Last week, I pointed out one of the reasons why capital is scare in Nigeria (Read that HERE). Here’s a follow up to that thought.
Whenever we read history, we read of great men who were the explorers and who broke new grounds and opened new horizons, of great political leaders who led great campaigns and conquered new frontiers for their people. There is one element that we hardly read about though, and from a short study of one family I did in the last week, it became evident that this particular factor is one of the keys to the real development of any modern economy. This factor is financing of dreamers, and it is the lifeblood of every nation that has gone from potentially great to actual greatness. In all the cases I have studied of the modern world from the 1800s forward, the finance for expansion (and yes, it is an expansion akin to empire building) has not come immediately from citizenry through taxation – it has come from banks.
The role of banks cannot be overemphasized. I studied the late expansion of the British Empire, and most of the expansion happened not at governmental instance but by individuals and businessmen who ventured out into the unknown. These trailblazers, like Cecil Rhodes, were heavily financed by banks such as the Rothschild Bank. The Rothschild family was a Jewish family originally from Germany who spread to all the major economies of Europe. It was their financing that drove construction of railways and the growth of much of the industry in many of these places. While they made a fortune doing this, they recognized their roles as facilitators of real growth in the economies they set up shop and in many cases their success was tied to how real the growth they facilitated was. It is not amazing that for example the English branch financed De Beers Diamond Mines in South Africa, one of the most profitable expansions of the British Empire and the largest player in diamonds and perhaps a mainstay of the South African economy throughout the Twentieth Century. The role that the Rothschilds played in Europe was undertaken by the likes of J.P. Morgan in the U.S.
To cut directly to the chase, Nigerian banks need to understand the kind of role that banks should play in driving growth in Nigeria. Enough of the fixation on COT. Enough of the lending that does not drive real growth. Enough of getting funds from CBN and customers at single digit interest rates and giving the loans out at about 30% interest rate without counting all manner of fees. This can get you money in the short term, but you will build nothing that will last. It will only create a big fish in a small pond scenario, where you will make the money in the economy but the economy will not grow to create more wealth. The greater the wealth creation that you facilitate in the economy, the greater the share that can come to you. It’s time for our Nigerian banks to play the role that European and American banks played to birth greatness in their capitalist economies. It’s time for Nigerian banks to break free from the tunnel vision of short term financing and begin to think long term. It’s time the cost of funds provided by Nigerian banks to young dreamers who will expand the frontiers of the nation and build the wealth we need becomes reasonable. Nigerian banks should not be content with the fact that they are one of the three industries (apart from Oil & Gas and Telecoms) which can pay a fresh graduate over One Hundred Thousand Naira monthly for starters. They should have financed enough real businesses for them to be in the minority in gainful employment provision. Nigerian banks should not be content with the fact that they are the ones that can afford the big head offices and nationwide spread. It means the real sector they should be financing is not growing, in spite of impressive growth that they post. It’s time for banks and bankers with nation building dreams to rise.
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