The founder, Institute of Credit Administration, Prof. Chris Onalo, has linked greed, lack of transparency and decency to the consistent cases of non-performing loans among commercial banks. In an interview with CORNELIA OSEGHALE, the Chief Executive Officer of the apex credit regulator urged other sectors of the economy to recognise credit as an economic system. Excerpts:
How would you assess credit management in Nigeria, compared to other developed countries?
Credit management in Nigeria is growing the same way as in other countries of the world, particularly the newly emerging economies. Credit management is present in all sectors of the economy. It begins with the individual down to the corporate bodies and it covers all tiers of government. The Nigerian society has not recognised credit as an economic system that can be adopted viz-a-viz the cast system. Credit is new to Nigeria and the average Nigerian believes that credit resides only with the banking sector. Nigeria’s credit system is gradually maturing compared to the sophistication of such in developed countries.
Specifically, what are the differences?
Years back, developed countries adopted credit as the most liberal plausible system of economic governance, which created jobs and wealth for individuals. And their governments put in place structures to sustain the credit system at both the consumer and commercial or business levels, down to Government. Nigerians, who frequently travel to these developed economies, are participants of the interplay arising from their credit economic system. There is limited spending involving cash; there is more spending on credit and the citizens of that country are open-ended to credits. The structure in developed countries is such that the system supports massive production and distribution of goods and services to both domestic and foreign markets, using the same credit at the business level. Government does not ask for credit line; rather, they encourage, through institutional framework, their local producers to sell to the developing markets. An enticing incentive for this is, if the developing market fails to pay you for the goods supplied, then, the government will pay.
Credit bureaux are expected to act as a social accountability mechanism in Nigeria; can you say they have performed to expectation?
Their performances so far are fair enough. It was a good starting point that we had credit bureaux and about three of them were licensed, having the power to run a credit bureau business. The need to have a credit bureau was evident and this indicated that credit was in the upsurge and could no longer be tamed in Nigeria. So there was a need for credit to grow.
There was the need to protect the growth of that credit which gave rise to the thought by the Central Bank of Nigeria for the development of credit bureaux as a measure of taming credit abuse in the banking sector. The typical Nigerian entrepreneurs see credit as loans taken from banks as a right or free package that you need not retire. So this had a negative effect on the banking industry. The creation of credit bureaux compelled banks to compulsorily provide information on all customers who receive loans from banks and default in paying; that their names and information should be supplied to the credit bureau.
What is your perception of the banking industry, especially as it is a key player in credit management?
The banks should not be blinded by the hedonistic passion to make profit that is bigger than the entire industry. In civilised economies, there is a limit to which you can declare profits. If you declare outrageous profits, there is a law to checkmate how you run your business in that industry. Nigerian banks need to be more transparent in the management of their credit and they need to subscribe to best practices. They need to go beyond multinationals, blue chip companies and conglomerates and target vibrant Small and Medium Enterprises. The Federal Government should be commended for removing government funds from the custody of banks, as this has made them to become lazy in deposit mobilisation. Also, the banks need to run and manage their credit transaction engagements with all sense of accuracy, objectivity, transparency, decency and decorum.
Despite the success of banking consolidation and recent regulatory initiatives introduced by the CBN, including the reduction of interest rates, which are expected to boost access to credit, the real sector, especially the SMEs, still complain of lack of funds. Is this connected to lack of credit information?
This has been an age-long challenge facing the government in respect of SME development. Over the years, the Nigerian government has continued to play lip service to the issue of bringing the SMEs into contributing significantly to economic development. There has been no purposeful government policy on this and I am still taken aback by the Nigerian government. In other countries of the world where the economy is credit-driven, there is a sufficient governmental policy that is unbreakable and is aimed at strengthening the contributions of SMEs to the economy. I have been advocating that government should establish a well-funded National Credit Guarantee Corporation that will be independent to wrap up the needs of the SMEs to access loanable funds from the banks. I disagree with the banks on all the points they raised as regards impediments to lending to the SMEs, because in an active credit economy, you do not loan money and relax. You must be involved in managing the process until the credit is repaid.
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