The President/Chairman of Council of Chartered Institute of Bankers of Nigeria (CIBN), Professor Segun Ajibola, has again stressed the importance of bank credit in engendering growth and development in an economy.
Prof. Ajibola, noted that indeed, banks play an important and active role in the economic development of a country.
The erudite scholar of economics, noted this at his Inaugural Lecture delivered recently at Caleb University, Imota, Lagos State on ‘Rhythms and Riddles of Bank Credit: Synergies and Dislocations in Nigeria’s Economic Growth’, demonstrated impact of bank credit on Nigeria’s economic growth.
The CIBN boss observed that there is no doubt about the fact that a well-functioning financial system is a key enabler of economic growth.
He also added that if the banking system of a country is effective, efficient and disciplined, it would bring about rapid growth in the various sectors of the economy.
The CIBN chief, also cited works of other renowned economists that affirm the fact that bank credit is an important determinant of the level of productive investment in Nigeria.
Professor Ajibola stressed that mobilization of savings for investment is one of the most important preconditions for accelerated growth and development.
While investment generates savings, it is impossible to sustain a sound investment effort without adequate savings mobilization. This is where banks come in with their credit management and money creation he said.
“The economic importance of banks, therefore, lies not in their monetary role but in their capacity as financial intermediaries. At a first glance, intermediation may seem a rather innocuous process lenders are matched to borrowers.
Upon further inspection, however, it is clear that intermediation is a crucial economic process”, Professor Ajibola added.
He, also, identified banks loans and advances as the major financial backbone to the Nigerian economy, adding that this function of banks have been impeded by poor credit/risk management, poor loan recovery,
frauds and forgeries, persistent bank robbery, insider dealings/abuses, shareholders interference in credit policy and lack of political will to deal with numerous credit abuses.
The research work distilled out critical findings amongst which were the fact that beyond making credit available for the different sectors, the timing of such credit was also critical to have 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.