CBN: Nigerian banks ‘averse to taking risk’

The Central Bank of Nigeria has said Nigerian banks do not like to take risks, but rather play safe while the economy collapse.

Jonathan Tobin, the assistant director, development fund department, Central Bank of Nigeria (CBN) said this on Tuesday, while revealing that the Nigerian economy needs N9.6t to adequately fund micro, small and medium enterprises (MSMEs).

Speaking at the workshop on Micro, Small, Medium Enterprise Development Fund, organised by the bankers’ committee of the CBN, he said the financing gap was caused by banks and other lending institution’s aversion to lending to small businesses in the informal sector.

“Nigeria banks are averse to taking risk. They like to play safe. The economy is virtually collapsing yet banks keep declaring huge profits.

“There are currently 17.3m MSMEs in Nigeria that employ about 33 million people. Yet only 4.2 million of these have access to finance.

“From 2002 till date, lending by Money Deposit Banks to the sector has reduced significantly. Now N9.6tr is needed to bridge the financing gap in the sector,” he added.

Tobin said lack of entrepreneurial skills by MSME operators, adoption of “one size fits all products” strategies for loans by banks and poor governance structure were some of the challenges faced by sector.

He said, “Banks and other lending institutions should offer tailor made solutions to lending for MSMEs instead of the current one size fit all approach.

“Customised risk management lending method in place of collateral driven lending currently employed by banks should be developed. We strongly recommend that banks start lending from their balance sheet.

“There is need for collaboration between CBN and other government agencies on the implementation of various initiatives geared towards de-risking the sector and making finance available to MSMEs.”

Tobin listed policies introduced by CBN to boost MSME to include Agriculture Credit Support Scheme, N200bn Commercial Agricultural Credit Scheme and the Nigeria Incentive Based Risk Sharing System for Agricultural Lending.

Others include the N220bn MSME Development Fund, SME Credit Guarantee Scheme and the National Secured Transaction Collateral Registry.