Unique identification number non-implementation frustrating economy—Analyst


..says only 14 out of 100 adults had access to credit in 2019

Uba Group

Non-implementation of unique identification number for every Nigerian is frustrating growth of credit in the country, an economic analyst, Mr. Tunde Popoola, has said.

Popoola, who is also the Managing Director of CRC Credit Bureau, made this submission at a forum with the theme; “Stimulating Economic Growth through Improved Access to Credit” organised in Lagos by the Finance Correspondents Association of Nigeria.

He said that the unique identification number, which may not be a card, was necessary to facilitate credit advances to individuals and businesses in the country.

“Credit enhances productivity leading to higher GDP and quality of life of the people; it helps to determine the vibrancy of the economy,” he said.

He stressed the importance of Credit Bureaus to the growth of the economy, noting that the penetration in Nigeria was very low compared with its peer countries, as only 14 adult Nigerians out of 100 had access to credit in 2019.

The CRC Bureau boss said credit facilities in Nigeria go to sectors with relatively low contribution to the GDP, oil and gas with less than 10 percent enjoys more credit compared with agriculture that contributes more.

He pointed out that the operation of Credit Bureaus in the country had helped to reduce the cost of credit as well as the size of non-performing loans from about 32.8 percent in 2009 to 9.3 percent in 2019.

Popoola said 1500 institutions in Nigeria had registered for the services of CRC Credit Bureau with about 33million credit records processed so far. CRC Credit Bureau is the largest credit reporting agency in Nigeria.

He noted that Credit Bureaus are institutions or infrastructure put together by every country to encourage access to credible information for creditors or lenders to have good information about the performance of financial obligations of every borrower or anyone who buys on credit.

“The whole objective is to make such information available for creditors and lenders to be able to lend with some level of confidence and trust,” he said.

Popoola explained that one of the main challenges that lenders face generally was knowing the capacity of potential borrowers and their willingness to repay loans and Credit Bureaus believe if one has been behaving in a particular way or pattern, the tendency is for such person to behave the same way in the future.

Credit Bureaus put data from various sources, including banks and public utilities like electricity, water, telecommunications and data companies, to generate credit report and credit scores, which lenders then rely on to be able to determine the creditworthiness of every individual or entity in that particular economy.

He said, “When that is done, the major benefit is that lenders would no longer give credit in the dark; they would lend based on credible information about potential borrowers, hence minimising the risk of their business.

“The second advantage is that it allows for risk-based pricing means persons with credit score pay a lower rate of interest than those with higher risks.

“The third one is that it helps lenders overcome the challenge of information asymmetry, which occurs when creditors do not know about a borrower but only rely on the information made available by the person seeking credit; which Credit Bureaus, banks and other creditors can get information from an independent third-party thus minimizing haphazard selection.”

He added, “For the borrowers, the existence of Credit Bureaus means those with good credit history would have the opportunity to have more access to loans and can buy on credit; more so, they would be able to negotiate the rate of interest they pay based on their credibility.”