The
major challenges to real sector financing from banks have been identified as unfavorable
macroeconomic environment, cumbersome documentation process, inadequate
long-term finance, lack of data base on borrowers and poor infrastructure.
Addressing
the Challenges of Lending to the Real Sector
(i) A
stable macroeconomic environment encourages lending. Thus, the Bank should
ensure minimal price and exchange rate fluctuations which are proxies for
macroeconomic stability. Related to
macroeconomic stability is the need for
effective coordination of monetary and fiscal policies which could be assured
through regular liaison with the Debt Management Office, Budget Office and the
Accountant General‘s Office. Frequent and focused meetings of the fiscal and
monetary authorities would ensure consistency in government pronouncements and economic
policy measures, and this would build confidence among industrialists who say
that frequent policy reversals scare them from borrowing.
(ii) Most
business people opine that the documentation process for obtaining loans in
Nigeria is too cumbersome and discourage prospective borrowers. The Bank could
through the mounting of workshops on documentation requirements encourage DMBs
to reduce the documentation processes for loans. The issue of borrower
identification which gives rise to multiple documentation requirements could
also be solved by the Bank partnering with relevant agencies to create a database
for all industrialists.
(i) The
various financing scheme established by the CBN should be monitored and
evaluated on half-yearly basis to ensure their efficient and effective
implementation.
(ii) Borrower
identification is also a major consideration for banks. The CBN should
encourage and help equip the credit bureau which will warehouse data concerning
firms and their credit portfolios. The bureau‘s data base should be electronic
and remotely accessible to all stakeholders.
(iii) In
addition to iv above, to be able to assign unique identification to all Nigerians,
the Bank should partner with the agency responsible for the National Identity
Cards Scheme to complete the project. It has to be emphasized that the new
cards should be chip-based and consolidated in a database that all authorized
persons and corporates could access as and when needed.
(iv) The
Bank should increase communication with the populace, especially as it affects
the various schemes which are available for industries and small borrowers.
(v) Management
should consider re-evaluating the funding schemes, like the ACGSF, SMEEIS,
CACS, etc to ascertain the reasons why they are not effective and take steps to
improve on their service delivery. In particular, 52 Central Bank of SMEEIS
should return to being mandatory to the banks as it performed relatively well
before it was made optional.
(vi) Government
should take urgent steps to fix the infrastructural facilities in the economy
to reduce the burden of providing them by the private sector, reduce their
operational costs and make them competitive. An approach that could help is to
raise development bonds earmarked for infrastructure in the energy and
transport sectors, in particular. For electricity, the national grid could be
dismantled and regional electricity boards set up to manage the transmission
and distribution operations, as generation is largely privatized. This will
engender competition and efficiency. A complementary approach is to encourage
the promotion of the cluster system in which infrastructures are provided at
designated sites for the benefit of industrialists.
(vii)
Lack of managerial expertise is echoed by both banks and firms as impediment
to ending/borrowing. The government,
through the Ministry of Labour and Productivity, should institute more skill
acquisition programmes for entrepreneurs, to inculcate in them corporate governance
and managerial skills.
(viii)
With regard to collaterals, the government should fast-track its
land reforms to ensure that land owners are enabled to secure Certificate of Occupancy
from governments which will make the banks more confident in granting loans to
the firms.