The Source And Application Of Funds To A Commercial Banking Sector ( A Case Study Of Access Bank)

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This researcher work sought to evaluate the sourcing and application of funds on Commercial Banks in Nigeria using Access Bank Plc Ogui Road, Branch Enugu as a case study.  The importance of prudent sourcing and application of funds in every business enterprise particularly the banking industry cannot be overemphasized. It is in this regard that the researcher went about his quest.  The researcher employed the personal interview. Observation and documentary instrumentations in data collections.  From the information and data sources, via the bank financial statements and records, the researcher was able to find out that though, the bank maintaining a sound sourced and application of fund policy, they still need to do more in view of the fact that sourcing and application of funds is a going process which needs to be reviewed and restructured from time to time to meet the yearning for prudent financial management and growth.  The researcher therefore is of the view that the bank management should evolved better deposit, lending and other like financial services policies such that the bank is able to provide the desired services to the public and other economic units and also ensure prudency, particularly in its lending sourcing and application of fund generally.




Background of the Study

Historical Background of the Study

Purpose of the Study

Aims and objective of the Study

Significant of the Study



Share Capital

Ordinary shares

Loan stock and Debentures



Description of Research

Description of Population

Sample of the Study

Description of Investigation Technique

Data Analytical Procedure



Analysis of Data

Interpretation of Data

Testing and Prove of Hypothesis and Findings

CHAPTER 5: SUMMARY, CONCLUSION AND RECOMMENDATION                                                                          







Background of the Study

The sources of funds in an organization denotes the various ways in which cash inflows to operate the business is realized.  The followings are some of the ways cash came into a business

Through an increase in liability

Through an increase in net worth

Through a decrease in asset

Through a net profit after tax

Through sales of shares, preferred or common stock

It also snows ways how an extra money comes into the organization through consultancy services, borrowing in form of loan.  Summarize sources of funds to any organization devotes all the ways money comes into an organization for its operational utilization and for achieving its stated goals and objectives.  However for an organization to thrive well it must also spent money to achieve it stated goals and objectives, thus application of funds refer to the various ways the sourced funds are put to usage in order to increase the value of fixed or working capital.  The followings are the various ways funds can b e put to use;

Where there is an increase in assets

Where there is a decrease in liability

Where there is a payment of cash dividend

When shares are purchased

Where there is a decrease in Net worth.

Having explained the meaning of sources and application of funds in a financial institution, it will be good to see what accounting bodies says about the same subject matter.  The Accounting Standard Steering Committee (ASSC) in their Standard Accounting Practice No. 10 (ASSAP 10) requires that all firms with an annual turn over of gross income of N25,000 or more should produce funds statement.  In its explanatory notes it describes the statement and principles underlying its preparation as follows.


That the profit and loss account and the balance sheet of a company should show the amount of profit during the year, and the disposition of the company’s resources at the beginning and the end of that year.  But for a more understanding of the company’s affairs, its necessary to identify the movement of assets, liabilities and capital which have taken place during the year and the effect of such movements on the net liquid funds.


The above statement is not specifically stated in the balance sheet or profit and loss accounts but rather can be made available in form of statement of sources and application of funds (fund statement).


Though the fund statement is in no way a replacement for the profit and loss account or the balance sheet, but yet it contain in summary form the information contain in the two above.  The objective of such statement is to show the manner in which the operations of a company are financed and the format selected should be designed to achieve this objective.


A fund statement should be able to show the resources from which funds flow into the company, and the way in which they are put to use.  It should clearly show the funds generated or absorbed by the operation of the business and the manner in which any resulting surplus of liquid asets have been applied or any deficiency of such assets has been financed where by distinguishing the long term from the short term.


The statement should also distinguish the use of funds for the purchase of fixed assets from funds used in increasing the company.  The fund statement will provide a link between the balance sheet at the beginning of the period, the profit and loss for the period, and the balance sheet at the end of the period.  A minimum netting off should take place as this will tends to mark the significance of individual important figures for example the sale of one building and the purchase of another should generally be kept separate in a funds statement.


