Abuja — While some stakeholders, especially those in the manufacturing industry, point their accusing fingers at banks as being responsible for the dearth of real sector financing, banks said that it was their duty to protect the interest of shareholders from bad debt as the money does not belong to the board and management of the institution.

The inability of the real sector to access funds from banks has been associated with the high lending rates which stood between 18 per cent and 20 per cent. Although, some operators in the manufacturing industry were excited that consolidation in the banking sector would usher in an opportunity for them to get credit facilities from banks at lower rate to increase their capacity utilisation, but they were disappointed with the rate to be contended with.

The high lending rates according to financial experts do not bring any meaningful results to the real sector as manufacturers will not have profitable production at the end of the day. They also explained that high cost of production would make it difficult for goods produced in the country to compete favourable in the local market due to the dumping of imported goods into the nation's market.

Experts pointed out that the combination of these have slowed down the growth of the real sector, thus making it difficult for the sector to contribute its quota to economic development of the country. Other financial operators who described real sector as back bone for the economic development of every country blamed the government for its poor growth.

They said that apart from high lending rate, there was absence of infrastructure particularly stable electricity and good road network among others. Operators were of the view that even if manufacturers received some substantial amount of money at a very low lending rate, it would still be difficult for them to produce at cheaper rate to enable them compete in the international market because of the overhead cost arising from provision of other social amenities.

They explained that the first thing the government should do is to provide the necessary infrastructure and create good operating environment that would enable businesses to boom in the country.

Admitting that the real sector is the major driver that would take the country to the destination of Financial System Strategy (FSS) 2020 they noted that banks are scared of keeping bad debt records in their books.

They pointed out that the growth of an organisation does not depend on finance only but it requires experts. Operators also noted that banks in a bid to make huge returns for their shareholders would go out of their way to employ qualified workers but it was not applicable in the manufacturing companies, especially the indigenous owned companies.

In his own contribution, the deputy director corporate affairs of the Central Bank of Nigeria (CBN), Mr Festus Odoko, said that banking business has become more sophisticated in recent times and as such the players must be very careful with credit facilities.

He explained that the lack of access to the credit history of borrowers is a major impediment to borrowing in the developing economy. Odoko noted that it was difficult for banks to ascertain the credit history of the borrowers as they could have borrowed from more than two banks at a time even when they had scores of loans to settle.

He stated that in a situation where there is no record of the individual's credit status, and after satisfying certain conditions and banks innocently grant the loan, most times they are faced with the consequences of bad debt.

The executive director, (Investment Banking) of the United Bank of Africa (UBA) Plc, Mr Chika Mordi, also said that the nation's economy would grow better if the country has good credit bureau.

He further explained that credit bureau would go a long way to reduce the time needed to process the loan application and also enhance the number of individuals or organisations that would qualify for credit facilities.

Mordi stated that this would not only help to reduce poverty in the country but it would improve the quality of life of many people and as well contribute to the growth of the nation's economy.

However, some bankers who pleaded anonymity said that the banks recent move to raise capitalisation to N100 billion was designed to enable them take part in big ticket transactions.

They explained that it was only when banks have adequate capital that they would be able to finance major projects that would add value to the economy. Bankers also stated that with increased capitalisation, banks would have enough money to lend to manufacturers, stressing that in recent, time banks needed to finance long term projects such as power generation, oil and gas and road construction projects that required huge capital. They stated that provision of power and good roads would as well help to reduce the high cost of production of the manufacturing companies.

Bankers who admitted that both banking sector and real sector are very important for the growth of the country said that if the financial institutions' failed to function properly due to bad loans, the situation would impact negatively on the economy and it might take a longer time for the mistake to be corrected.

Other industry watchers also stated that the establishment of credit bureau would make banks to be willing to lend to individuals and organisations because the bureau would provide the necessary information.

They pointed out that although the bureau might not state the credit worthiness of the firms or the person but it would provide data that would reflect both the negative and positive aspect of the payment habit of the borrower.

Generally, it is true that real sector of the economy requires loans from banks in order to increase their production capacity. However, their inability to repay the credit at the end of the day due to overhead costs often discourage financial institutions from lending to them. In as much as banks demand for collateral to enable them recover the loan when the beneficiary defaults, but some chronic debtors have resorted to the use of the judicial process to block the creditor's access to the collateral. Many of them get 'cash-and-carry injunctions' from courts to frustrate the auctioning of the collateral.

Officials of the Nigeria Deposit Insurance Corporation (NDIC) who accepted the fact that it is very difficult to recover loan given to people, said that most defaulters are prepared to go to any length to delay court proceedings just to make sure that justice was not achieved. The corporation stated that while the bank in question continued to accumulate more losses on the recovery process, the bad loan culprit is roaming around seeking for another financial institution to borrow money. Therefore, for the real sector to be empowered financially by the nation's financial institutions there is need for the country to establish credit bureau that would indicate the good and bad payment habit of loan seekers.

On the other hand, the present administration needed to address the issue of infrastructure, especially power and road to enable businesses to thrive to boost the growth and development of the economy.

Lending rate would come down naturally by itself if there is a friendly business environment and assurance of loan repayment. In fact once a bank noticed that a particular individual or company always pays back loans without delay, every one of them would be struggling to do business with such ones. It is then the person or company would have an opportunity to bargain for reduction in lending rates.