Restricted Credit Access Impedes Business Growth And Exacerbates Poverty Levels in Nigeria – NICA
The National Institute of Credit Administration (NICA) has expressed concerns regarding the adverse impacts of limited access to credit on business expansion, production capacity, and the escalation of poverty levels throughout Nigeria.
In a recent announcement, NICA highlights the importance of an efficient consumer credit system, which facilitates the purchase of goods and services on credit, thereby reducing reliance on cash transactions.
This system empowers individuals to fund critical and substantial projects, encourages domestic production, and promotes economic development.
The statement read:
“In the country, consumer credit has been bedevilled by challenges such as the demand for collateral by the lending institutions which many of the SMEs lack, unwillingness of banks to give out long-term loans, and high interest rates among other challenges. These have hindered the dreams of many ambitious entrepreneurs and regular salary earners from expanding their businesses or acquiring other household items.
It has also worsened financial inclusion, most especially at the grassroots. Poor credit access hinders business growth, reduces production capacity, and adds to the poverty level in the economy. To support the growing economy and unlock Nigeria’s economic potential, credit availability should be prioritised.”
NICA underscored the pivotal role of an efficient consumer credit system in nurturing economic advancement. Such a system not only allows individuals to make purchases on credit, reducing reliance on cash transactions but also facilitates the funding of urgent and substantial projects, thereby bolstering domestic production.
However, Nigeria faces formidable challenges on the path to establishing consumer credit. These include stringent collateral requirements, which many SMEs struggle to meet, banks’ hesitancy to provide long-term loans, and the burden of exorbitant interest rates. These hurdles have dashed the aspirations of countless entrepreneurs and ordinary earners while exacerbating financial exclusion, particularly in grassroots communities, according to NICA.
Moreover, NICA emphasized the significance of broadening access to consumer credit services to a wider spectrum of the population, encompassing the informal sector, low-income earners, artisans, and SMEs. By extending credit to these vital economic stakeholders, the initiative seeks to fortify the resilience and expansion of the Nigerian economy.
