President Goodluck Jonathan
President Goodluck Jonathan Tuesday called on banks to increase lending to the real sector, particularly agriculture, which he described as the buffer against the intermittent economic shocks occasioned by disruptions in crude oil production and prices.
He said except there was a noticeable change in the pattern of banks’ lending, government may be tempted to limit their access to public sector deposits, which the banks often get at no cost.
Jonathan further argued that it would still be profitable to the banks even if they give out public sector funds to farmers at two per cent interest rate. He said the financial sector remained critical to the growth and development of both agriculture and solid minerals.
The president, who said government, had done more than enough in encouraging lending to the real sector through several policies and measures that had been put in place to create enabling environment for bank, wondered why they were still not comfortable with lending to the sector, while agriculture continued to account for a lower percentage of the industry loan portfolio.
Speaking at the opening of the Seventh Annual Banking and Finance Conference titled: ‘Upholding Professionalism in the Financial Services Industry: Supporting the Economy’ organised by the Chartered Institute of Bankers of Nigeria (CIBN), Jonathan said the banking sector was not doing what it was supposed to do and cautioned that time was running out on the banks to intervene.
Represented by the Minister of State for Finance, Alhaji Yerima Ngama, he said supporting the agricultural and mining sectors would have bigger multiplier effect in the economy than oil would do.
He noted that crude oil activities currently benefited the expatriates who often had a larger share of the wealth which is taken out of the economy. Conversely, he argued that the benefits from agriculture and mining would stay within and add more value to the economy.
He said oil had brought nothing but shocks to the economy, adding that agriculture and solid minerals were better alternatives to such vulnerabilities, including theft and bunkering.
He said government was particularly worried that the real sector, which is described as the bedrock of the economy, was being sidelined by the banking industry.
He said government was particularly worried that the real sector, which is described as the bedrock of the economy, was being sidelined by the banking industry.
According to the president, save for the Central Bank of Nigeria’s (CBN’s) intervention through schemes such as the Commercial Agricultural Credit Scheme(CACS) and Nigerian Incentive-Based Risk Sharing System for Agricultural Lending(NIRSAL), the agricultural sector would have been deprived of the funding support it needed to grow and play its roles in national development.
Jonathan further noted that the CBN’s efforts towards the real sector ought to have been complemented by the banks.
He said although the banks had often blamed the inherent risks in agriculture lending as major reasons for not lending money to agriculture, it had been established than lending to that sector had less risks compared to other sectors of the economy.
Jonathan however noted that it would require collaborative efforts by the government, real sector and financial sector to make agriculture and solid minerals sectors to work properly.
He said: “The banks have to come together and see how they can put funds together to really support the farmers. The statistics we have coming from Central Bank is that when you lend to farmers they pay you. I think we have First Bank’s experience where the percentage of the non-performing agric loans to performing is less than 1.5 per cent. So, the poor actually pay their loans but why are the banks always eager to go and lend to the riskier businesses than this safe agricultural businesses?"
Continuing he said: “The issue is with our psyche, we think that maybe they are not high tech or maybe there is too much documentation based on a loan of N50,000 or N100,000. But as a nation, you have to look at it as your responsibility. We owe this nation; we have to rise to that challenge and see that the banking sector should come together with a solution and no longer wait for the central bank to be coming with the solution."
On his part, the President of the CIBN, Mr. Segun Aina, reassured the government of the institute’s readiness to work with government in order to deepen banking knowledge and improve the delivery of financial services in the country.
Also, in his keynote address, the CBN Governor, Mallam Sanusi Lamido Sanusi, called for improvement in operational standards and capacity in the banking industry. Represented by CBN Deputy Governor, Corporate Services, Mr. Suleiman Barau, Sanusi also decried the lack of uniformity in standards among banks.
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