The Vice President, Prof Yemi Osinbajo, recently gave Nigerian banks a real home truth when he lambasted them and told them that Nigerian banks had failed the country on account of the banks’ low impact on the citizenry, with no fewer than 40 per cent of the people under-banked, adding that for most Nigerians, banks have not really significantly impacted on their lives or livelihoods.
He made the remarks in Abuja during the public presentation and launching of a book: “Banking Reform in Nigeria: the Law, the Prospects and the Challenges”, which was written by Dr. Bode Ayorinde, a former law lecturer at the Obafemi Awolowo University, Ile-Ife, Osun State, and now, a member of the House of Representatives. Indeed, with the under-banked population put at 40 percent, it means that a significant number of Nigerians do not even have access to banking facilities, let alone banking products
of any kind.
Coming at a time when Nigerians are crying loud about the high interest rates charged on loans by banks, the VP’s remark is most welcome. Equally sad is the fact that the majority of those who have bank accounts for a variety of reasons are not able to access personal loans, mortgage or business loans. If anything,
this explains why financial inclusion has gained inclusive currency and resonance in the past few years and it shows that the banks are not responsive to their operating environment.
The banks must reach the rural areas and serve them just as it is doing in the urban centres. The CBN must direct the banks to do this and the time to do it is now. In other words, there is the need for all the banks to introduce mobile banking in the rural areas and expand such mobile facilities to full-scale banking as their customers grow
Worse is that depositors give their hard-earned money to the banks at single-digit interest rate but they get double digit interest on loans they get from the banks for their businesses or mortgages for homes. Among others, it accounts for why banks declare hefty profits every year. Propelled by the neo-colonialist policy of market forces, the banks have no human face and are forced to press for high interest rate at all cost for their personal interest at the expense of the economy and their
customers.
The Federal Government too should be blamed for banks’ inability to reach the rural areas. Apart from the fact that the financial system favours the strong and excludes the weak, time was in this country when banks were compelled by the Central Bank of Nigeria to open branches in the rural areas. Things took a turn for the worse in 1986/87, when the country embraced economic liberalisation and the so-called neo-colonialist policy of market forces taking control of the country’s economy. Following this, many new banks were licensed with a view to ensuring that more people had access to banking services. Rather than opening new branches in the rural areas, the banks in their mad race for deposit mobilisation, opened more branches in the urban centres, particularly in the commercial areas where they could mop up
deposits.
Today, the chicken has come home to roost. The issue now is not just about safe keeping of funds, especially for the poor and those in the rural areas, but that of financial inclusion of those in the rural areas and their ability to have access to financial products designed for the low-income earners, as well as for the SMEs. At the start of the conditional cash transfer scheme for the poor, the Federal Government had relied on the words of some enthusiastic banks for sending N5,000 to the first batch of the one million poor folks; but the Federal Government was terribly disappointed when the banks could not perform. It is noteworthy that the banks failed woefully and the banks’ so-called strength failed them when the government most needed their services and it called upon them to do cash transfer to the poor, in the rural areas.
Now that it has become open that there were flaws in the way Nigerian banks’ businesses were designed, more so that the bank businesses in the country have little or no room for financial inclusion and little room for those who could pay the banks charges, there is a compelling need for the Federal Government to amend the charter of banks in the country to make them render services to all Nigerians and to make their presence felt in all parts of the country. The banks must reach the rural areas and serve them just as it is doing in the urban centres.
The CBN must direct the banks to do this and the time to do it is now. In other words, there is the need for all the banks to introduce mobile banking in the rural areas and expand such mobile facilities to full-scale banking as their customers grow.
Yet another important issue is the interest rate charged by banks. It is imperative that the banks must be able to charge single digit interest on loans to their customers, if the country is to grow its Small and Medium Scale Enterprises. At the same time for the country to achieve accelerated growth, its SMEs must grow in quantum. The fact is that no serious business can be done with the high interests being charged by the banks on the loans they give their customers.
No serious country leaves its economy at the mercy of the neo-colonialist market forces doctrine. With such policies the World Bank and the IMF have ruined the economies of many third world countries. The CBN would therefore need to lower its discount window rates to allow the banks too to drastically reduce their interest rates. Going forward, that is the way to go, if the country is to achieve its dream of a robust economy.
*Onibile, a veteran journalist and economic expert, lives in Lagos
