By Chinwendu Obienyi
The role of the banking industry and the private sector in an economy is very much clear in the sense that the banking sector focuses on capital formation and accumulation while the private sector acts as the engine room of economic growth.
Over the years, the Nigerian banking system appears to be the most misunderstood sector of the economy by its critical stakeholders, resulting in a huge confidence crisis that should aid economic synergy between the banks and the private sector.
Despite a series of efforts made by industry leadership to address and resolve the prolonged mistrust with its economic partners, there exists the widening of the communication gap between these two important actors of economic development.
For instance, as the Nigerian banking sector struggles with market, operational, reform and regulatory challenges in a bid to ensure sustainability as profit making entities, the private sector groans with the perceived difficulty in access to finance.
This private sector position is well captured and articulated in the various National policy documents on MSMEs by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN). According to the 2021 policy document, some of the major challenges faced by Nigerian enterprises are as follows; on average, they have low operating capabilities and huge skill gaps in terms of management, technology and attitudes.
Also, there is predominance of “necessity” entrepreneurs over “opportunity” entrepreneurs. They face weak infrastructure especially in terms of power, transportation and workspace. They also lack a collective voice and have relatively weak influence on policy formulation.
The aforementioned challenges mean that the promotion of a collective voice and increased influence on policy formulation for the private sector as well as increased access to vital resources especially finance is needed.
This also signals the need for a rethink of strategy towards achieving an enduring synergy between the two actors of development.
Speaking during the first national stakeholder conference on synergy between the Nigerian banking industry and the organised private sector (OPS) which held in Lagos, the President, Association of Corporate Affairs Managers of Banks (ACAMB), Rasheed Bolarinwa, said the banking sector and the OPS are meant to be the main drivers of the nation’s economy and added that the two must function together if the economy is to develop and grow.
Bolarinwa said, “There is a symbiotic relationship between the two sectors. The more active and synergistic the relationship between banking and the private sector, the more we are collectively able to develop and grow the national economy for a sustainable Nigeria”.
Also speaking, National President, Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Ide John Udeagbala said an efficient financial system breeds a vibrant economy that promotes sustainable inclusive economic growth and development across all sectors.
According to him, fostering synergy between the banking industry and the OPS ensures the promotion of a ‘collective voice’ and increased influence on policy formulation for the private sector, as well as, increased accessibility to vital resources, especially in the areas of funding.
Economic analysts who spoke at the conference themed; Promoting synergy between the Banking Industry and the Organised Private Sector’ said the nexus between the banks and the OPS has lost steam over the years due to some policy somersaults and inability of banks to give out loans.
Director General of the Nigeria Employers’ Consultative Forum (NECA), Adewale Oyerinde said the industry-banking relationship in the country has lost steam as underlined by the declining quantum of loan extended to the productive sector over the years.
According to him, reports from the CBN Statistical Bulletin showed that the share of commercial loans to the manufacturing sector to the aggregate loan to the economy averaged 0.1 per cent from 2017 to 2021.
Oyerinde maintained that the development, in no doubt, limits manufacturing activities in the country in terms of investment and production.
“The industrial and the banking sectors are critical components of any economy. The industry needs the banking sector credits to improve investment and production while the bank needs the rental income and equity subscription from the industry to maintain financial stability.
Availability of fund and at cheaper rate reduces the cost of production, improves the quality of outputs, or the efficiency with which inputs are transformed into outputs and contributes to the growth of private sector in an economy and the multiplier effect will be poverty reduction; increase in per capita income, increase in the competitiveness of the country and by extension, economic growth.
He said the current low performance of the industrial sector, particularly manufacturing, is due to the limited funds available, which does not allow for significant investment and expansion in productive activities.
However, the Deputy Director, Banking Services, CBN, Egboagwu Ezulu, urged the OPS to take advantage of the various interventions of the CBN to boost output through the BOI, DBN and commercial banks.
Ezulu said the dumping of FX offshore is contributing to the challenges of FX supply in the country.
“We are taking FX out of this country and dumping offshore when we are told to bring them back because if Nigerians are bringing them back home, we would not be talking about the challenges of FX. There is a challenge and we have to do the right thing.
That is why the CBN introduced the RT200 to encourage you to bring back the dollar you are saying is scarce but in the books of the banks we see billions of dollars that have been exported out of the country and the OPS are not bringing it back. So, the question is how do we finance FX demand?” Ezulu queried.