cash/Cheque on Delivery) until the business has been deemed
credit worthy. Once its established that a business can pay its bills on time, it is possible to negotiate trade
credit and terms with suppliers. The importance of trade credit, namely reliance of suppliers to fulfill their
need for additional finance, increases for developing markets, where alternative sources of finance are
almost unavailable and the development of stock and bond market is modest (Demirgue-Kint &
Maksimovic, 2001)
As indicated in Cunat (2007) although the implicit interest rates in trade credit are commonly very high as
compared with the rates in bank credit, trade credit is widely used by firms due to its advantages. Firstly,
obtaining a trade credit cause less transactions costs for firms compared with bank credits. Furthermore, it
is less costly for firms to postpone trade credit payments than negotiable bank loans. Finally, being in the
same value chain there is a mutual dependence between suppliers and firms. Suppliers may finance the
growth of small customers to assure growth of their own sales and capture future profitable business from
the firms. Therefore, owing to stronger communication between supplier and firm, trade credit allows firms
to better match the timing of cash outlays and cash receipts from sales.
However, the various benefits of trade credit is beset with some problems, for example, moral hazard
problem which refers to the case when the credit is diverted to non-value maximizing projects by
borrowers, emanates from the asymmetric information between the creditors and firms. On the other hand,
trade credit is believed to decrease the moral hazard problem because in case of default, suppliers are
entitled to cease the supply of goods to the firms. In accord with this, Biais & Gollier (1997) show that
trade credit increases the availability of bank credit, particularly for small firms that are typically affected
by asymmetric information problems.
2.2. Types of Trade Credit Terms and Variations
To understand the concept of trade credit, it is important to know the range of alternative credit
arrangements that can occur in trade. Depending on credit policy, payment can be made at different times.
It can occur before delivery, on delivery or after delivery. In the last case, the seller can offer discounts for
prompt payment or not depending on trade arrangements. When payment does not occur before delivery or
at delivery time, trade credit is being extended and the seller assumes the credit risk. Otherwise, trade credit
is not being offered and the buyer assumes the risk.
There are two main types of credit terms under which trade credit can be given (Ng et al 1990; Walker &
Petty II, 1986; Pike et al; 2005). One type is called net credit term or net period. Net period refers to the
trade credit period given to customers without a discount (Wilson, 2008). In this type of credit term, a
buyer is required to pay for the goods delivered within the agreed date (e.g. 30 days after delivery). A debt
which is not paid within that agreed date is known as overdue debt, and the debtor might be charged
interest on the amount due.
Another type of credit term involves the credit period with discount. In this case, a buyer obtains a certain
discount on the total bill if he/she pays before or on the due date (Ng et al; 1999; Pike et al, 2005). Credit
period with discount can be quoted like this: “2/10, net 30 days – which means that a discount of 2% of
the total bill will be given if a buyer pays within ten days. On the other hand, if a buyer pays after the
discount period, (he/she pays within 30 days but after ten days), no discount is given. In this case, a buyer
pays the full amount of the debt and incurs the cost of using trade credit for the period beyond the discount
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date. If the buyer in this example does not pay within the discount period of ten days, he/she incurs the cost
of using trade credit for 20 days (30 minus 10 days).
Credit terms are usually expressed with a discount for prompt payment. The two most common forms of
trade credit are simple net terms and two-part terms that include a discounted price or credit option. Net
terms (e.g. Net 30 and Net 10 accounts) specify that payment is due within a stated time period and interest
is charged if payment is made by the net date after which the buyer is in default. Thus, payment is expected
to be made in full 30 (net 30) or 10 (net 10) days after the goods are delivered to the buyer. Some
vendors/supplier offer cash.
The two-part offers consist of an option to pay a discounted price if payment is made within a specified
short period of time or pay the full price on the net date (e.g. 2/10 Net 30 means the buyer can claim 2%
discount payment within 10 days; otherwise the full amount is due in 30 days). An implicit interest charge
is incurred if the buyer elects to forgo the discount and pay later. For instance, if an invoice is N5,000.00
and “2/10 Net 30” is noted, the buyer can take a 2% discount (N5000 x 0.2 = N100.00) and make a payment
of N4900.00 within 10 days.
