The issue of creating enabling environment, including policy support initiatives, to improve the capacity of Nigeria’s real sector has been in the front burner of public discourse among the nation’s policy experts over the years.
Indeed, it is quite clear that the development of the manufacturing sector has been a major pre-occupation of the successive governments in view of the beneficial effects on the economy and by implication, the nation’s overall development.
This desire is largely driven by experiences of history of economic development in the past but more particularly what is happening in the developed economies and more recently, the remarkable economic growth trajectories being recorded by the Asian countries, where the manufacturing sector is the chief driver of their economic growth.
A major plank the successive administrations identified as key to achieving the much-desired growth of the real sector is financial interventions, particularly the creation of cheap funding windows for millions of the enterprises as a strategic option of catalyzing their operations and improving their productivity. This has led to the establishment of various banking institutions and models that the various governments, depending on their economic agenda thrusts, have put in place to provide low interest or affordable credit to needy manufacturers and entrepreneurs.
A cursory appraisal of the various efforts to fulfill this desire of establishing entrepreneur-supportive banks in the country showed that more than 10 of such institutions had been established in the past without much to show for such efforts in terms of making cheap funds available to the needy entrepreneurs.
For instance, experiences in banks’ lending to the real sector right from the days of the Nigeria Industrial Development Bank (NIDB) through the era of the Peoples Bank and National Economic Reconstruction Fund (NERFUND) to the Bank of Agriculture (BoA) and the Bank of Industry (BoI) phase showed clearly that effectiveness of the lending processes is lacking.
Yes, the BoI has been demonstrating its seriousness to reach out to the needy enterprises in the provision of credit in recent years, especially to the most critical sub-sector of the Medium Small and Micro Enterprises (MSMEs), the processes of accessing the development institution’s credit, based on testimonies from thousands of potential borrowers out there, require some simplification still.
As it is today, the experiences of Nigerian entrepreneurs in accessing low interest loans from all banks, including the Deposit Money Banks (DMBs), Development Financial Institutions (DFIs) and the over 850 Micro Finance Institutions (MFBs), are harrowing and frustrating. This has been a major bane of the nation’s manufacturing sector and the very reason Nigeria remains an import-dependent nation in spite of her huge manufacturing endowments.
The failures and lamentations of the millions of the entrepreneurs, particularly the MSMEs owners, over lack of access to affordable credit despite sundry initiatives of the Central Bank of Nigeria (CBN) and the fiscal authorities which are commendable though , may have informed the present promise by the present administration to establish new banks for the struggling entrepreneurs.
To achieve this goal, the Central Bank Governor, Godwin Emefiele, hinted recently that the apex bank, in collaboration with the Bankers’ Committee and the Nigerian Postal Service, would establish a national MFB to create better access to credit for MSMEs owners.
According to him, the monetary authorities had contacted NIPOST and that it agreed to join in the latest drive for the national MFB by providing their facilities in 774 local government areas as their own contribution by way of equity into the establishment of the proposed MFB.
This is even as he explained that the apex bank’s Nigeria Incentive-Based Risk Sharing System for Agriculture Lending (NIRSAL) would be expected to bring its experience in financing low-income entrepreneurs and de-risking credit originated by the national MFB by providing guarantee in line with its mandate.
Similarly, the Vice President, Prof. Yemi Osinbajo, in the frenzy of the electioneering about two weeks ago during his visit to the palace of the Oloja of Epe, Oba Kamorudeen Animashaun, spoke passionately the plan of the Federal Government to alleviate the financial challenges of the MSMEs owners by establishing both an Entrepreneur Bank and a Peoples Money Bank to complement the BoI’s interventions in the sub-sector if President Muhammadu Buhari is re-elected.
Osinbajo hinged the government’s position to establish the two new banks on the need to create several avenues for people to access funds to set up their businesses and thereby create opportunities for more jobs.
But then, the question is do we need new banks now for entrepreneurs when the BoA, BoI, 24 DMBs and 898 MFBs are playing or expected to play the same financial re-engineering roles in the real and other sectors of the economy? We strongly believe that the latest efforts by government and the CBN to bring in more banks are needless based on socio-economic realities in the country.
We say No to new banks now. What we feel is reasonable to do as a national economic emergency initiative for the real sector is for the fiscal and monetary authorities to critically appraise the constraints of the existing banks in their efforts in lending to the real sector and proffer urgent remedial policy solutions to them.
As has been maintained earlier, the BoI is doing fairly well by extending its interventions to the MSMEs across the geo-political zones. It needs more support to ease its operations. The DMBs and MFBs should also be supported through fiscal incentives that will make them to reach out to the micro shoemakers, agro-processors, soap makers, carpenters and millions of others MSMEs owners in single-digit interest rate credit. Also, a more conducive and enterprise-supportive environment remains the hub the monetary and fiscal incentives will revolve round to impact on the real sector.
We conclude by saying once again, that NO to new banks but more for the existing banks in terms of fiscal incentives and a more conducive environment to operate!