Since the crude oil boom in the 1970s and influx of petrodollar to the Nigerian economy, things have never remained the same. We abandoned a model of building a strong and solid base economy through agriculture, mining and development of our solid minerals, manufacturing, and service industry for a rentier economy, depending largely on ‘free’ money from crude oil export. We began to live in illusion, not only believing that the fossil fuel which is a wasting asset would last forever but also that the economic boom hinged on it would continue in perpetuity.
We completely forget or deliberately ignored the lessons from the rise and fall of the steam engine and coal era economies. We became fixated on easy money. Sadly, while other oil-rich countries were developing their countries through massive infrastructural and human capital developments for economic diversification from proceeds from sales of crude oil, our leaders were focused on white elephant projects that will enable them to loot and stash funds abroad. Today, the chickens have come home to roost!
We now have a very weak and fragile economy, broken education and health systems, poor or nonexistent infrastructure, and worsening security challenges occasioned by a ready army of uneducated, unemployed, ill-informed and hungry youths. Data from the Central Bank of Nigeria (CBN) put inflation at 14.89% as at November 2020, and 27% unemployment rate.
Also, as at December 26, 2020, a whopping 87.94 million people, representing 43% of the population, live in extreme poverty, according to the World Poverty Clock. From all the economic and social indicators available, our leaders only paid and are still paying lip services to the growth and development of Nigeria. Is there yet hope for real economic and social prosperity in Nigeria? Can the most populous black nation on earth retrace her steps? Is she beyond redemption? For me, the hope of Nigeria lies in getting GENUINE LEADERS and mobilizing PATRIOTIC CITIZENS.
That said, there is an urgent need to kick start and reposition our economy. We need to come out of recession and rapidly grow our Gross Domestic Product (GDP) per capita. To achieve this, jobs need to be created especially in the Micro, Small and Medium Enterprises (MSME) space; and to get these businesses going, there should be seamless access to credit facilities by both small businesses and households. There comes another challenge, lack of actionable data and/or lack of congruence between data (where they are available) and government’s policy thrust. This has been a major hindrance to granting of consumer credits and small businesses loans by deposit money banks. This has also hampered Nigeria’s economic prosperity in no small measure.
Lack of actionable data: In today’s world of Big Data and Artificial Intelligence, access to quality and reliable data in a timely manner has become a great differentiating factor between successful organization and struggling ones. Unfortunately, in the course of putting this piece together, I tried to lay my hands on up-to-date data on the percentage of total loans by commercial banks to individuals and MSMEs, and the nonperforming loans portion attributable to these categories of borrowers, to no avail. Apart from the asymmetrical and incomplete nature of the available data, the majority of them cannot be obtained real time. This is a real problem for banks to take lending decisions. Why can’t we have proper house numbering, at least in cities and towns? Why can’t biometric data be synchronized such that an individual can’t be having varying information for driver’s licence, voters’ card, national ID card, among others. It is pleasing to note however that some banks now insist on alignment of information such as date of birth and name arrangements, including spellings, before establishing or continuing a banking relationship with them.
However, because there is no central data storage system that is online real time, dubious individuals can always make multiple age declarations and/or name changes in attempts to cheat the system. Other data such as credit history and social/behavioural profiling will continue to hamper the growth of the much-needed loans in the economy. Though some credit scoring firms and credit bureaus are already in place, much more need to be done. We need to get our acts together and develop a culture of deliberately collecting, analyzing, storing and continuously updating data about anything and everything that affects our existence as a people.
Government policies: No doubts, government’s policy direction has direct implications for credit extension to individuals and businesses. In this regard, I would like to commend the government who through the Central Bank of Nigeria has come up with Bank Verification Number (BVN), Loan to Deposit Ratio (LDR), and Global Standing Instruction (GSI). These three tools, especially the GSI- which allows the credit balances of a bank customer to be applied in settlement of the same customer’s bad loan in another bank has restored some level of confidence in lending. The full implementation of this would see a spike in consumers credits. Nevertheless, the government still has to do a lot in the areas of data collection and storage centrally. Government agencies like the National Bureau of Statistics should be strengthened in terms of manpower and infrastructure to be able to produce quality and reliable data, real time.
With the percentages of total loans by deposit money banks to consumers/microbusinesses in Nigeria, Brazil and South Africa put at about 10%, 33% and 40% respectively, one would not be surprised to know that the Gross Domestic Product (GDP) per capita for 2019 stood at $2,229.9; $8,717.2 and $6,001.4 respectively, according to World Bank data. Several studies and reports have established a direct link between access to credit when needed, and in a cost-effective manner by small businesses and consumers, to GDP growth. It goes without saying therefore, that for Nigeria to achieve quick economic recovery and be on a consistent growth path, access to loans by the critical segment of the economy must increase in volume and value. To achieve this:
- There should be adequate and continuous data collection, synchronization and storage in a central system, for individuals and organizations, to aid credit decisions in a timely manner.
- Government policies must consciously be data driven, and should be reviewed periodically.
- Citizens must be patriotic enough to repay their loans instead of trying to be ‘smart’.