These two kinds of trade credit give different signals. A company being offered on net term form of trade
credit is considered financially solid, because the business offering trade credit is confident that their
creditor will still be in business when payment is due. On the other hand, a company accepting (paying on
the 30th day) a 2/10 net 30 trade credit offer however, must be in a very difficult situation to have to
finance itself at an implicit annualized interest rate of 43.9 per cent.
Wilson and Summers (2002) keep this distinction, but add questions concerning the reasons given by small
businesses for granting trade credit. Through their analysis of postal questionnaires filled by 500 American
businesses, they find that the decision between two-part and net terms depends on product and market
characteristics. First, when it takes time to determine the quality of products, net terms are offered instead
of cash to enable an easy return of merchandise, which supports the finding of Ng, Smith and Smith (1999).
Second, small firms feel obliged to adopt industry practices and grant trade credit to remain competitive.
However, the rates defined by credit term can be quite high and frequently much higher than funds
obtained from financial institution. In spite of this, the use of trade credit is widespread and represents the
largest simple source of short-term financing for firms in market economies.
The body of empirical research which explores the connection between investment and finance has
developed with the theme that financial structure of firm is relevant to its investment decisions when
financial markets are imperfect (Adelegan and Ariyo, 2008). This is in contrast to Modigliani and Miller’s
(1958) irrelevance theorem. They have argued that in a perfect financial/capital market, a firm’s investment
decisions are independent of its financing decisions because the financial structure would not affect the
costs of investing. Under such assumption, they conclude that a firm’s financial structure is irrelevant to its
value (retained earnings, debt and equity) as sources of investment finance are assumed equivalent to one
another.
However, recent research argues that, in an imperfect financial market, internal and external finance are not
perfect substitutes for each other. Investment financing may consequently depend on such financial factors
as availability of internal finance, ease of access to debt (bank credit) or new equity finance, or the
functioning of particular credit markets. This may be due to imperfect information about the quality or
riskiness of the borrower’s investment project. Information asymmetries are costly contract enforceability
generate agency costs that result in outside investors demanding a premium on debt and therefore cause
external funds to be an imperfect substitute for internal fund (Hu and Schianjavelli, 1998).
The economic importance of trade finance was alluded to and restated by Davis and Yeoman (1974) when
they evidenced that large U. K. firms used trade credit to cushion themselves from tight monetary policy in
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the late 1960s. It therefore, suggests that trade finance should be considered by policy makers because of its
ability to affect the outcome of policy interventions.
Furthermore, when products are purchased, trade credit can also play a role in a firm’s quality control
efforts. Smith (1987) and Long, Melitz & Ravid (1993) argue that the use of trade credit allows a firm to
verify product quality before paying. Burkat & Ellingsen (2004) opined that it is typically less profitable for
an opportunistic borrower to divert inputs than to divert cash. Therefore, suppliers may lend more liberally
than banks.
Cook (1999) also finds evidence for the facilitating role of trade credit, through its curbing the adverse
selection problem. He shows that trade credit provides a positive signal for firms, hence increases the
probability of acquiring bank credit. Love, Preve & Sarria-Allande (2007) however find for six emerging-
market-countries that firms that experience a sharper decline in bank credit also experience a sharper
decrease in trade credit. This complementary relationship is due to the fact that a credit crunch that affects
financial lenders also affects trade credit lenders.
Trade credit is an important element of the balance sheets of many firms especially small business. Results
of a national survey conducted in Chicago shows that it accounted for 31.3% of the total debt of small
business in 1993, and 60.8% of firms had outstanding credit from suppliers (NSSBF, 1993). Previous
studies offer numerous examples of how, for some firms, finance market imperfections may create
dependence on trade credit as a source of fund. Peterson and Rajan (1997) and Nilsen (2002) argue that
firms that have no access to markets for traded long-term securities or commercial paper rely on trade
credit for financing during economic downturns and monetary policy contractions.
