Contributions Of Nigerian Banking Credit To GDP Weak – Experts | Independent Newspapers Limited
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Contributions Of Nigerian Banking Credit To GDP Weak – Experts

Posted: Jun 22, 2015 at 12:02 am   /   by   /   comments (0)

By Sylvester Enoghase, Lagos and Oladele Ogunsola, Ibadan

The enormous contributions of the nation’s banking credit system to the domestic economy notwithstanding, the impact on the output on the Gross Domestic Product (GDP) has been weak, financial experts have said.

BThe weak output, the analysts said is evident in Nigeria that real activity which is encapsulated in GDP and Consumer Price Index (CPI) is driven more by small firms than large firms.

National President of Association of Senior Staff of Banks, Insurance and Financial Institutions (ASSBIFI), Comrade Sunday Olusoji Salako who believes that the sensitivity of loan to changes in monetary policy is related to bank size said, the existence of many banks may shelter small firms from the negative asymmetric effect of monetary policy, whereas a significantly concentrated banking industry may penalise them more than large firms.

Salako emphasised that increased risks of small firms during the periods of restrictive monetary policy causes banks to concentrate their loans on larger, more diversified firms.

According to him, over the past two decades, the Nigerian banking sector has undergone remarkable changes, prominent among which is financial consolidation influenced largely by weak capital base of the banks, overdependence on public sector deposits, insolvency and internally focused competition.

The intuition, he argued  is that if a positive relationship exists between Deposit Money Banks (DMBs’) credit growth and economic activity after the consolidation, then any wave of further bank mergers may be impactful to economic growth in Nigeria.  “This underpinning phenomenon, to the best of my knowledge, has since been an open problem until now”, he said.

Also, a Senior Lecturer at the Polytechnic, Ibadan, Samuel  Babalola Babarinde  at the institution’s fifth inaugural lecture with the topic, ‘Money, Banking and Development: The Nigerian Experience’, which he delivered at the Assembly Hall in the North Campus of the institution, called for deliberate efforts on the part of government, monetary authorities and policy makers in Nigeria to channel adequate funds from banks to productive sector for the nation’s economy to grow.

He highlighted the nexus between money, banking and economic development in Nigeria and implored government to provide the necessary infrastructure for the banking sector to provide its services at minimal cost.

According to Babarinde, the Central Bank of Nigeria (CBN) and the Nigeria Deposit  Insurance Corporation (NDIC) must also put in place regulations, guidelines and supervisions  that would reduce  fraud  and other inefficiencies in the banking sector to zero level.

He said: “The judiciary should also bring to book perpetrators of internet fraud, a.k.a ‘Yahoo, Yahoo’, in accordance  with international best practices. The banking system needs to overhaul its internal control and facilitate the more, the use of e-payment models”.

“Over the years, the efficacy of monetary policy in Nigeria improved progressively; nevertheless, monetary policy faces enormous challenges in the years ahead.Current monetary policy operations need to be further fine –tuned to sustain the relevance of the policy in the economy,” he added.