The heart is a vital organ in the body that pumps and supplies blood to different parts of the body. If the heart stops pumping blood to some parts of the body, those parts suffer gangritis, leading to an even growth in the body. But when the heart properly supplies oxygenated blood to all the parts, the body grows evenly. Though the blood is produced from food by other parts of the body, the heart has the charge of circulating the blood in the body. Also, though industries create wealth from natural resources in a society, banks influence a balanced economic growth through the wealth distribution.
Banks are institutions of trusts that provide financial services, for keeping and lending money.[1] Banks evolved after trade-by-barter system of exchanging goods and services gave way to a more unified currency system. Then, instead of exchanging yams for chicken, people could exchange goods and services for accepted pieces of silver or gold. Merchants stored their silver and gold currencies with gold keepers, who gave promissory receipts as evidence of their deposits. The gold keepers eventually lend out the accumulated notes, with interests, to other people for industry or other businesses.
Modern banking system has evolved such that people can transact businesses from different parts of the world without physical cash. Yet, the initial principle of keeping and lending money on interest remains an influential force.[2] With this lending facility, banks redistribute wealth in the society by collecting from surplus owners and lending to inventive people. The inventive people use the funds to create wealth and employment through their industrial initiatives before paying back the loans. When properly directed in the society, banks contribute immensely to spreading development in the society. Yet, when banks fail to properly support some productive initiatives, those initiatives dry up, causing uneven growth in the society. Major bank roles in the society include:
- Promoting the peoples saving habits people.[3]
- Providing of funds for industry and businesses by converting deposits to loans.
- Enabling smooth transaction of trade and commerce to and fro different parts of the world.
- Creating direct employment for staff, and indirect employment by supporting industries.
- Support agricultural development through low-interest loans for research and activities.
- They provide monitoring data about the economy for government policy.
- Balanced development within an economy by extending branches to rural areas.
- Supporting human resource development with low-interest and well-spaced academic loans.
Progressive societies function by the members’ agreement to collaborate in utilizing natural resources for producing what they need.[4] Responsible governments provide adequate regulations to enable the citizens to use their natural resources in creating wealth. Then, banks contribute to this productivity by providing affordable loans and financial guidance to prospective inventors or industrialists. This results in a society’s total industrial output, Gross domestic product and generally improved standard of living.
Observation of Nigeria’s economic growth pattern shows an uneven distribution of wealth resulting from the colonially-imposed structure in Nigeria. British colonialists formed Nigeria by yoking several unrelated communities and kingdoms under a militarized federal system[5] for economic exploitation.[6] The government seized and sells the different people’s mineral resources[7][8][9] in exchange for foreign currency and consumer goods. Because of the mineral resource-confiscation, the different groups in Nigeria are unable to produce wealth (technological goods) from natural resources. Instead, they are all required to provide labour in administrative, marketing or other services to get government-issued currency for survival. At the same time, government officials allocate scandalous amounts to themselves as salaries and allowances.
Because of the unproductivity caused by the restriction on mineral resources, banks are reluctant to fund technically productive initiatives. Instead, banks fund private individuals and firms who obtain government license to import or distribute consumer goods and services. Hence, Nigerian politicians, workers and unemployed are urged by adverts to increase consumption without producing technical items. Then using a restricted control of consumer goods, the importers and distributors suck most funds in circulation as profit. This uneven distribution makes it possible that only 2percent of Nigerians own 90percent of total deposits in Nigerian banks.[10]
The employment opportunity created from administrative, marketing and other services are unstable and insufficient to engage many Nigerians. Instead, the main importation and distribution businesses can and have been hijacked by few politically connected people. Through political intervention, license and waivers, these few individuals obtain huge loans and subsidies to import and distribute the major consumer goods in the country, while other people struggle to raise funds through dangerous means which include difficult loans with costly collaterals or crime. This situation makes Nigerian business atmosphere very unconducive for newcomers and people without political connection.
Several banks take advantage of this situation of unproductivity to exploit labour and capital in the society. Hence, instead of contributing to an even distribution of wealth, banks assist in concentrating wealth among the politically privileged. Apart from providing soft loans to the politically privileged, banks could connive with government officials in diverting public funds. Eventually, banks partner with the monopoly importers and distributors to suck up circulating funds through consumer goods. Other ways through which banks weaken an economy include:
- Encouraging reckless spending by personalized adverts, instead of reliable investments.
- Supporting importation for quick returns, over industry for economy stability.
- Exploiting the situation of unemployment in the society to underpay workers, instead of creating a comfortable middle class. Some of them deny health insurance and other necessary allowances to their staffs, especially to unskilled workers.
- Discouraging industry and agriculture by attaching difficult conditions to loans for agriculture and industry.
- Concentrating wealth and branches in the urban areas, instead of distributing their financial services to vitalize developing areas.
- Giving unmonitored and zero-interest loans to relatives and directors, thereby liquidating the banks and customers’ funds.
- Attaching exploitative service charges and irregular deductions to customers, who are rarely given interests on deposits.
Though the growth of industrial productivity for wealth-creation is highly dependent on government policies that liberalize industrial efforts, banks contribute immensely. And despite not being charity organizations, banks catalyse even development and productivity by supporting sustainable industrial initiatives with favourable loans. Through low interest and spaced loans, Nigerian banks can promote education, industry and other necessary welfare to enable productivity.
[1] Cf. Oxford Advanced Learner’s Dictionary, International Student’s Edition, S. V. Bank
[2] Sanderson Abel, “Role of banks in the economy”, in The Herald 10th October, 2013. https://www.herald.co.zw/role-of-banks-in-the-economy/ Retrieved 1st May, 2018
[3] Bandlamudi Kalpana and Taidala Vasantaha Rao, role of commercial banks in the economic development of india, http://www.iraj.in/journal/journal_file/journal_pdf/14-358-14982087631-4.pdfDepartment of Commerce and Business administration, Acharya Nagarjuna University, Guntur, ap
[4] Chukwunwike Enekwechi, “Revoking the license to beg in Nigeria” in Restartnaija 1st March, 2018. https://restartnaija.com/2018/03/01/revoking-licence-to-beg/ retrieved 4th May, 2018
[5] Ogban Ogban-Iyan, Re-inventing Nigeria through Pre-colonial traditions, in Issues in contemporary political economy of Nigeria, (ed.) Hassan A. Saliu. (Ilorin, Sally & Associates, 1999). P77
[6] Walter Rodney, How Europe underdeveloped Africa, 2009 edition(Abuja: Panaf publishers, 2009)
[7] Nigerian minerals and mining act 2007 act no. 20, chapter 1, Part 1, Section 1, paragraph 2
[8] Nigerian minerals and mining act 2007 act no. 20, chapter 1, Part 1, Section 2, paragraph 1
[9] Nigerian minerals and mining act 2007 act no. 20, chapter 1, Part 1, Section 1, paragraph 3
[10] Emma Ujah, 2% of Nigerians own 90% bank deposits — NDIC https://www.vanguardngr.com/2016/06/2-nigerians-90-bank-deposits-ndic/