By Babajide Komolafe
Some members of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has called for increased targeted lending to Micro, Small and Medium Enterprises (MSMEs) to address the nation’s sluggish economic growth.
Making this call in their personal statements at the MPC meeting held in January, they noted that banks’ unwillingness to lend to MSMEs is limiting growth of the nation’s Gross Domestic Product (GDP), stressing that the increased lending to soft loans to small businesses and farmers is critical to achieving the budget 2019 GDP growth target of 3.0 percent.
They spoke against the background of the 3.8 percent decline in banks’ lending in 2018, low GDP growth rate of 1.98 percent in 2018 and unemployment rate of 23.1 percent as at third quarter of 2018.
Noting that the sluggish economic growth is partly due to banks’ lending preference, an MPC member, Dr. Robert Asogwa said: “The inverse movement between bank total assets and bank total credit at the same time may simply be as a result of banks’ excessive interest in securitization and other non-traditional banking activities rather than real sector lending.
‘The negative implications of this credit reluctance by banks in a period of economic recovery have been discussed severally and remain significantly limiting for the economy.”
Speaking on the need for increased soft loans to SMEs, farmers and households as a means of boosting GDP growth, another MPC member, Professor Dahiru Hassan, said: “The assumption of growth rate at 3.01 percent will also be possible only if there is improvement in access to credit to the real sector of the economy particularly for the small and medium scale enterprises (SMEs), small holder farmers and increase in the level of consumption in the economy by households.
“To achieve inflation rate of 9.98 per cent therefore, the following must be taken into consideration, application of development finance through making soft loan provision by government through agencies like Bank of Industry (BOI), Bank of Agriculture (BOA), Nigerian Development Bank (DBN) and other micro-finance agencies to households and firms in the economy to stimulate economic activity.
“CBN should ensure credit allocation through its intervention schemes to provide microfinance credits so as to reduce the cost of production in the agricultural and the SMEs sectors of the economy”.
Re-echoing this position, CBN Deputy Governor, Operations, Mr. Ade Shonubi, stressed that: “Overall, the sluggishness of growth highlights the need to intensify implementation of measures, including targeted credit delivery and the current infrastructure expansion by government to facilitate improved productivity and increased aggregate demand.”