I feel sorry for Nigerian banks. A young girl defaulted on her N200,000 loan payment that entered delinquency for sixty days. The bank’s head office kept calling her throughout the day and sending emails. The girl answered the calls and begged for just seven days to rearrange her business and pay the money but the bank manager kept calling ,with other calls from head office following.
You know what? N200,000 is just $133! No wonder no Nigerian bank is in the first 20 banks in Africa. While Standard Bank of South Africa has capital base of $12.5bn, the biggest bank in Nigeria,First Bank has a capital base of $1.9bn.
The huge gap explained why our banks cannot finance development. A bank that cannot sleep because of $125 has nothing to contribute to an economy.
In China banks are encouraged to give loans of $5000(N7.5m) to peasants on self identification without collateral and with default in mind. If there is deliquency or business failure,the banks will just write off the debts and move on.
I am not saying people should not pay their debts, but in Nigeria the business externalities are so unpredictable that people find paying loans difficult, but that does not mean the banks should not give loans .
The CBN should absorb the loses and allow the economy to breathe. Without loans no economy can grow,it is the leverage that nourishes businesses.
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