CBN Governor, Mr. Godwin Emefiele
Financial
and economic experts at the Institute Credit Administration Nigeria say
credit availability in monetary and trade terms will drive economy
growth by boosting wealth and job creation.
They also said Nigeria must engage free
market economy in order to achieve a remarkable resilience in economic
activity, employment and fiscal performance.
The experts spoke during the inauguration of the third Governing Council of the institute in Lagos.
“Abundance of credit availability in
monetary and trade terms to fuel exports of made-in-Nigeria goods must
become the major driver of our economic activity; oil must be
de-emphasised, agriculture must become a major backbone of the nation’s
economic growth,” the ICA council members said.
The President, ICA, Mr. Tunji Oyebanji,
said the well-functioning of credit in any economy was a pre-condition
for enterprise and trade to develop and thrive.
He, however, said that for credit to grease the economy it had to be sustainable and responsible.
He explained that “the granting and state
of credit in any economy has important implications for both financial
stability and private sector sustainability.
“In times of an economic recovery which
is still susceptible to external shocks, the well-functioning of credit
is crucial for our economy.
The poor attitude to credit, especially
to public loans provided by government’s development finance
institutions, and lack of a robust regulatory regime for the development
finance institution sector to operate is a fundamental threat to the
health of any credit economy. Government must be committed to enhancing
the regulatory regime; government must enhance credit regulations by
providing more protection for the DFIs.”
Oyebanji however, said regulation alone was not enough.
According to him, in granting credit,
both parties to the transaction need to be guided by a sense of values
and ethics in their business dealings.
He said, “The present situation of credit
lax has evidenced the gaping hole that should be occupied by values.
Integrity and honesty need to be the guiding principles in all business
decisions.
It is this responsibility towards the other party which will determine the well-functioning of credit in any economy.”
The expert said the need to advance
credit to businesses and individuals, as well managing credit risk, had
taken a much bigger dimension.
In spite of this, the business community still lack proper commitment towards the culture of honoring credit obligations.
The ICA leader observed that in an
environment of persistent national deficits and borrowings, inflationary
pressures were bound to surface and negatively impact the available
money supply which otherwise would have been deployed for productive
investment and consumption.
As a result, he said the cash shortage had amplified the demand on banks to create more money through loans and advances.
He said, “As this demand for credit has
increased, businesses are being expected to participate in the credit
creation mechanism through deferred payments and credit terms granted to
their customers.
Under these economic and financial
realities, competition has also driven businesses to improve and compete
not only on quality and price, but more significantly so on the credit
terms they provide.
“Businesses today are using generous
credit terms as an effective tool to gain a competitive advantage. This
is so only if they are managed effectively, if poorly managed, credit
terms could lead to a disaster. These considerations amply demonstrate
that credit management cannot be more relevant than it is today.”
Oyebanji said the prevailing economic
conditions had also made the institute to focus on strengthening and
sustaining the Federal Government’s economic development efforts.
He said the ICA was assisting its members
to mitigate the credit difficulties caused by the ever-increasing cash
flow deficiency.
The expert, however, noted that “the idea
of an effective credit management function should not be solely limited
to the private sector remit.
“As a general rule, it should equally
apply to the public sector as well especially when the public sector is
the debtor. In its efforts to improve local business practices and
ethics, the ICA has continuously persisted in developing its education
and research initiatives.
“It has progressively grown its capacity
building and market intelligence, and has continued to provide excellent
guidelines and advice to its members. The institute, highly supported
by its international network, has definitely made a positive difference
on credit management issues in Nigeria.”
