By Babajide Komolafe
MEMBERS of the Monetary Policy Committee, MPC, of the Central Bank of Nigeria have called for development of a strong consumer credit system in the country, stressing that this is a requirement for boosting economic growth.
In their personal statements at the last meeting of the Committee held in May, released by the apex bank last week, the MPC members cited the lack of a vibrant consumer credit system in the country as one of the major impediments to the nation’s economic growth.
While noting the decline in banks’ lending to the private sector of the economy between February and April, 2019 they lamented banks’ preference for lending to the federal government through investment in treasury bills, stressing that such attitude is not helping economic growth.
Professor Adeola Adenikinju, a member of the Committee stated: “The preference shown by the Deposit Money Banks, DMBs, for fixed income government assets over credit to the real sector of the economy is worrisome.
“Credit to real sector is not only low but decreasing in relative terms in asset portfolio of DMBs, and is concentrated on low employment generating sectors. Banks seems to have abandoned their primary role of intermediation. This unhealthy trend should be strongly discouraged. Banks continue to focus on easy ways of making money, including through its various charges on customers and government securities, at a time when the economy is in dire needs of banks’ credit.
“The Nigerian economy needs a vibrant consumer credit system in order to drive private consumption and expand domestic supply. Consumer credit is a major driver of growth in a capitalist economy. However, the ecosystem and institutions needed for a successful consumer credit system must be established.”
Also speaking in this regard, Deputy Governor, Financial Sector Surveillance, Aisha Ahmad, said: “Information from bank staff reveals contraction in credit to the private sector between February and March 2019, even as income from trading activities increased vis a vis a reduction in non-interest income from credit activities.
“Whilst factors such as residual low risk appetite in the light of recent high levels of NPLs and significant asset portfolio write-offs are duly noted, the industry must dramatically increase lending to the real sector to strengthen the economic recovery, bolster domestic productivity and create jobs.
In addition, banks are encouraged to ramp up investments in technology to facilitate efficient retail loan distribution and explore using behavioural analysis and artificial intelligence to enhance credit decisions, particularly for loans to the informal sector.”
Another member of the committee, Prof. Balami Dahiru Hassan, called on banks to embrace consumer credit, saying, “It has been identified that there is demand gap in the economy and, therefore, banks should embrace consumer credit. This would impact on consumption, production and growth in the economy. Private credit bureau or system be created, engage stakeholders to contribute their quota and how to honour their obligations, and alternative dispute resolution system be established. The credit channel for monetary policy will aid growth and will have high impact in housing, mining, and transportation value chain.”