Another look at Bank Consolidation
The now bigger and consolidated banks were also expected to lend at highly reduced interest rates. However, months after the conclusion of banking consolidation, interest rates in banks have remained high at between 18%p.a. to 22%p.a. Indeed, in early 2004, the former CBN Governor, Chief Joseph Sanusi, had brought bank lending rates to 17.5%p.a. The existence of high interest rates in Nigeria now or in the past is not the fault of the banks. The country is hopelessly deficient in the provision of basic infrastructure such as power supply.Thus for CBN to expect banking consolidation to now force banks to lend at an interest rate Banking of 10% p.a. is to live in a fool’s paradise.. The structure of output in which oil and agriculture accounted for over 60 per cent share of the GDP still subsists. Manufacturing used to account for uninspiring 5 per cent of GDP before consolidation, now it is less than 4 per cent. Three economic sectors - oil, agriculture and wholesale trade- account for more than 80 percent of GDP, all the other sectors including the priority sectors of manufacturing, solid minerals, tourism, still account for less than 20 percent of GDP. This structure of output, in spite of consolidation, calls for grave concern not jubilation. It is not in line with the 20-20-20 dream.The growth that comes from this structure of GDP holds little prospect for economic development even if that growth rate were 20 per cent. Neither bank consolidation nor other public sector policies are responsible. ordinary men on the street are yet to see the gain of the banks consolidation and the benefits to the real sector- Nigerian economy. It is difficult to see the difference in the real sector Nigeria economy before and after consolidation. Nigeria economy was primitive and driven by primary production Any economy which performance is not driven by improved knowledge and technology giving rise to wide spread productivity gains and value-addition especially in manufacturing and services cannot meaningfully reduce poverty.
Therefore the real benefit of the current beauty of bank consolidation can only be seen when the financial sector promotes investment in the real sector Nigerian economy that can lead to economic transformation. By the bank consolidation strategy the CBN has taken a position in the long debate as to whether the financial sector follows or leads development. The consolidated banks must now prove that banks lead and not follow development. They must not now wait for opportunities to invest, but aggressively create those opportunities within the real
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