‘Financial development critical to real sector’s growth’
The University of Lagos Professor of Finance, Mrs. Esther Adegbite, said banks should focus on how to design financial instruments that will attract household savings noting that it is a quite stable consumer market.
“The relevance of these financial institutions cannot be over emphasized as they play a vital role in the economic growth and development of communities, and on a global level by providing businesses with credit facilities, savings and investment”, she added.
Speaking at an inaugural lecture recently, the Professor reiterated that microfinance banks are meant to make services accessible to individuals and businesses within underdeveloped communities in the country rather than wanting to operate like commercial banks.
Furthermore, Adegbite cited the danger of banks setting a higher interest rate as counter-productive and called for a bench mark interest rates, best provided by the central bank that will favour both the bank and business “One of the things that drive rates of interest through the roofs, forcing banks to be caught in adverse selection of projects is the existence of leakages in the system and information asymmetries, which banks try to make room for by raising interest rates.
“Government rascality can be a problem to the financial institutions, leading to consistently higher rates of interest. This must be watched and nipped in the bud”.
She described the economy of Nigeria as such that follows the performance pattern of the international market such that, when there is a boom in the oil sector, the economy will be buoyant but when the oil sector is in crisis, the economy suffers.
In her words: “Government should diversify in order to cushion the effect of the oil factor on the economy.
It has been a long debated issue that now becomes a matter of urgency. Diversification will give the government something to fall back on when the oil is exhausted. Government should tap other resources and reduce strain on the oil sector”.
Adegbite lamented the state of the country’s refineries. She stressed that it should not be heard of a country that produce oil to export it for refinery and buy it back four times its initial worth. “Government should put the refinery to work and do away with subsidy removal”, she stated.