Banks’ Credits to real sector and domestic economy needs improvement

One of the issues discussed at the 21st seminar for Finance Correspondents and Business editors organised by the Central Bank of Nigeria (CBN) in Ibadan Oyo State was financial sector and economic growth.

It was agreed at the seminar that deposit money banks’ financial intermediation role as regards credits to real sector and domestic economy mortgage facilities retail credits / products need improvement.

Specifically, the CBN’s economic report for the month of November 2015 revealed that at N20,470.8 billion, aggregate credit to the domestic economy, on month-on-month basis, fell by 4.1 per cent at end-November 2015, compared with a decline of 0.8 per cent at the end of the receding month.

The development reflected the 22.0 and 2.0 per cent fall in claims on the Federal Government and private sector, respectively. Over the level at end-December 2014, net domestic credit grew by 6.2 per cent at the end of the review period, compared with the growth of 10.8 per cent at the end of October 2015. The growth reflected the increase in claims on the Federal Government and private sector.

At N18,706.8 billion, banking system’s credit to the private sector, on month-on-month basis, fell by 2.0 per cent, in contrast to 1.9 per cent growth at end October 2015.

The development relative to the preceding month reflected the 8.0 per cent fall in central banks’ claims on the private sector. Over the level at end-December 2014, banking system’s credit to the private sector grew by 3.2 percent.

  The Apex bank noted at the seminar that Credit to the private sector has remained below the benchmark, which warrants policies that will enhance flow of credit to the private sector.

The CBN said the benchmark for credit to private sector stood at about 25 percent, while the actual credit was less than five percent in 2015.

Moses Tule, director, monetary policy department, CBN, who gave a presentation on “monetary policy and financing real sector growth in Nigeria”, noted some improvements in the Agricultural Sector in terms of the number of Projects by Value Chain under Commercial Agricultural Credit Scheme (CACS) as at February 2015.

Speaking at the seminar, Bola Adesola, managing director/CEO, Standard Chartered Bank, Lagos, said domestic credit provided by banking sector (% of GDP) in Nigeria was last measured at 21.65 percent in 2014.

Represented by Yemi Owolabi, executive director, finance, Standard Chartered bank, she said domestic credit to private sector (% of GDP) in Nigeria was last measured at 14.61 percent in 2014.

She said the government can further help the growth and development of the Financial sector by: implementing the Financial System Strategy 2020 (FSS2020) initiative; formulating and implementing enabling laws and regulations; connectedness of Fiscal and Monetary policy; provision of Infrastructure and public utilities; ease of Doing Business- Transparency; Corruption; Cost of raising funds, Civil Service Bureaucracy, among others.

Other facilitators at the seminar include Godwin Emefiele, CBN governor who gave a keynote address, and represented by Adebayo Adelabu, deputy governor, corporate services; Mudashiru Olaitan, director, development finance department; Ubong Awah, project manager for Nigeria financial infrastructure international finance corporation; Paul Eluhaiwe, former director, development finance department, and special adviser to CBN governor on development finance, and Dipo Fatokun, director, banking and payment system department, CBN.

Others are Gbenga Adefeye, editor-in-chief, Vanguard Newspapers, Abdul Garba, Ahmadu Bello University Zaria and a member of monetary policy committee; Ibrahim Muazu, director, corporate communications department, CBN; Sam Olofin, university of Ibadan and former member, monetary policy committee, and Musibau Olatinwo, branch controller.

HOPE MOSES-ASHIKE