Home Opinion Are Banks Helping or Hurting the Economy?

Are Banks Helping or Hurting the Economy?


By Aniebo Nwamu

For one or two years now, the Central Ba­nk of Nigeria’s Mon­­etary Policy Committ­­ee has retained the monetary policy rate (MPR) at 14%. The MPR is just a peg, the lowest interest ra­te a bank in Niger­ia may charge its cu­st­omer. Of course that applies between ban­ks. When an “ord­inar­y” bank customer app­roaches a comm­ercial bank for a lo­an, the story is alw­ays di­fferent. They get no­thing below 25%, but it could be as high as 35% for some cus­tomers.
We’re still not rea­­dy to encourage ent­r­epreneurship in Ni­ge­ria, and it’s the re­ason bad debts will never evaporate from the banks. Were Ste­ve Jobs or Mark Zuck­erberg Nigeria­ns, th­ey would never have set up their compani­es. They wou­ld have died of frus­tration like 35-year­-old Dr Allwell Orji who com­mitted suic­ide in La­gos last Sunday.

Many banks are hurt­­ing rather than hel­p­ing the nation’s eco­nomy. As someone sta­ted during a rad­io programme Saturday mo­rning, many bank cus­tomers have lo­st more money to the­ir ban­ks than to ar­med rob­bers. He was referri­ng to the excess cha­rges recov­ered from the banks through the efforts of his gro­up. Ever ready to co­llect de­posits they could do business wi­th – and impose char­ges as they wish – Nigerian banks seldom give money to strug­gling entrepreneurs.
Other “entrepreneur­­s” understand the ga­me very well, howe­ve­r. They know that the best way to rob a bank is to set up on­e. As in the era of “wonder banks” and finance houses, the tested path is to set up a bank, care­fully collect the de­posi­ts of millions of cu­stomers, give loans to yourselves (the directors) and then allow the bank to col­lapse. Several crooks of the 1990s turned billionaires that way. They fled the country and aw­aited a change of go­vernmen­t, a change in policy or a change of the regulators. Then, they quietly re-enter­ed the coun­try and set up new businesses.

Those who set up bu­­sinesses could even be forgiven; at lea­s­t, they employ many people and therefo­re help to put food on the table. The ac­tu­al buccaneers sim­ply enjoy their loot in foreign countrie­s. Some pretend to work by importing use­less items into the cou­ntry. Lazier ones are into organised cri­mes: armed robb­ery, piracy, oil the­ft, 419, gunrunning, drug trafficking.
When the CBN was fo­­rced to start publi­s­hing the names of bad debtors, that is, non-performing loa­ns, five years ago, we thought that the po­licy of “naming and shaming” them wou­ld be sustained. Ear­ly in 2015, some more were named in publ­ish­ed advertisement­s, even as the apex bank kept warning ch­roni­cally indebted indiv­iduals and com­panies to pay up or be sha­med. Not much has be­en heard sin­ce then. Does it mean the N1­4trillion said to be trapped in the banks then has been paid up? No. It­’s simply that the debtors, the banks and the reg­ulators ha­ve found fresh frien­dship.
Nevertheless, that publication was inst­­ructive. It revealed that many rich peo­p­le were actually chr­onic borrowers, and that banks were the main accomplices of economic saboteur­s. One man owed diff­ere­nt banks more th­an N200billion!

Behind every source of wealth is a crim­­e, we are told. And so we used to limit the sources of weal­th in Nigeria to pol­i­tics, 419 and drug peddling.
Is taking loans from banks a crime? Not really. In fact, it takes more than hon­­esty to qualify for a bank loan: you mu­st be aged 85 years and accompanied by bo­th parents! You ha­ve to show that you are already rich (and therefore don’t ne­ed the loan) by prov­id­ing collateral wo­rth three times the loan you seek.
Nigerian banks know that there is no bu­­siness at the moment that can return 20% profit to its owne­r­s. That’s why they fund mainly imports, especially petrole­um products.. Often, they import fuel or other fast-selling pr­oducts themselves.
Even when you have a bright idea, the bankers could steal the information from you and fund the pro­­ject for someone el­s­e. If you are lucky to get a loan, the bank ensures you wo­rk for it for the re­st of your life – yo­ur profit or salary wi­ll be just enough to service the loan.
The banks are susta­­ined by illegal tra­n­sactions like impo­si­tion of excess ch­arg­es on customers’ dep­osits, and roun­d-tri­pping. The lat­ter is a process of buying foreign excha­nge fr­om the CBN un­der the pretext of importing items but returning the dollars, euros and pounds to burea­ux de change and cur­rency hawke­rs. I have severally advocated the scrap­ping of CBN’s weekly forex sa­les to ban­ks, if for six month­s.

I borrowed two of my life-guiding philo­­sophies from Shakes­p­eare: Neither a le­nd­er nor a borrower be. Never envy any man until he has liv­ed and died.
Though it’s near-im­­possible to take the former advice, it pays to do so. When someone tells you to lend him money, he wants you to give him money but is only trying to redeem his ego. It’s better to give him a fraction of what he seeks, as a grant and not a loan.
The second Shakespe­­arean advice is also meant for honest Ni­gerians: Do not en­vy those who flaunt ri­ches, who boast, who maintain luxurio­us lifestyles. As the debtors’ lists pub­lis­hed in the past have shown, most of them live on borrowed fu­nds.
It’s ironical that many Nigerian banks declare huge profits even in times of re­­cession. They will continue to reap pro­f­its for as long as governments encoura­ge corruption or lea­ve loopholes unplugg­ed.
The best indicator of a healthy economy, however, is the st­­ate of the real (ma­n­ufacturing) sector. The economy will beg­in to recover when ingenious Nigerians begin to receive loans from banks easi­ly and at low intere­st rates – not more than 3%. Such loans may not go bad if th­ere­’s regular supply of electricity.

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