GETTING OUR CREDIT SYSTEM RIGHT WILL STIMULATE THE ECONOMY

Wednesday, 17th April 2024.

CreditEconomy News Interview

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Ndidi Amaka Ukaonu, FICA.

Managing Director/Chief Executive Officer, Parthian Capital Limited

GETTING OUR CREDIT SYSTEM RIGHT WILL STIMULATE THE ECONOMY

 

The Managing Director/Chief Executive Officer, Parthian Capital Limited, Ndidiamaka Ukaonu, FICA, speaks on why credit registry should be strengthened in Nigeria

 

What is your assessment of credit business in Nigeria?

Let me say we are on our way now. Our assessment of how well we are doing is based on the capacity in our population for borrowing versus the actual and I will focus on the consumer market for my opinion.

“As we all know, credit is tied to the earning capacity of the individual i.e. repayment is from cash flow. When you look at the minimum wage rate currently at N30,000 ie N360,000 annually limits the borrowing capacity of the individuals in question especially considering that over 65% of our population live below the poverty line”.

Secondly, the issue of the proportion of our population in structured employment where lenders can therefore easily lien or encumber salaries for repayment impairs the advancement of credit. Project this thought with the consideration that 80% of our economy is attributed to the informal sector. So we have an idea of our answer on the scale of 1 to 10. It is thus not surprising that attempts in the past by major retailers of household goods and equipment fell through the cracks.

This is not to suggest all is bad. As they  say,  we  are  not where we want to be but we are certainly also not where we were.

“Today people in structured employment can access credit from the banks and with the help of  technology  are able to obtain credit from the comfort of their homes even at weekends”.

I am also aware that some creative use of algorithms in technology is broadening accessibility while tightening losses to fraud and the inherent repayment risk which should ultimately grow the scope of formal lending beyond structured employment.

 

What is your take on the ongoing economic reforms in Nigeria?

I think it has been good and in saying so I acknowledge that this has been a painful process, but truth be told,  no economist will argue on the removal of subsidies and the liberalization of the exchange rate which triggered several spirals in the  process  of  economic  correction.  Thankfully, the government is seemingly getting a grasp of the situation and a good example of this is the recent appreciation of the Naira against the US Dollar.

Perhaps we will all continue in our general disagreement with method or process and these arguments held in several quarters are evident of a growing economy. Hindsight as they say is 20/20, we must all wish our government and our nation the very best and hope they continue to get it right. The reforms are critical and needed to happen, this we can widely agree on.

 

What would you say should be the Nigerian type of consumer credit in the country?

I will not wax academic here but go straight to the type of credits that I personally believe hold potential for  great impact in our economy. The first type of consumer credit is growing  gradually,  being  payday  loans  which  before  now existed in informal structures via peer-to-peer lending. It appears to be institutionalized in the banks and non-bank financial institutions further accelerated by technology. The second type that I refer to is grossly underutilized and for good reason I must add. I am speaking about Mortgage availability. Mortgages are critically important not just from the perspective of the individuals but from the angle of the relative impact on the nation. Mortgages will rub off positively on our ability to achieve greater accessibility to funding for small and medium-scale enterprises which make up 48% of GDP yet they employ an estimated 80% of the population. One way, owners or founders of small businesses could improve funding is something that happens actively in the developed world, which is mortgage refinancing, because often times, the property appreciates in value overtime. Therefore, one can approach the banks to get additional loans when the value of their property has appreciated. Like I said, I think we are advancing in the aspect of payday loans and Payday loans are a good start, however, we need to achieve more.

I was in the banking sector for over 22 years and honestly, I see where the banks have struggled with growing payday loans. They have the intention of putting these facilities in place and doing so much, but the propensity for fraud and the unavailability of mitigating factors does not quite help them to advance the provision of credit.

If we get it right, credit will stimulate the economy, and the drive by government to achieve a $1 trillion economy will be fueled. If we can create this credit bedrock, we will oil the exponential growth of Nigeria’s multidimensional, multifaceted, economy.

 

Professionally speaking, what is your advice to the government to transit the economy from cash based to credit system?

I love this question. Recently, I had this conversation with one or two people. I think we must strengthen our credit registries for one while there are other factors that will help and need to be concurrently looked at and worked on.

Let me explain what I mean by strengthening our credit registries. Today, it appears the credit registries are limited to the giving and taking of bank loans only or at least they are not playing actively in other areas like utilities. But an individual’s credit reputation or credit score has a multiplicity of application. This wide application creates further avenue to farm data which strengthens the reputation of the idea of a credit score. It then really becomes the credit data aggregator i.e. where an individual’s credit score is to be determined, it goes beyond bank records. Thank God for BVN, a person cannot fraudulently create a new persona to evade a bad score hence everyone will guard their credit score jealously. The credit score or repuation will give insight into a person’s character and the kind of tenant he will turn out to be for instance, it will determine if a retailer of house hold goods can comfortably lend, it will determine how people are offered employment in the informal sector and ultimately will address the current malaise with fraud that is wide spread because our value system has be significantly compromised. The credit agencies have a critical role to play to address this society menace.

In addition, I personally believe that National Institute of Credit Administration (NICA) is in a position of prominence to advocate the strengthening of the credit registry, so that NICA’s impact on society can even be felt the more strongly.

“On this note I have to commend the CEO of NICA, Prof Chris Onalo. Honestly, the incredible work he has done over the years to drive this engagement, even when nobody saw a need for it must be celebrated, because very few people can make that kind of sacrifice”.

I do not know him nor have I met Prof personally, but I feel his impact and determination strongly because of this work that he has championed. I hope that I have hopefully expanded the thinking around the impact that a credit economy can have on the entire nation. On a final note, there will certainly be less Court cases if we strengthen the credit registries and that is something that even our overstretched legal system will be grateful for.

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Prof. Chris Onalo, FICA, ICCF, B.Sc, M.A, Ph.D (credit management)

Registrar/Chief Executive Officer, NICA

Business Leaders Laud NICA’S Credit Programme for Executives

 

The SIX-MONTH mandatory Credit Management Academic Improvement Programme, popularly known as “MCMAIP,” introduced by the National Institute of Credit Administration (NICA) for those it inducted through direct membership, has been applauded by corporate and business leaders that constitute the current stream 11th executive class.

Business leaders, corporate directors, and enterprise managers expressed profound satisfaction with the novelty of the MCMAIP programme, saying:

“This is a programme that makes you feel business is a combination of internationalisation and corporate elitism culture, showing superior governance attitude with behaviour consistent with business management elites.”

The 11th stream executive class, which ostensibly is designed to achieve sound executive grounding in credit management and general business governance, is overwhelmingly adjudged the best of its kind by the class.

“According to them, it is what obtains in advanced climes. Prof. Chris Onalo, the driver of MCMAIP programme, the class said, is a formidable, powerful instructor, whose main focus had always been on the well-being of corporate organisations, the people running the organisations, and the economy of the nation”.

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