The body of knowledge was further expanded at an Inaugural Lecture delivered by an erudite Professor of Monetary Economics, Segun Ajibola, at Caleb University, Imota, Lagos. The topic of the Lecture by Professor Ajibola, who is also the President/Chairman of Council of The Chartered Institute of Bankers of Nigeria (CIBN), was Rhythms and Riddles of Bank Credit: Synergies and Dislocations in Nigeria’s Economic Growth. The paper which is an outcome of several years of Professor Ajibola’s research in the areas of bank credit relied on data from 1970 to 2016.
The Lecture of the seasoned banker cum academic benefitted immensely from his three-decade experience as a practitioner in the banking industry especially in the areas of appraising credit proposals, managing credits granted to the various clients or devising means of recovering the problematic ones.
According to Ajibola, so many things compete for funds in the hands of banks. In constructing their portfolios, therefore, banks struggle to strike a trade-off between the conflicting objectives of liquidity and profitability. Bank credits engender illiquidity but remain the most profitable assets of a bank. Indeed, the two pillars of financial intermediation are deposit mobilised from the surplus funds unit and loans and advances to the deficit funds unit in the economy.
The don, in his paper, did not shy away from some of the criticisms and concerns that are often thrown at present-day banking and finance practitioners. These include competition among banks in a bid to declare humungous profits, often at the expense of the health of their customers and service offering; fraud and other malpractices such as insider abuse, staff connivance etc; high interest in quick wins with little concern for the growth of the real sectors of the economy and high interest rates amongst others.
Let it be known to you that the CIBN boss did not attempt in his paper to defend the banks against these allegations nor did he rationalize those criticisms, his submission however focused squarely on demonstrating the impact of bank credit on Nigeria’s economic growth over the years using the findings from a series of works carried out by the don either individually or in conjunction with other academics.
He also noted that banks as financial intermediaries channel depositors’ funds to the deficit units to finance economic activities in the various sectors of the economy. When discharging this function through credit allocation, banks’ decisions are often determined by the quality of collateral, political pressures, personality, loan size and covert benefits to loan officers influence.
The research works distilled out critical findings amongst which include the fact that beyond making credit available to the different sectors, 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 it is important to have in place credit policies that could see to the direct punishment of credit abusers (customers or insiders), rather than the current practice of declaring such loans and advances as bad debts. His findings also revealed that the impact and timing of credit on sub-sectoral growth, especially for agriculture and manufacturing, differ. While the previous year’s loans and advances to agricultural sub-sector had a positive effect on economic growth, the current year’s loans and advances to the same sector had a negative impact. For the manufacturing sub-sector, current year’s credit facilities impacted positively on economic growth compared with those of the previous year.
Professor Ajibola encourage banks to remain ethical and professional in the conduct of their lending business and continue to engage staffers of right skills and competencies in lending while devoting more attention to capacity building in the relevant areas. He also recommended that specialized financial institutions such as Bank of Agriculture, Bank of Industry, Nigeria Export-Import Bank and the new National Development Bank should stick faithfully to their mandates of lending to specific segments of the economy.
The don concluded by stating that the National Orientation Agency and other similar arms of government should mount campaigns in every nook and cranny of Nigeria to let Nigerians know that bank loans are meant to be paid back and are 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.