The figures from which a fund statement is constructed should generally be identifiable in the net profit and loss account, balance sheet and all related accounts or notes.  Furthermore the fund statement should show:

The profit before tax or loss for the accounting period together with adjustment for items, which did not use funds or provide funds e.g. depreciation.

The individual paid and those proposed to be paid.

Acquisition and disposal of fixed and other non-current assets.

Finds raised by increasing or expending in repaying or redeeming medium or long term loans or issued capital of the company.

Increase an decrease in working capital sub-divided into its components and movement in net liquid funds.  Net liquid cash means cash at hand and at bank, less bank over drafts repayable within one year.

Increase in liabilities and decrease in assets in liabilities is regarded as a source of funds, while decrease in liabilities and increase in assets are regarded as application.  Some of the functions of commercial banks includes the following.

  1. i)          Acceptance of deposits

On current account:-  In this case the money is with drawable by cheque on demand.  There is no interest payable top the customers on this account. The Access Bank current is a flexible account that offers the customer a lot of new modern banking services either in person, online, or by phone.  Access Bank operates the following types of current accounts.


Joint account

Corporate account

Non governmental organizations

Sole proprietorship/enterprise account

Partnership account

Trustees/executers/administration account

Unincorporated societies, club and association account

  1. ii)         Savings Deposit Account:- This is also an interest yielding account, where customers are only allowed to withdraw money by using a pas book and also allowed to deposit using the same pass book or the bank teller.

The Access Bank Savings Account attract a competitive interest rte which is paid monthly on the full closing balance.

The features of the account are as follows

Zero cot

Quarterly statement of account transactions

No invoice for withdrawals

Withdrawal and deposits from any of their branch.

Statement of transaction on request.

It also offers electronic banking, which includes Internet Banking, Telephone Banking, and Mobile Banking to enable customers access to their account from just about anywhere.


iii)        Domiciling Account:-  These are accounts maintained in currencies other than the Nigerian naira, the accounts are essential to the business operations of entrepreneurs due to the sizing global business challenges and opportunities.

Access bank domiciliary accounts carryout the following transactions:

Telegraphic fund transfer to Third party Own

Withdrawal of foreign currency cash and travelers cheques.

Deposit of foreign currency cash and travel less cheques

Choosing of foreign currency cheques and foreign currency draft issuance

Lotlers of credit

The Access Bank Domiciliary Account supports the following currencies

US Dollars

British Pounds

Starling Euro

The minimum opening balance for the Access Bank Domiciliary Account is five hundred US Dollars (US$500) or its equivalent in Euro es Pounds Starling.


  1. iv)        Long Term Financing

Access Bank supports their customers in the attainment of their long term business, by providing of a broad array of financing options to suit their particular requirements.  This is particularly handled through the followings:

Term loans

Project finance


Note issuance facility

  1. v)         Products and Services

At Access Bank, there is an extensive range of products and services tailored provide a value added banking solutions ranging from day – day transactional banking and complex financing structures, to help customers achieve all the products and services they need in obtaining liquidity, strong finding reduced capital costs and stronger balance sheets.

Other services includes:

Cash management

This is carried out through;

Access Bank collection services

Access Bank Payment Solution

Access bank in liquidity management solutions

Access bank in correspondent banking services

Access bank information solutions

Electronic banking

Access Bank provides the customers with an easy and component ways to carry out their banking at the comfort of their homes and offices

  1. vi)        Working Capital Financing

At Access bank customers are offered with a wide rang of working capital financing to enable them meet up with their short-term financing needs.  The above services is obtains able through the followings:-

Drawing against undeared bank cheques

Overdraft facilities

Revolving credit facilities

Invoice discounting

Distributor credit plans

Trade finance

And leases


Historical Background of Access Bank

Access bank was incorporated on 8th February, 1989 as a privately owned commercial bank.  It obtained a banking licence in December 1988 and commenced business on 11th May, 1989.  The bank was converted to a public limited liability company on 24th March 1998 and was listed on the Nigerian Stock Exchange on 18th November, 1998.  In December 2001, Access Bank was successfully recapitalized and the bank’s board of directors appointed the current executive management team with a clear mandate to reposition the bank as one of Nigeria’s top five (5) banks by the year 2007.