Deloof and Jegers (1999) provide empirical evidence that the amount of trade credit used is determined by
the availability of internal funds (retrained earnings, depreciation provision, deferred taxation) and is an
important alternative not only for short-term bank debt but also for long-term financial debt. Antov (2005)
and Alphonse, Ducret and Severin (2004) on the other hand, argue that the availability of institutional
finance increases with the level of trade credit. Antov (2005) examines firms’ choice to use trade credit and
in particular the way in which the availability and level of institutional loans affect that choice. His finding
that higher levels of trade credit are associated with higher levels of conventional loans suggests that there
exists synergy from combining supplier credit and bank credit.
Alphonso et al (2004) provide similar evidence when they argue that trade credit is a quality signal that
helps firm acquire reputation and improve their access to institutional finances. However, the two lines of
research are not mutually exclusive: firms use trade credit because they are denied access to institutional
finance (a demand effect), but also trade credit granted by suppliers facilitates access to institutional loans
(a supply effect).
Antov (2005) however find it difficult to separate the supply and demand effects on a cross-sectional data
analysis. In the context of panel data, he observes that over time, a certain class of borrowers systematically
increases its use of trade credit when the level of institutional finance declines. This finding suggests a
strong demand side effect.
Habib & Johnson (1999) suggest suppliers have repossession advantages when redeploying the asset sold
while Wilner (2000) argues that restructuring debt advantage explain why trade credit is being offered.
Empirical studies conducted in Germany on the financing motive theory of trade credit provide mixed
evidence. For instance, Long, Malitz and Ravid (1993) find no support for the financing motive: less
creditworthy non-financial firms do not apply to more creditworthy firms for financing due to credit
constraints.
Ng, Smith & Smith (1999) obtain similar results, but Antov (2005) shows that firms with high levels of
trade credit have high levels of institutional loans. In contrast, Nilsen (2002) in the case of the U. S. observe
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that small firms which are more likely to be credit rationed, rely heavily on trade credit when credit market
conditions deteriorate.
A survey of manufacturing firms by State Bank of New South Wales (1992) reported that the average
proportion of credit sales to total sales was 88.9%. Of the firms surveyed, 73.4% reported that the most
common period over which credit was extended was 30 days while the average time taken to pay was 50.6
days. This confirms that most sales by firms are credit sales given rise to accounts payable by the firms
taken advantage of suppliers’ credit. If the financial institutions are perfect, firms should be indifferent
between trade and bank credits. Imperfections in the financial institutions often remove this indifference.
In their survey of the reasons for the existence of trade credit, Schwartz & Whitcomb (1979) identify two
such imperfections. The first is the existence of ceilings on interest rates, and the second, is the fact that
information is costly to collect and that the cost differs between providers of finance. Once there are
ceilings on the interest rates which financial intermediaries can charge, and those of ceilings are binding,
then there must be disequilibrium in credit rationing. When some firms that require funds are unable to
obtain them from a financial intermediary, it may be optimal for suppliers to extend finance to buyer firms
through trade credit. However, Cunat (2007) outlined that the interest rate of trade credit is more expensive
than that of bank credit due to its insurance premium and default premium.
Peterson and Rajan (1994, 1995) find that firms that are less likely to be bank credit constrained tend to
rely less on trade credit. It is possible that the ambiguous empirical evidence on the financial motive theory
of trade credit use is due to the static and dynamic misspecifications caused by the conventional
classifications used to split sample firms into constrained and unconstrained (e.g. small versus large firms).
A survey by the International Chamber of Commerce (2009) however reveals the extent of damage to the
trade credit market. It discovers that 47% of the 122 banks in 59 countries reported lower volume of trade
credit, and 43% in the letter of credit transactions in the last quarter of 2008. Over 40% of firm’s
respondents reported higher fees they have to pay for commercial letters of credit standbys and guarantees.
