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Cash and carry economy

It is unfortunate, unproduc-tive, a throwback to practices which this country should have left behind and most inimical to the growth and development prospects of the Nigeri

naira sygn
naira sygn

an economy the report that transactions are now done on cash and carry basis.

The report coming out is that there is a dearth of credit in the economy. The fact remains that no economy will function optimally without the availability of credit as most businesses structure their operations based on the availability of one form of credit or another.

In fact we can make bold to claim that there is no company anywhere  in the world that does not use one form of credit or another in its operations. Banks are reported to have stopped lending and are now concentrating on debt recovery as they  are now living in a state of suspended animation not knowing what the Central Bank might come up with the next moment.

Specifically it is reported that oil companies cannot find credit to carry on with their importation of petroleum products and there is fear that the fuel queues with their enormous  cost implications for the economy  are imminent and product importation is now being inadequately  carried out by only NNPC and Zenon Oil and  government is concerned about  adding the problem of scarcity of petroleum products to the numerous other problems encountered by the citizenry. The aviation sector is reported to be one of the worst hit sectors of the economy with some tales which sound  comical if not that this has serious and untoward implications for the economy.

It has been reported that this sector has credit exposure of the order of about 5 billion Naira to the banks and as a result of the recent developments relating to bad debts particularly in the downstream petroleum products market that the banks are now only prepared to deliver products based on cash payment; pay as you go! And that airline operators now load the planes, collect cash from unsuspecting passengers and then rush to pay before products are provided resulting in flight delays and all manner of inconveniences to the traveller.

This development is remini-scent of the way and manner economic relationships were conducted in the distant past. It is recorded history that in times past economic agents aimed to be self sufficient depending on land. And when it became obvious even then that that was not a practicable proposition resort was had to trade by batter, including pawn broking with all the difficulties which conducting business in this manner portends not the least of which is finding coincidence of needs.

Then came banks with their financial intermediation role. The banks stood in the breech between those with cash surplus to their immediate requirements and those in a deficit situation that could productively use the credits and the extent of the performance of this  function defined the efficiency of a banking system.

In fact the received wisdom is that the depth of the financial system is measured by the extent of relative availability of long tenured credit in an economy which until the Consolidation program no one ever gave the Stock Market a chance of providing. It is also correct to observe that since then the pension funds have also given an indication of their potential in fulfilling this role. And this is why the core functions of banks is lending and therefore a banking system without lending operation is to put it mildly mal-functioning.

The banks, those audited and those that as the time of putting these thoughts together have not been audited  are reported to have recovered 90 billion Naira. We can celebrate this feat where the recovered monies have already been classified as bad debts but not as it has been proven in the current situation that some were debts which were incurred in the normal course of business whose forced recovery could be counterproductive.This development is all taking place in an economy which has seized to be productive. The


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