Since the new team lead by Mr. Aigboje  Aig-Imoukhede (MD/CEO) and Mr. Herbert Wigwe (Deputy MD) assumed office, the bank has witnessed a movemental change  in all facets of its operations.


The new Access Bank is well positioned to become Nigeria’s leading provider of financial services, by providing its customers with banking services and solutions that exceeds their expectations and helping them manage their business more effectively.

  1. I)         BUSINESS

Access bank is engaged in the provision of universal services to corporate, commercial and individual customers.  Within the first year of its five year transformation program, the bank recorded over N1 billion in pre-tax profits for the 2002/2003 financial year exceeding the total cremelative profits made by the bank since inception.  It is for this reasons amongst others that Access bank shares were the most actively traded stocks on the Nigerian stock exchange in year 2003 and the bank was nominated as “Bank of the year 2003” by This Day News Paper.


The bank maintained this outstanding performance in its 2003/2004 financial years and was ranked 5th in terms of total assets from a lowly 65th in 2001.  in recognition of its strong operating performance, the bank was conferred with an “A” rating by the Global Credit Rating Company (GCR).

  1. II)        Technology

Success in the highly competitive financial services sector often depends on the speed with which an organization reacts to opportunities and market changes as at and when due.


In October 1999, Access Bank became the first Nigerian bank to deploy the FLEXCUBE Banking Application to Support its banking operations.  FLEXCUBE is an end-to-end, integrated product suite for universal banking.  Flexcube has evolved over the years in response to changes in global financial world.  The most recent version is Flexcube 6.2 “a state of the art universal banking solution”. Commercial Banking Sector


Consistent with the bank’s desire to bring world class banking to customers and after an extensive due diligence review by KPMG international, the bank took a bold decision to upgrade its existing Flexcube application to the latest version 6.2, a browser enabled version.  This ground-breaking upgrade positions access bank as the first bank in Africa to implement the latest version of Flexcube and the second most advanced Flexcube user in the world after one of India’s biggest banks – Syndicate Bank.  In recognition this the bank recently received the Hewlett Packard for the best implementation of a core banking infrastructure in West Africa. Commercial Banking Sector

Iii)       Value Added Services

The bank defines value as the ability of its products and services to deliver cost savings to its customer’s board in the course of the year approved a charter on the bank’s internal audit.  The charter isolates and insulates the Internal Audit Department from the control or influence of the Executive Management and also frees staffs within the Internal Audit unit from operational and management responsibilities that could impair their ability to make independent reviews of all aspects of the banks operation there by making the department independent.

  1. V)        Financial Summary

The financial summary presented below is extracted from the reporting accountants report on the profit forecast of access bank for the years ending 31st March 2005, 2006 and 2007, assuming the offer is fully subscribed, and the reporting accounting’s report on the audited financial statement of Access Bank for each of the five year ended 31st March 2004.

Profit Before Tax (PBT)

The bank’s PBT for the year ended 31st March 2004 was N952 million, representing a 17% increase over the previous year’s PBT of N811 million.  The bank’s PBT is projected at N2.02 billion, N4.89 billion, and N7.85 billion for the years ending 31st March 2005, 2006 and 2007 respectively.


Profit After Tax (PAT)

The bank’s PAT for the year ended 31st March or increase their capacity to generate more revenues.  The bank has hosted several sector forums to enable existing and prospective customers learn about best practices, share experiences with pears, and freely interact with regulators and policy makers.  These interactions have had significant positive impact on customers business.


The bank also collaborated with Nigerian Maritime Authority to develop a functional framework for implementation of the newly enacted sabotage legislation.  Local shipping companies, as beneficiaries of this legislation have confirmed that the implementation framework completely addresses the operational and funding issues the law intends to resolve.


