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Home Business News

This trend in extension of credit to Nigeria should trouble FG

Chacha Wabara by Chacha Wabara
July 6, 2017
in Business News, Politics
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Given the important role of the government in providing services that provide benefits to the widest range of people in their countries, institutional investors are usually more interested in lending funds to government than in lending the private sector. However, the reverse is the case in Nigeria.

In Nigeria, the case is the opposite as private sector is attracting the biggest and the juiciest of loans/credit facilities from both regional financial and development institutions. This situation becomes even more perplexing when the cash-strapped condition of the Federal Government is considered. Currently, the country is seeking ways to finance a N2.23 trillion budgetary shortfall, which it says is critical if the country is to successfully arise from the pits of the economic recession it currently finds itself in. Despite this, regional financial and development institutions are rather reluctant to approve credit facilities the FG needs. Granted, some facilities have been extended to the FG, but these are paltry sums when considering the amounts going to the private sector.

In stark contrast, recently, Africa’s largest trade bank, Africa Export-Import Bank (AfreximBank) approved a facility worth $1 billion to Dangote Industries Limited while extending another $100 million facility to Heirs Holdings, institutions in Nigeria. Similarly, the bank renewed and provided new credit lines and letter of credit confirmations to Nigerian banks, with the current exposure exceeding $1 billion a couple of months back. Even a facility for the provision of healthcare facilities, a sector usually under the oversight of the government, was extended to the private sector rather than to the government.

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One of the major reasons for this seems to be an erosion of trust in the ability of the Nigerian government to efficiently use funds provided by these institutions to implement required projects. Head of Communications, Afreximbank, Obi Emekekwue, said: “Afreximbank lends for intra-African trade to any entity, private sector or public sector that is able to meet the necessary requirements.” One of these requirements includes responsiveness to governance principles like transparency, which many of these lenders do not believe the Nigerian government is taking seriously enough.

In addition, for institutions’, the overall goal is achieving the greatest good with the available funds. As a result, they lend to whoever has the minimal political and/or entities risk. “They are also not charitable organisations, but are there to make money, by lending at concessionary rates and countries that meet their requirements benefit from it. Besides, the entities they support create jobs too, which is for the good of all,” CEO of Financial Derivatives Limited, Bismarck Rewane says.

The quality of proposed projects has also been under question, with experts believing that inability to provide justification for proposed projects through sound parameters and good returns-on-investment prospects is playing a major role in the preference for projects by private sector.

Whichever of the reasons, the problem still boils down to the perceived inefficiency of government-handled projects. This trend is worrying, because despite all the good they may want to offer, private sector will always come second to government in their ability to provide social needs. If government though cannot access the funds to do so due to inherent lapses, how does the nation cope?


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Chacha Wabara

Chacha Wabara

Chacha Wabara-Ogbobine is a Legal practitioner with over 9years post call experience. A research Consultant, professional writer and a blogger at heart,owner of four thriving websites with well over 10years of experience. Totally in love with keeping fit and coaching weight loss enthusiasts. I love my quiet time, being with my kids, watching TV series for hours on end.

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