At the same time, the cost of trade credit increased dramatically.
Boissary and Gropp (2007) using a unique data set on trade credit defaults among French firms to
investigate whether and how trade credit is used to relax financial constraints discovered that firms that
face idiosyncratic liquidity shocks are more likely to default on trade credit, especially when the shocks are
unexpected, while firms with little liquidity are likely to be credit constrained or are close to their debt
capacity. The study also found that the chain of defaults stops when it reaches firms that are large, liquid,
and have access to financial markets. This finding, therefore, suggests that liquidity is allocated from large
firms with access to outside finance to small, credit constrained firms through trade credit chains.
Neeltje (2005) discover that statistics show that the sale of goods on credit is widespread among firms even
when they are financially constrained and thus face relatively high costs in providing trade credit. A
possible explanation for this is the use of trade credit as a competitiveness tool. By analyzing both the
impact of customer as well as producer market power on a firm’s decision to provide trade credit, he
examined whether trade credit is indeed used as a way to lock in customers by firms in developing
countries. Using a new data set containing a large number of firms in 42 developing countries, he found
strong evidence that an important driving force behind the decision to provide trade credit is the urge to be
competitive. This finding particularly holds true for those firms that still have to establish a solid market
reputation and for firms located in countries with an underdeveloped banking sector.
Burkart & Ellingsen (2002) hypothesized that the availability of trade credit increases the amount that
banks are willing to lend, for a given bank loan, additional trade credit permits the borrower higher levels
of diversion as well as investment. However, due to the relative illiquidity of trade credit, the borrower’s
return from investing increases by more than the return from diversion.
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Anticipating that available trade credit boosts investment rather than diversion, banks are willing to
increase their lending, hence, bank credit and trade credit are complements for firms whose aggregate debt
capacity constraints investment. By contrast, for firms with sufficient aggregate debt capacity, trade credit
is a substitute for bank credit. As for variation in trade credit across cities, it was further discovered within
Burkart and Ellingsen (2002) model that in countries with perfect legal protection of creditors, trade credit
loses its edge because it becomes as difficult to divert cash as to divert inputs.
2.3. Trade Credit Period
Closely linked and associated with trade credit terms is trade credit period. Trade credit period means the
length of time (measured in days) after the delivery date before a customer has to pay for the goods. Trade
credit period is an important issue concerning cash management as it has a significant impact on the firm’s
cash flow. A longer trade credit period reflects the length of time that the capital (finance) provided by the
supplier remains with the buyer before it is returned to the supplier. To that effect, a longer trade credit
period may enable firms to properly match the expected inflow and outflow of cash. Conversely, a longer
trade credit period may negatively affect a supplier’s cash flow. In particular, a longer trade credit period
may tie up the supplier’s capital and thus reduce the firm’s profitability. As such, the length of the trade
credit period is something which firms have to consider with respect to trade credit transactions.
However, trade credit period varies widely among firms even for firms of the same supplier (Iglesias et al.,
2007). Few studies have been carried out which directly or indirectly investigated the determinants of trade
credit period include Paul and Boden (2008), and Wilson and Summers (2002) for U.K firms; Giannetti et
al (2008) for U.S. firms; Ge and Qui (2007) for Chinese firms; Iglesial et al (2007) for Spanish firms, and
Fafchamps (1997 and 2000) for Zimbabwean manufacturing firms.
Trade credit periods are likely to be influenced by a number of factors which includes the business
characteristics of the buyer and seller (Giannetti, et al, 2008); volume of transactions (Arnold, 2002);
ethnicity ( Fafchamps, 2000); length of the relationship of the trading partners (Iglesias et al, 2007);
product characteristics (Wilson, 2008, Paul and Boden, 2008); whether a transaction is domestic or export
(Neale and Schmidt, 1991); and frequency of transaction (Wilson and Summers, 2002, Summers and
Wilson, 2003).