At significant financial cost to the bank, it engaged, a local software developing company to incubate “cliuc”, which is a software application that allows customers to reconcile their bank statements in seconds.  The not only made this software available to customers but its free of charge and the bank also bears the cost of installation and training of their employees.


  1. IV)      Corporate Governance

Access Bank has imbibed the highest standard of corporate governance and best practices.  In line with the bank’s quest to maintain the highest standards and ensure the independence of the internal audit, the 2005, 2006 and 2007 respectively is projected at N1.56 billion, N3.76 billion and N6.05 billon respectively.


8   Profit before Tax                                        Profit after tax            8.0

(N’b)                                                          (N’b)

6                                                                                              6.0


4                                                                                              4.0


2              Profit before Tax           Profit after Tax                 2.0


0                                                                                              0.0



8   Profit before Tax                                        Profit after tax            8.0

(N’b)                                                          (N’b)

6                                                                                              6.0


4                                                                                              4.0

2              Profit before Tax           Profit after Tax                 2.0



0                                                                                              0.0

2000      2001      2002      2003     2004     2005     2006      2007

E          =          Estimates based on Access Bank’s profit forecasts for the years

ending 31st March 2005, 2006 and 2007


As at 31st March 2004, Access Bank’s total assets stood at 31.34 billion representing a 39% growth over the previous years total assets of N22.58 billion.

  1. VI)      Shares

At present the authorized share capital of the bank stood at N6 billion comprising 12 billion ordinary shares of 50k each, while its issued and paid up share capital is N2 billion comprising of 4 billion ordinary shares of 50 kobo each.


The charges in the share capital of the bank since the NSE listing are summarized below.



Authorized Issued & fully paid (N)  


Income Cumulative Increase Cumulative
1998 0 600,000,000 19,205,000 163,205,000 Cash
1999 0 600,000,000 300,000,000 493,205,000 Cash
2000 0 600,000,000 106,795,000 600,000,000 Cash
2001 1,400,000,000 2,000,000,000 150,000,000 750,000,000 Bonus
2001 0 2,000,000,000 600,000,000 1,350,000,000 Cash
2003 0 2,000,000,000 150,000,000 1,500,000,000 Bonus
2004 4,000,000,000 600,000,000 500,000,000 2,000,000,00 Bonus


Shareholding structure

As at October 2004, the 4,000,000,000 ordinary shares of 50 kobo each in the issued ordinary share capital of the bank were beneficially held as follows:

Shareholder Number of ordinary share held Percentage
SDS limited 203,716,565 5.09
Access Bank staff investment scheme 404,713,472 10.12
United Alliance Company Limited 847,268,277 21.18
Others 2,544,301,686 63.61
4,000,000,000.00 100.01

At the 15th annual general meeting of the bank held on the 30th August 2004, the shareholders of the bank empowered the directors of the bank to issue a maximum of 3,000,000,000 ordinary shares of 50 kobo each to the general public, by way of an offer for subscription.  The board of directors subsequently resolved that 3,000,000,000 ordinary shares be offered for subscription at N2.90 kobo per share.

Purpose of the Offer

The bank expects to receive not proceeds of N8.22 billion from this offer after deducting estimated offer expenses of N480 million.  These proceeds will finance the bank’s  strategic business development and expansion of its network of branches.  This will involve the establishment of the following thirty branches.  Abeokuta, Abuja, Kebbbi, Ilorin, Makurdi, Sokoto, Bauchi, Uyo, Minna, Katsina, Yola, Owerri, Lagos (6), Port Harcourt, Abakaliki, Damaturu, Yenagoa, Ado-Ekiti, Dutse, Gusau, Lafia, Jalingo, Lokoja, Umuahia and Kano. Commercial Banking Sector

Vii)      Nationwide Spread

Access Bank’s  Head Office is situated  at Plot 1665 Oyin Jolaefemi Street, Victoria Island Lagos.  In addition, the bank operates from 30 business offices across Nigeria.  Details of the bank’s premises are provided below. Commercial Banking Sector

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