‘Deep, efficient financial system key to for economic transformation’

CIBN re-echoes calls on banks to support troubled SME sector
With a paltry 30.3 per cent ratio of bank assets to Gross Domestic Product (GDP) and 15.7 per cent private sector credit as a percentage of the GDP, the nation’s banking sector has been d scribed as lacking the necessary depth to power economic growth.

A former Deputy Governor of the Central Bank of Nigeria (CBN), Prof. Kingsley Moghalu, who made the observation, said the country was yet to scratch the surface of what the banking sector can do to drive growth.

Besides, he noted that majority of the banks focused more on small segment of the economy, on high net-worth individuals and government clients, as well as foreign exchange trading and treasury bills, among others, for survival, neglecting the real economy.

Moghalu stated this at the 2018 yearly lecture of the Chartered Institute of Bankers of Nigeria (CIBN), where he spoke on the theme: “Of Banks and Bankers: Finance and the Challenges of Economic Development in Nigeria”.

But the President/Chairman of Council, CIBN, Dr. Uche Olowu, called on financial institutions to continue in their resolve to further support Micro, Small and Medium Sized Enterprises (MSMEs) across various productive sectors of the economy and the adjoining value chains.

The call, he said, is following the significant roles they play in allocating resources in the development of industry and facilitation of trade, which promotes job creation, social stability and sustainable growth and development of the economy.

He also sued for exhibition of good ethical conduct and professionalism by institutions to ensure and sustain confidence in the banking industry, as well a smooth functioning of the entire financial system.

According to Olowu, creating a better banking system will require good vision, firm determination and strong ethical and moral values, saying, “our task therefore, is to free ourselves from prison of wrong values, especially greed and avarice.”

Moghalu, however, called for urgency in broadening and deepening of options on the path to significant, sustained and inclusive economic growth and transformation.

The don said that beyond all the reforms in the banking sector till date, what was crucial for the economic transformation is deep and efficient financial system, noting that banking is about collecting money deposits from customers and channeling those resources to the productive parts of the economy and fostering innovation.

The former bank chief who compared Nigeria’s ratio of bank assets to GDP to other countries like Egypt (103 per cent), South Africa (120 per cent) and Kenya (60.8 per cent) and double figure for private sector credit, described what is obtainable in Nigeria’s economy today as the “oxymoron of capitalism without capital.”

Moghalu recalled how recapitalisation of banks began in 2004, which strengthened the current landscape of the banking industry, but lamented that the newly recapitalised banks, rather than focus on becoming engines of economic development at home, focused on globalisation.