3. Methodology
Secondary data were sourced for this study. The data were sourced from the Annual Reports and Accounts
of the sampled firms and annual publication of the Nigeria Stock Exchange for the period 2000-2009. A
random sample of 70 non-financial quoted firms listed on the Nigeria Stock Exchange (NSE) was selected
for this study. Data collected were analysed descriptively.
4. Results and Discussion
Table 1 presents the results of mean, median and aggregate trade credit use by sampled firms for the period
2000-2009. The results indicate that average trade credit use is highest in the period 2004 (0.619),
2007(0.574), 2008(0.517) and 2009(0.501) respectively. Table 2 and Figure 1 present the results of the
sectoral pattern of trade credit financing across twelve (12) sectors of manufacturing companies for a
period of ten (10) years (2000 – 2009). The figures represent the mean value of trade credit used by firms
in each sector.
In year 2000, the result indicated that trade credit usage in the Conglomerates sector is the highest at a
mean value of 0.535569 or 53.56%. This is closely followed by Textile sector which stood at mean value
of 0.517838 or 51.78%. Automobile and Tyre recorded the lowest value of 0.028169 or 2.8% while
Printing/Publishing and Chemical/Paints followed at percentages values of 6.0% and 5.9% respectively. In
the same period, apart from Textile and Conglomerates sectors that recorded the value above 50%, all other
sectors such as Food and Beverages (28.02%), Printing and Publishing (6.8%), Chemical and Paints
(5.9%), Industrial/Domestic Products (18.04%), Brewery (33.12%), Building Materials (35.11%),
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Healthcare (7.3%), Agriculture/Agro-allied (33.4%), Footware (22.18%), Automobile and Tyre (2.8%)
stood at values below 50 percent. This indicates that trade credit activities in these sectors are much lower
compared to Textile and Conglomerates. Overall, the period 2000 is characterized by low usage of trade
credit by the sampled quoted firms in Nigeria.
In the period 2001, there was a general increase in the value of trade credit used by quoted manufacturing
firms in Nigeria compared to the previous period. However, unlike period 2000, account payable in the
Conglomerates sector is lower with a value of 33.20%, while the value of Textile rose to 88.49% about
3.7% higher than the previous period. The value also represents the highest among sample sectors in the
period under consideration. Healthcare sector which recorded a value of about 7.0% in the previous period
2000 dropped to 2.82% in period 2001, indicating a decline in the supplier’s credit available to the sector at
the time. This lowest record in this period is closely followed by Automobile and Tyre (9.88%). Although
the value of Automobile sector is comparatively higher (2.81%) than the previous period 2000, the account
payable of the sector stands and rank among the lowest in the period 2001. Surprisingly,
Industrial/Domestic Products sector which recorded a low value of 18.04% in the previous period
represents the second largest in the current period with a value of 76.59%. Chemical/Paints and Brewery
come into lime light in the current period with high dose values of 63.5% and 63.96% respectively. The
increase in the value of Chemical/Paints in the period 2001 is more than 100% over the previous period,
while Brewery also recorded close to 100% increase over the accounts payable available in the previous
period of 2000. Agriculture/Agro-allied recorded a value of 58.09% of accounts payable which shows an
increase over the past period and next to Textile, Industrial/Domestic Products, Brewery and
Chemical/Paints respectively. Food and Beverages has an increased value of 33.18%, while
Printing/Publishing has accounts payable value of 19.62% representing over 100% increase over the
previous period. Building Materials has a value of 15.46%. An increase in accounts payable was also
recorded for Footware (33.56%).
The overall pattern of trade credit in the period 2001 shows an increase in the aggregate account payable
over the previous period. Although the accounts payable patterns in the period indicates variations across
sectors, implying inconsistency of some sectors in the two periods. At period 2002, there seems to be
decline in the overall trade credits usage by quoted firms compared to the period 2001. For example, the
highest accounts payable is noticeable in Agriculture/Agro-allied with a value of 70.63% which is
comparatively lower than the highest value obtained – 88.49% - in period 2001. Brewery recorded average
accounts payable of 43.79% to occupy second position in this period. Conglomerates which had a value of
33.20% in the previous period recorded a slight decrease in trade credit value with an average of 32.13%.
