Bank Credit Allocation in Nigeria – A Driver of Premature De-Industrialisation?
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.