Nigerian banks have been faced with series of challenges over the years, which continue to make it difficult for them to extend the needed loans for productive activities to the real sector.
The observations, which form part of the outcome of several years of research in the areas of bank credit with data spanning from 1970 to 2016, was disclosed by Prof. Segun Ajibola.
Ajibola, who was a banker and now an academic and President of the Chartered Institute of Bankers of Nigeria (CIBN), identified these challenges as the quality of collateral, political pressures, personality, loan size and covert benefits to loan officers' influence.
Speaking on the theme: "Rhythms and Riddles of Bank Credit: Synergies and Dislocations in Nigeria's Economic Growth," at the third inaugural lecture of Caleb University, Imota, Ikorodu, Lagos State, he pointed out that banking originated as a noble profession with trust as a key ingredient.
According to him, bank credit is a pre-requisite, necessary, though not sufficient condition for sustained economic growth in Nigeria, hence, banks must continue to play this critical intermediating role by creating a veritable link between the surplus funds units and deficit funds units of the economy.
He urged that specialised financial institutions should stick to their mandates of lending to specific segments of the economy, but advocated extensive campaigns to let Nigerians know that bank loans are to be repaid and not their own share of the "national cake."
"This perverse mentality has contributed to the humongous toxic credits of government-owned specialized banks, microfinance banks, deposit money banks and other financial institutions over the ages," he said.
He said that so many things compete for funds that are already short term in nature in the hands of banks, leaving the lenders struggling to strike a trade-off between the conflicting objectives of liquidity and profitability.The don noted that beyond making credit available to the different sectors of the economy, the timing of such credit was also critical for having a significant impact on the economy.
Also, for credit to have the desired impact on economic growth, he said it is important to have in place credit policies that could see to the direct punishment of credit abusers, rather than the current practice of declaring such loans and advances as bad debts.
While he did not did not overlook the criticisms and competition among banks in pursuit of high profits, he urged the sector operators to redefine their lending behavior to favour longer tenor loans.
"Indeed, long-tenored loans are more impactful to the real sector like agriculture and manufacturing. Banks should restructure their operations and business templates to directly source longer-term funds in the form of equity, debentures, bonds, tenured deposits to enable them to lend for a longer duration," he said.
Ajibola encouraged banks to remain ethical and professional in the conduct of their businesses and continue to engage staffers of right skills and competencies in lending, while devoting more attention to capacity building in the relevant areas and adhering strictly to the rules of the game.