Textile was dose with trade credit value of 31.07% while Building Materials, Chemical/Paints, and
Printing/Publishing recorded accounts payable of 30.92%, 30.20% and 30.00% respectively. With the
exception of Chemical/Paints sector, Building Materials and Printing and Publishing sectors recorded
substantial increase in the trade credit compared to the previous period. Food and Beverages sector
recorded a decline in the value of trade credit with an average of 29.43%. Other sectors such as Footware
had an average of 20.20%, while Automobile/Tyre recorded an average of 10.51% which is slightly higher
than the previous year trade credit value. The lowest value of trade credit during this period is observed
with Healthcare sector with a low average value of 9.8%, which represent the highest over the previous
periods of 2000 and 2001 respectively. In all, most quoted firms in this period 2002 have a reduced value of
trade credit compared to the observed value in the previous periods.
At period 2003, Agriculture/Agro-allied sector took the centre stage in trade credit activities with a high
average value of 91.23%. Building Materials trailed closely with an average value of 83.20%, the highest
over the last three periods. Industrial/Domestic products sector also recorded a high average value of
63.22%, a substantial increase over the immediate past period of 2002. Brewery rose slightly above the
previous value with current average of 43.67%. Printing/Publishing sector recorded the highest trade credit
value since the beginning of the sampled period 2000. It has average value of 42.03%. Chemical/Paints
sector recorded a higher value of 35.32% compared to the previous period. Textile sector recorded the
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lowest decrease in trade credit value since the start of the study period. A value of 30.17% was observed
for the sector. Food and Beverages also recorded its lowest values since period 2000 with an average of
17.07%. Footware declined by 50% and stood at an average of 15.32%. Trade credit value in the
Healthcare sector increased to 10.51%, the highest since the beginning of the sampled periods. Automobile
and Tyre recorded a trade credit value of 9.99% while the lowest trade credit value since the beginning of
sampled period is 0% in the Conglomerates sector.
At period 2004, an unprecedented increase in trade credit was observed for Footware and Chemical/Paints
with a value of 148.90% and 148.88% respectively. Brewery sector recorded a trade credit value of
97.36%, Footware and Beverages sector (55.35%), Printing and Publishing (50.14%), Industrial/Domestic
Products (53.91%), Building Materials (45.41%), Healthcare (9.99%), Agriculture/Agro-allied (46.44%),
Textile (35.73%), Congomerates (39.64%), and Automobile and Tyre (10.52%). At period 2005, Food and
Beverages Sector recorded trade credit value of 36.02%, Printing and Publishing (58.17%),
Chemical/Paints (69.64%), Industrial/Domestic Products (52.59%), Brewery (39.74%), Building Materials
(21.45%), Healthcare (10.52%), Agriculture and Agro-allied (44.09%), Textile (42.98%), Footware
(69.64%), Automobile and Tyre (3.60%) and Conglomerates (87.04%).
At period 2006, Food and Beverages had a trade credit value of 45.45%, while Printing/Publishing
(44.50%), Chemical/Paints (87.05%), Industrial/Domestic Products (37.11%), Brewery (65.27%), Building
Materials (51.02%), Healthcare (3.63%), Agriculture/Agro-allied (44.56%), Textile (32.18%), Footware
(77.05%), Automobile and Tyre (21.02%) and Conglomerates (75.57%). At period 2007, Food and
Beverages recorded a trade credit value of 62.34%, Printing/Publishing (80.76%), Chemical/Paints
(79.47%), Industrial/Domestic Products (62.42%), Brewery (74.87%), Building Materials (26.01%),
Healthcare (21.02%), Agriculture/Agro-allied (95.43%), Textile (42.98%), Footware (74.95%),
Automobile and Tyre (13.60%), and Conglomerates (54.39%).
