‘Why government should review lending rates’

Preparatory to the Monetary Policy Committee meeting later this month, the Lagos Chamber of Commerce and Industry (LCCI), has charged the Central Bank of Nigeria (CBN) to review the Monetary Policy Rate (MPR) as well as empower Development Finance Institutions (DFIs) to fulfil their mandates.

According to the president of LCCI, Dr. Nike Akande, diversification agenda can only be implemented with the appropriate financial assistance.

Similarly, the Director, Research and Advocacy, LCCI, Dr Vincent Nwani, noted that reduction of the MPR would stimulate the economy through improved access to credit facilities.

Nwani said: “The private sector has long been chased away from the banking halls. Monetary Committee raised MPR from 12 per cent to 14 per cent in the wake of recession.

“Today, private sector can only borrow between 25 per cent and 35 per cent from commercial banks and if you are borrowing from microfinance banks, it can be as high as 50 per cent.

“Who borrows such money? To do what? Except if you are doing an illegal business; even the ease of getting this credit is cumbersome.

“The challenge of high interest rate in the country has made government’s effort at stimulating the real sector of the economy ineffectual.

To Akande, she said: “The chamber is drawing attention to the need to reposition and diversify the Nigerian economy. In addition, the Chamber wishes to address the issue of value addition in Nigeria’s non-oil sector with a view to achieving industrialisation, which will enable the nation to earn more foreign exchange from commodities and processing in Nigeria. We are moving away from over-dependence on oil to sectors like agriculture, solid minerals, and renewable energy.

“The Bank of Industry was established with a primary function of providing financial assistance for the establishment of large, medium and small projects as well as the expansion, diversification and modernisation of existing enterprises; and rehabilitation of existing ones. Today, we are glad to join the Managing Director/CEO of BoI, Waheed Olagunju to celebrate the successes of BoI in the reduction of youth unemployment through the Youth Entrepreneurship Support (YES) Programme and several other matching and managed funds.”

Nwani noted that the challenge had exacerbated the dearth of SMEs, low capacity utilization, staff rightsizing, increased cost of production, reduced purchasing power and increased nonperforming loans.

The director argued that the country’s improved ranking in the access to credit indicator, recently released in the 2017 World Bank’s Ease of Doing Business report, was theoretical.

“I watch the market and economy every day. The improvement in ease of getting credit is not in reality with what is on ground in the country.

“If we are talking about ease of banks to borrow money to government, it has improved.

“If it is about private sector, it has been worsened by higher interest rate and harsh business environment,’’ he said.

Nwani who lauded the various intervention funds of the CBN, however, noted that efforts should be geared toward ensuring that targeted recipients access the funds.

He stressed that the lending process utilised by financial institutions should be simplified and be investment friendly to accelerate economic growth.