TheCable

BY MAYOWA ADEBAYO

In a rapidly globalising world, nations are looking inward to discover indigenous solutions to economic challenges. For Nigeria, one of the keys to unlocking a prosperous economic future lies in promoting “Made in Nigeria” products. However, this endeavour needs a catalyst—a force that stimulates demand, boosts production, and drives innovation. Enter consumer credit.

Consumer credit, which allows people to purchase goods or services before they’ve actually earned the money to pay for them, has long been recognised as an essential tool for stimulating demand in economies worldwide. It enables consumers to spend more, and in turn, stimulates production, job creation, and economic growth. Yet, when targeted towards locally produced goods, its benefits are magnified.

Empowering local industries: The first and most direct benefit is the empowerment of local industries. When consumers have the credit facilities to buy “Made in Nigeria” products, local manufacturers get the motivation to enhance production quality and capacity. It’s a ripple effect: the increase in demand leads to increased production, which then requires increased raw materials, labour, and logistics. The end result is job creation, better income distribution, and a stronger local economy.

Reducing dependence on imports: Currently, Nigeria’s reliance on imported goods drains foreign exchange reserves and often results in capital flight. By making consumer credit readily available for local products, there’s a real potential to shift the balance. Consumers, empowered by credit, can opt for local alternatives, reducing the demand for imported goods. The nation’s foreign exchange can then be channelled into more impactful projects or reserved for essential imports.

Fostering innovation and competitiveness: As local industries sense the growing demand for their products, there’s an inherent push for innovation. To keep attracting consumers, they will invest in research and development, seeking ways to improve product quality, introduce new products, and adopt best practices from global industries. Over time, this innovation culture will make Nigerian products not just locally relevant but globally competitive.

Facilitating transition to an export-led economy: A strong domestic demand for “Made in Nigeria” products lays the foundation for exploring international markets. When local industries meet and exceed local demand, they naturally look outward. With the right policies and trade agreements in place, Nigeria can transition from being import-dependent to becoming an export powerhouse. This will not only boost the country’s foreign exchange earnings but also position Nigeria as a key player in the global market.

Positive feedback loop of economic growth: Consumer credit’s role doesn’t stop at boosting demand. It plays a part in a positive feedback loop that’s essential for sustained economic growth. As credit facilities make local products more accessible, industries grow, leading to job creation. With more people employed, there’s an increase in disposable income, which means more spending. And when that spending is again channelled towards local products, the cycle continues, leading to consistent economic expansion.

However, for this vision to materialise, there are prerequisites:

Robust financial infrastructure: For consumer credit to be effective, Nigeria needs a strong financial infrastructure, one that is inclusive and accessible to all. This includes sound banking systems and capital markets, consumer credit guarantees, efficient credit bureaus, and tech-driven solutions.

Education and awareness: Consumers should be educated about credit facilities, their rights, and responsibilities. This ensures that they use credit judiciously and understand the importance of repayment.

Quality control: To promote “Made in Nigeria” products, the government and relevant agencies must ensure that these products meet high-quality standards. Only then can they gain the trust of local consumers and stand a chance in the international market.

Federal-backed consumer credit guarantee company: To instil confidence in lenders, a federal-backed guarantee company can ensure loans given to consumers are recoverable, stimulating banks and financial institutions to extend more credit.

Robust regulatory and legal framework: A sound framework ensures that all players, from consumers to lenders, operate within defined boundaries. This will safeguard against exploitation, maintain industry standards, and offer recourse in case of disputes.

Risk management framework: It’s pivotal that risks associated with lending—such as default risk—are proactively managed. A comprehensive risk management framework, possibly driven by technology and big data analytics, can aid in predicting, evaluating, and mitigating these risks.

In conclusion, consumer credit, when channelled correctly, has the potential to be a game-changer for Nigeria’s economic landscape. By focusing on Made in Nigeria products, the nation can foster industrialization, pave the way for a transition to an export-led economy, and truly harness the vast potential it undoubtedly possesses. The journey might be long, but the path is clear, and the rewards are immensely promising.

Adebayo is a risk management executive with a global financial institution.