Nigeria's economy has been struggling for years, and President Bola Ahmed Tinubu's new administration is seeking novel ways to turn the situation around. One of his major proposals is the introduction of a credit culture in our economy.
Credit culture refers to an economic environment where people have access to loans and credit facilities to support their business and other economic activities. In countries where credit culture thrives, people can easily obtain the funds they need to invest in various economic activities, including agriculture, small and medium-sized enterprises, SMEs, education, healthcare, and many others.
In developing such an economy, financial institutions will be encouraged by policy to be more willing to offer loans to individuals and businesses, based on their ability and willingness to repay. Though we are yet to see the details of Tinubu's proposal, we believe it will be aimed at reducing the barriers to obtaining loans and other credit facilities, which will provide a pathway for economic growth and development.
Credit cultures have worked in various countries where they have been introduced, such as the industrialised Western countries, South Korea and China. These countries have seen significant improvements in their economic development, especially in the SMEs, agriculture, and healthcare sectors, where businesses have been able to access loans for investments.
However, Nigeria's economy has a high default rate when it comes to credit repayment, which will make it challenging to implement such a culture fully. Nevertheless, with effective strategies in place, it can be achieved. Tinubu can tackle this issue by establishing credit bureaus to facilitate credit checks on potential borrowers before issuing loans.
To make credit culture work in Nigeria, government needs to create an enabling environment for its citizens to access credit facilities. This means reviewing existing policies to ensure they support the initiative, and creating incentives for financial institutions to lend to individuals and businesses.
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Furthermore, government needs to empower small and medium enterprises in the agriculture and manufacturing sectors, which have significant roles in the growth of the economy. They can do this by providing technical and financial support, through loan facilities or through the establishment of government-owned credit facilities.
A functional credit-based economy will fight poverty and drastically reduce dependency which itself is an impoverishing factor. It will also fight corruption, make government more relevant in the life of the average Nigerian and promote love for the country. It will also become a natural component of palliative measures to cushion the effects of the fuel subsidy removal by the Tinubu regime.
If done right, Nigeria's economy can see significant growth and development in various sectors, leading to an overall improvement in the standard of living for citizens.
We eagerly await the launch of this policy as soon as possible.