During year 2008, the value of accounts payable for Food and Beverages is 51.42%, Printing and
Publishing (103.65%), Chemical/Paints (55.88%), Industrial/Domestic Products (62.15%), Brewery
(70.48%), Building materials (45.10%), Healthcare (13.61%), Agriculture/Agro-Allied (70.64%), Textile
(7.7%), Footware (35.88%), Automobile and Tyre (72.40%) and Conglomerates (31.36%). In year 2009,
average value of trade credit used for Food and Beverages Sector is 62.33%, Printing and Publishing
(1.07%), Chemical/Paints (53.55%), Industrial/domestic products (71.32%), Brewery (34.54%), Building
materials (73.09%), Healthcare (72.40%), Agriculture/Agro-allied (97,45%), Textile (20.53%), Footware
(43.55%), Automobile and Tyre (21.32%) and Conglomerates (50.01%).
5. Conclusion
This study examines the trends of trade credit use in Nigeria between period 2000-2009 The results reveals
a variation and gross inconsistency in the use of trade credit by Nigeria quoted firms. The finding suggests
the possible reason for low financial status of most Nigeria firms as indicated by their low utilization of
alternative source of financing. The study indicates a need for overall motivational drive by stakeholders to
encourage the use of trade credit.
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Table 1: Mean Median and Aggregate Trade Credit Use by sampled firms (2000-
2009)
Year Trade credit
Mean Median Aggregate
2000 0.247822 0 2.973867
2001 0.415343 0.333799 4.984119
2002 0.297584 0.30103 3.571007
2003 0.368127 0.327441 4.417521
2004 0.618577 0.482854 7.422921
2005 0.446275 0.435368 5.355296
2006 0.487003 0.450033 5.844033
2007 0.573536 0.62382 6.882433
2008 0.516882 0.536498 6.202578
2009 0.500974 0.517821 6.011688
Source: Data analysis, 2011
Table 2: Sectoral Mean of Trade Credit Usage: Accounts Payable (APAY)
Sector Yr 2000 Yr 2001 Yr 2002 Yr 2003 Yr 2004 Yr 2005 Yr 2006 Yr 2007 Yr 2008 Yr 2009
food and beverage 0.280209 0.331847 0.294334 0.170748 0.553452 0.360225 0.454454 0.623438 0.514213 0.623351
printing and publishing 0.060114 0.196223 0.300031 0.420298 0.501355 0.581678 0.445033 0.807558 1.036471 0.010669
chemical & paints 0.059433 0.635569 0.302029 0.353231 1.489021 0.69637 0.870495 0.794692 0.558783 0.535521
industrial/domestic products 0.180458 0.765986 0.183214 0.632221 0.539057 0.525974 0.371058 0.624202 0.621461 0.713179
Brewery 0.331206 0.639597 0.437983 0.436744 0.973626 0.397356 0.652692 0.748698 0.704805 0.345369
building materials 0.351078 0.154568 0.309186 0.832012 0.454142 0.214534 0.510183 0.260121 0.451026 0.730913
health care 0.073697 0.028169 0.098776 0.105111 0.099933 0.105247 0.036312 0.210221 0.136063 0.724041
agriculture/agroallied 0.33431 0.580873 0.706338 0.912342 0.464352 0.440965 0.445612 0.954321 0.706432 0.974472
Textile 0.517838 0.884913 0.310653 0.301651 0.357345 0.429772 0.321786 0.429772 0.076948 0.205319
Footware 0.221786 0.335569 0.202029 0.153231 1.489021 0.69637 0.770495 0.749469 0.358783 0.435521
Automobile & tyre 0.028169 0.098776 0.105111 0.099933 0.105247 0.036312 0.210221 0.136063 0.724041 0.213211
Conglomerates 0.535569 0.332029 0.321323 0 0.39637 0.870495 0.755692 0.543878 0.313552 0.500121
60
13. Journal of Economics and Sustainable Development www.iiste.org
ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online)
Vol.3, No.5, 2012
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