Bank credit, key driver of Nigeria’s economic growth – Ajibola

By Folake Ogunleye

The President Chartered Institute of Bankers of Nigeria (CIBN) Professor  Olusegun Ajibola said bank credit was the key driver of Nigeria’s overall economic growth whose impact varied when the economy is disaggregated into sectors and sub sectors.

Speaking at the 3rd inaugural lecture of the Caleb University entitled,   rhythms and riddles of bank credit synergies and dislocations in Nigeria’s economic growth”, he said bank credit was an important determinant of the level of productive investment in Nigeria adding that it was made up of loans, advances, and investment which constitute important segments of the commercial banks’ assets.

According to him, money in economic development buttresses the relevance of bank credit as a key enabler for growth and development.

He stated that most Nigerians get their business source from commercial banks rather than other financial institutions because the financial institutions charge more on their loans  than the commercial banks and this has made commercial bank credit more popular among Nigerian investors and that is why their credit aggregates on economic growth in Nigeria from 1970 to date.

According to him, various religions view banking and credit from different perspectives. For instance, he said the Islamic religion forbids the collection of interest on deposit or charging of interest on loan and Christianity frowns at it in Old Testament for which he quoted some bible verses to back it up.

He stressed that for bank credit to be effective, the variable must be effectively managed which he highlighted the variables as inflation, foreign exchange and political stability.

He acknowledged that problems associated with economic growth in Nigeria cannot alone be resolved by deployment of money in various sectors but by a package of  policies that would address other macroeconomic challenges of inflation, availability of foreign exchange,  and  socio-political stability and security.

He further said efforts of the bankers’ committee in order to reduce the funding cost of SMEs in the country through a programme tagged Small Medium Enterprises Equity Investment Scheme (SMEEIES) which was initiated 15years ago, did not achieve the desired objectives of proper growth in the segments of the national economy.

He recommended that all banks should restructure their operations and business template to direct source longer term funds in the form of equity, debentures, bonds, tenured deposits to enable them lend for a longer duration.

“Banks should remain ethical and professional in the conduct of their lending business and also engage staff of right skills and competence in lending.

“More so, National Orientation Agency (NOA) and other similar arms of government should mount campaigns  in order to let Nigerians know that bank loans are meant to be paid back, it is not their own share of national cake.

“Specialized   financial institutions such as Bank of Agriculture, Bank of Industry, Nigeria Export-Import Bank, and the New National Development Bank should stick faithfully to their mandates of lending”, he added.

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