One of the promises of bank consolidation in Nigeria was that small and medium sized businesses (SMEs) will have better or easier access to funds. There were hopes and even expectations that the post-consolidation banks would be in a better position to fund ventures particularly real estate developments, there were all sorts of statements from the government regarding hosuing mortgage programs and all that.
Bank Consolidation: The initiative required commercial banks to raise their capital base to 25 billion Naira. At the end, of the initial 89 original banks, 25 bigger and supposedly better banks emerged. Eighteen banks didn’t “make cut†and have since been liquidated. The exercise was carried out in 2005.
However, aside from the grandly designed real estates and offices owned by the banks, I’m afraid nothing much can be said about the consolidation exercise. On paper, the consolidation was a great innovation, but in reality, the promises have totally missed the common man on the streets and business owners, some of the intended beneficiaries. The exercise appears to be one of the numerous (failed?) economic interventions of the Obasanjo administration that haven’t really achieved its purpose.
Les Leba, a columnist with the Vanguard and a blogger at Rational Perspectives, shares the same thought in an article tittled: The Success and Failure of Bank Consolidation (Nigeria). Excerpts:
“Indeed, I was a guest on a radio programme a while back, and I recall that the presenter introduced the discussion on banking consolidation by declaring that there can be no doubt that the exercise has been a success but wondered why SMEs still found themselves in the lurch in spite of the orchestrated promises of consolidation! I gently urged the presenter to recognize the contradiction in her statement, that an exercise cannot be said to be a success if one of the major benefits, and indeed, many other promises remained unfulfilled! …I concluded that the media campaign to support and acclaim the ‘success’ of consolidation had been so good that most Nigerians, including my dear broadcaster, had become gullible victims of misinformation!…
Not many customers will confirm that there is any significant improvement in service delivery; certainly, irrepressible interest rates and other ‘charges’ still ensure that the cost of borrowing remains above 20%; manufacturers and other industrial stakeholders still lament the reduction in lending to the real sector, and agonize on the fall in demand for their products as a result of the flow of substantial funds into the acquisition of banking shares in the last two years or so!…The Nigerian Labour Congress, NLC, has at various times also condemned the huge job losses brought about by banking consolidation, while thousands of customers have lost their money or still have their income tied up in protracted, no end in sight NDIC procedures, inspite of past assurances of prompt settlement by the authorities!”
When Les asked: “Who are the banks lending to, with their huge capital base?” This is a question I hope someone and bloggers more knowledgeable than me can answer.
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