Expressing concerns over the detrimental effects of poor access to credit for business expansion, manufacturing and production activities and the worsening poverty levels across the country, the National Institute of Credit Administration (NICA), has again reiterated the essence of a well-functioning consumer credit system, which facilitates the acquisition of goods and services on credit, thereby diminishing the dependency on cash transactions.
In a statement, the body said a good credit system enables businesses and individuals to finance urgent and significant projects, stimulates domestic production and fosters economic growth.
“Consumer credit has been bedevilled by challenges such as the demand for collateral by the lending institutions which many of the SMEs lack, unwillingness of banks to give out long-term loans, and high interest rates among other challenges. These have hindered the dreams of many entrepreneurs from expanding their businesses. It has also worsened financial inclusion, most especially at the grassroots. Poor credit access hinders business growth, reduces production capacity and adds to the poverty level in the economy. To support the growing economy and unlock Nigeria’s economic potential, credit availability should be prioritised,” the body said.
Emphasising the critical role of an effective consumer credit system in fostering economic growth and industrialisation, it said such a system would not only enable individuals to purchase goods and services on credit but also stimulate domestic production.
“However, Nigeria’s path to acquiring consumer credit is fraught with challenges. Among these are the stringent demands for collateral, which many businesses cannot meet, the reluctance of banks to offer long-term loans to manufacturers and the burden of very high interest rates, which many manufacturers say is inimical to production.”
It would be recalled that the Central Bank of Nigeria (CBN) recently increased the monetary policy rate (MPR) by 400 basis points to 22.75 per cent from 18.75 per cent in response to economic pressures. Expectedly, credit loans to businesses have increased simultaneously, with stakeholders fearing that the already poor access to credit that businesses suffer, is only going to worsen. The Manufacturers Association of Nigeria had many times in the past, listed access to finance as one the major challenges facing industries and industrial growth in Nigeria.
Stressing the importance of making consumer credit services accessible to all including the informal sector, low-income earners, artisans, and SMEs, NICA said by extending credit to these economic players, the economy will experience exponential growth.
