The Group Managing Director/CEO of CRC Credit Bureau Limited, Dr. Tunde Popoola has said that consumer credit is an important element of any economy and that a consumer’s ability to borrow money easily allows a well-managed economy to function more efficiently and stimulates economic growth.
This is just as he also posited that a consumer credit system allows consumers to borrow money or incur debt and to defer or spread repayment of that money over time.
He said this while delivering a speech titled, “The Role of Credit Reporting in Facilitating Consumer Credits” for Finance and Business Online Publishers Association (FiBOP) on May 30,2022.in Lagos.
According to him, having credit enables consumers to buy goods or assets without having to pay for them in cash at the time of purchase.
Speaking further Popoola asserted that today, most successful economies are driven by credit, adding that in the press release dated May 10, 2022, issued by the Federal Reserve Bank of New York’s Centre for Microeconomic Data, in its Quarterly Report on Household Debt and Credit in the USA stated that there was a solid increase in total household debt in the first quarter of 2022, increasing by $266 billion (1.7 per cent ) to $15.84 trillion.
The Bank, he said highlighted that “balances now stand $1.7 trillion higher than at the end of 2019, before the COVID-19 pandemic”.
He hinted that it was highlighted that the report was based on data from the New York Fed’s nationally representative Consumer Credit Panel.
To buttress his point, he pointed out that the Central Bank of Nigeria’s monthly economic report for October 2021 indicated that the growth in consumer loans was driven by a 52 per cent, year-on-year increase in personal loans and rose to N1.57 trillion in October 2021.
According to him, the provision of consumer credit has a key economic function and is a largely beneficial activity, propelling spending and thereby increasing income levels of a country.
Popoola said that consumer credit enhances productivity and leads to higher Gross Domestic Product (GDP).
According to him, “It has been proven repeatedly that an economy with strong credit culture improves standard of living, stimulates growth, and ensures prosperity of many of its inhabitants, by enabling borrowers to purchase goods and services and spread repayments over time. This makes it possible for consumers to purchase items they need without having to fully save to purchase these items.”
To buttress his point, the Managing Director /CEO of CRC Credit Bureau Limited, said that they can enjoy reasonable access to basic and good things in life such as food, shelter, education, commuting and some relative luxuries.
He listed the items such as motor vehicles, houses and even television, air conditioners among others are too expensive for most people to pay for all at once, with their own earnings or savings.
On access to consumer credit in Nigeria, the Managing Director/CEO, noted that the availability and ease of access to credit is represented by the level of credit penetration and that this is measured by the ratio of total credit to the private sector to the GDP.
Popoola informed that access to consumer credit is relatively low in Nigeria and that it underscores the challenge of access to credit in Nigeria.
He added that the World Bank Data as at 2020 indicated that domestic credit to the private sector as a percentage of GDP stood at 12.1 per cent up by 2.1 per cent in 2018, which was a mere 10.2 per cent in Nigeria compared to 2020 and 2018 in four other economies showed that by 2020, it was 32 per cent in Kenya, 96 per cent in Morocco, 70 per cent in Brazil and 134 per cent in Malaysia.
