By Naomi Uzor
The Managing Director of CRC Credit Bureau Limited, Mr Ahmed Popoola, has disclosed that total credit to the private sector moved up drastically from N1.5 trillion in 2006 to N2.8 trillion in 2007 and to N8trillion in 2009.
This is based on a report carried out by the 2010 Doing Business Report jointly released by the World Bank and International Finance Corporation (IFC).
Delivering a speech at the 2010 annual symposium of the automobile and allied products sectoral group of the Lagos Chamber of Commerce and Industry (LCCI), tagged (( Vehicle Financing in Recession Economy: The Best Model for Nigeria”, Popoola said despite the impressive growth recorded over the years, the implication is that growth has moved by almost 100 per cent year on year since 2005,
but has not translated into improved lives of the citizens.
However, he said, an interesting observation of this growth is that credit allocation was in favour of sectors with least contribution to the real Gross Domestic Product (GDP), as the agricultural sector contributed 42 per cent of the real GDP in 2009, the proportion of banking credit to that sector was a mere 1.4 per cent.
“Paradoxically, commercial banks lending to agriculture in 1980, at the outset of financial liberalization in Nigeria was 7 per cent, manufacturing which used to enjoy a sizable injection of bank loans suffered a more devastating shock.
Total bank credit to that sector plummeted from 31 per cent of total credit to the private sector in 1980 tol1.7 per cent in 2009. Little wonder, the share of contribution of manufacturing had also come down to 4.17 per cent in 2009 and has further declined to 3.93 per cent
by the end of the first quarter in 2010. General commerce, telecommunications, oil/gas and finance/insurance became the new brides of the banking sector in terms of credit allocation, accounting for a total of 48 per cent” he stated.
Nonetheless, he said, the interesting scenario of the whole analysis is that, in spite of the banking consolidation exercise and the new capitalisation of surviving banks, and notwithstanding the efforts to ensure that more people and businesses have access to credit, credit penetration remains low.
It is perhaps little wonder that, though there is increase in GDP (economic growth), it has no translated to economic development in form of poverty reduction, employment opportunities and wealth creation. The Group Head; retail banking, Wema bank PLC, Mr. Akilolu Ayileka, said. the best financing model for Nigeria has to meet the expectation of users and protect the interest of financiers and among the options of hire purchase, auto loan, finance lease and dealer financing, finance lease is the best option for Nigeria.
According to him, finance lease covers users and financiers’ interests in the area of ownership, usage and control, convenience _ easy repayment and flexibility of terms, compels dealer to deliver on warranty commitment, ensures adequacy of insurance cover during lease, tax benefits for the lessee and cash flow management benefit.