Are banks engines of economic growth?

All over the world, banks are known to be engines of economic growth. They mobilize funds from areas of surplus to areas of needs. They give interest to the depositors and charge interest from the borrowers, thereby providing income for those who have idle funds, and earning income from those that borrow money to finance […]

All over the world, banks are known to be engines of economic growth. They mobilize funds from areas of surplus to areas of needs. They give interest to the depositors and charge interest from the borrowers, thereby providing income for those who have idle funds, and earning income from those that borrow money to finance their businesses.
In Nigeria, the interest rates are fixed by the Central Bank of Nigeria through the monetary guidelines and circulars. In most cases, the difference between the rates of interest payable to the depositors and borrowers is not more than 3-4%.
The Nigerian banks, instead of being the engines of economic growth, seem to become the opposite. The excessive charges they charge borrowers make it impossible for most businesses to break even not to talk of making profit. In most cases, businesses financed by bank loans collapse and the capital of investors also gets lost. The cumulative charges i.e. interest, processing fees, disbursement fees, loan management fees, quarterly charges, COT charges, management fees, default charges etc. of bank loans can be as high as 45-50% even though they gave the CBN much lower rates for publicity.
Before, on weekly bases, the CBN used to publish the deposits and lending rates of various banks in Nigeria in the dailies, and at the bottom of the rate table, it says the rates include all charges and commissions. None of the banks charges are in compliance with what is published.
Another area of concern is the legal charges which are debited to the customers’ accounts without any negotiations. They can be as high as 10-15% of the loan amount.
Gone were the days when banks internal inspectors/auditors would direct branch managers to refund over charges of interests or COT to the customers and report the case to the governor.
Gone were the days when the external auditors of a bank would direct branch managers to refund customers excess or unauthorized charges and the case reported in their annual report.
Gone were the days when the NDIC will do the same.
The mere saying that the CBN has opened complain desks in some branches is not a solution to the problems. How many customers are literate to take their cases to the desk?
Both the CBN and the NDIC should wake up to their responsibilities to enable the Nigeria economy to grow. Let the business people borrow money to do business and get profit, but not collapse and in most cases lose their own capital to banks. If they cannot pay back the loans, their collaterals are sold by banks to recover the debt.
There is no lawful business which one can execute and make profit from a bank loan with interest and other charges of 45%.
S. Y. Doguwa 08036074100 [email protected]