Banking System, Stakeholders Need To Synergize to enhance economic growth – Caleb university Don


A university lecturer, Prof. Olusegun Ajibola, has called for synergy between the banking system and stakeholders in the economy to enhance Nigeria’s economic growth and development.

Ajibola, who is the Dean, College of Postgraduate Studies at Caleb University, Imota in Lagos State, made the call while presenting the third inaugural lecture of the institution.

The title of the lecture was “Rhythms and Riddles of Bank Credit: Synergies and Dislocations in Nigeria’s Economic Growth”.

Ajibola, a Professor of Economics, said the Nigerian banking system was fraught with many problems causing impediments to the nation’s economic growth.

“One challenge that I have had to confront recently is the nexus between bank credit and economic growth in our contemporary environment.

“I have scanned pieces of literature and it is clear to me that the literature remains unsettled as far as the interrelationships between bank credit and the developmental aspirations of many developing economies like Nigeria.

“Often, the question is whether the transmission mechanism between the monetary and the real sectors of the economy is sufficiently strong to harness the benefits that money has to offer,’’ he said.

Ajibola, who is also the current President of Chartered Institute of Bankers (CIBN), said that many attempts had been made to provide answers to problems facing the banking sector which had remained unsolved.

“Most of the works attempted to provide answers to the multiple questions and criticisms that have trailed the roles of banks.

“This is so, especially in mobilising surplus funds for lending to support economic and commercial ventures in the various segments of the economy.

“Banks have been put on the spot severally and issues that bother on their ethical and corporate rules and standards have been raised.

“Often, questions are asked: Are banks shylock? Are they opportunists, profiteers, cheats or victims of circumstances?

“Are they comrades in development and partners in progress?

“These and many other questions keep reverberating,’’ he said.

Ajibola contended that high lending rates, often charged by banks, would not engender economic growth.

“Banks are daily dragged to the court of public opinion regarding their lending practices.

“Why are banks charging exorbitant rates on their loans, but paying me peanuts on my deposits?

“As these questions multiply, the critical question comes in handy: Where lies the disconnection between the fund mobilisation and loan creation functions of banks?’’

He said the rhymes and riddles manifested in the available records of the lending behaviour of the Nigeria banks over the years.

Occasionally, he said, the more of bank credit deployed in the economy, the less the overall impact of such credit on economic growth and development.

Ajibola said banks had critical roles to play in economic development of any country, adding that a strong banking system would be a catalyst to an viable economy.

“Across the globe, a well-functioning financial system is a key enabler of economic growth.

“Banks play an active role in the economic development of a country.

“If the banking system of a country is effective, efficient and disciplined, it brings about the rapid growth in the various sectors of the economy.

“The problems with our banks are, however, competition with one another in a bid to declaring huge profits at the expense of the health of their customers and service offering.’’

The CIBN president said that cases of fraud and other malpractices were rising on daily basis through collusion, insider’s abuse and staff connivance, among others.

This, he said, depicted the total loss of integrity among practitioners.

He said banks were only interested in quick wins, thereby supporting trade and commerce without due concern for the growth of the real sector of the economy.

“Interest rates charged by Nigerian banks are among the highest the world over.

“The failure of banks to lend to agriculture, small and medium scale enterprises as well as micro businesses is responsible for the weak performance of the economy over the years,’’ the lecturer said.

In response to the challenges facing the banking system, Ajibola proposed some solutions which include a flexible system of lending and lower interest rates.

“We need more positive growth through loans for the lagged period.

“Therefore, banks should redefine their lending behaviour to favour longer tenor loans.

“Indeed, tenured loans are more impactful for the real sectors of agriculture and manufacturing in the country.

“Banks should restructure their operations and business template to directly source longer-term funds.

“This should be in the form of equity, debentures, bonds, tenured deposits to enable them to lend for a longer duration.’’

According to him, banks should remain ethical and professional in the conduct of their lending.

“They should continue to engage staffers of right skills and competencies in lending,’’ he said.