Abstract

Has the allocation of credit to consumer spending hurt the long term prospects of emerging market economies? In his report for The Private Debt Project, Richard Itaman studies Nigeria's banking system to ask if policies that have encouraged lending to the consumer sector are trading short term gains for long term economic stagnation and financial instability? 

Credit to the private sector is on the rise in advanced economies, and African countries which were believed to have undeveloped financial systems and consequently lower consumer credit, have not been left out of this trend. As obtains in advanced high-income economies of America, Europe and emerging Asia, where banking activities have long shifted away from traditional lending from savers to borrowers to extraction of income from households (Allen and Santomero, 2001), with ever increasing income from net-interest spread, especially for the poor (Bazot, 2013), banking operations in Africa show similar trends (Griffith-Jones and Karwowski, 2013). Also, while banking in Africa is being re-focused towards more complex technology-driven products designed to extend financial services to more of its growing population (Dos Santos and Kvangraven, 2017), lending to productive activities or the real sectors is declining – a phenomenon characteristic of advanced capitalist economies.

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Author(s)

Richard Itaman

Richard Itaman





Richard Itaman is a Lecturer in Comparative Political Economy and Development in the Department of International Development at King's College London



ADDITIONAL ARTICLES

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Richard Vague on Why Large Rapid Build Ups of Private Debt Cause Financial Crises.

An excerpt from The Next Economic Disaster: Why It's Coming and How to Avoid It.

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America's Private Debt Problem: How Private Debt is Slowing Down Growth and Hurting the Middle Class

A World Economic Roundtable report on private debt and the American middle class.

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A Guide to Essential Readings on Private Debt

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Private Debt Bonanza, Public Debt Legacies: The Euro-Zone’s Experience With Liberalized Private Finance Under Its Ill-Designed Currency Union

How institutional design and austerity is destroying the European economy