Photograph — M 93

Access Bank and Peugeot Automobile Nigeria (PAN) have teamed up to provide ease of access to car loans, for customers. the partnership was borne out of the desire to improve the welfare of Nigerian customers. Both companies recently signed a memorandum of understanding (MoU) to this effect. According to Victor Etuokwu, Executive Director, Access Bank, the automobile financing scheme would last one year and customers will be able to fully repay the car loans within four years.

Partnerships between Nigerian banks and automobile companies to aid vehicle financing have become a norm. Access Bank partnered with Hyundai earlier this year, the leading financial institution also partners with Nissan and KIA for the same purpose. KIA Motors is partners with Sterling Bank. However, while the scheme was inaugurated to benefit customers within and outside the bank, do these automobile and banking partnerships really improve the welfare of the general Nigerian populace?

In recent times, Nigeria’s economic growth has been forecast by the International Monetary Fund (IMF) as slow and declining. According to World Bank Projections, over 700 million people in Sub-Saharan Africa and Asia will live below the poverty line in 2015. Therefore car financing as a means of steadying the economy, may not apply to those Nigerians who cannot afford to pay back their car loans due to the high unemployment rates and other financial difficulties.

According to Suna Korkmaz, the development of financial institutions will increase economic activity in a country but with a lot of credit loans similar to the vehicle financing by these corporations, there is bound to be a problem if the country encounters inflation. In this case, if there is a high demand for car loans given out by these banks and auto companies are without economic resources in the country, the economy may not improve as expected. The Nigerian banking sector has its own challenges, the Central Bank of Nigeria (CBN) recently released a report on the decline of the banking sector in Nigeria, the sector reportedly lost about $186 billion in the second quarter and experienced a 1.1 percent drop in lending rates.

A banker who spoke with Ventures Africa on the condition of anonymity, said several bankers do not readily take up the car financing loans as it is always difficult for them to meet up with their needs when their salaries are deducted. If a banker can be reluctant to take an auto financing loan, customers living on basic salaries with a minimum wage of N18,000 will hardly consider these car finance loans.

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