7 December 2017

Nigeria: CIBN Chief Lists Challenges of Credit Extension in Banks

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.


We Can't Surrender to Corruption - Buhari

President Muhammadu Buhari has urged Nigerians to rise above personal, group, sectarian and other interests, and promote… Read more »

See What Everyone is Watching

Copyright © 2017 The Guardian. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 700 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.