The Nigerian Senate has urged commercial banks in the country and sector regulator, the Central Bank of Nigeria (CBN),to support small and medium enterprises growth rather than the perceived continued fixation on profit making in the industry, which is strangulating the growth of the SMEs.
Deputy Senate Leader, Senator Bala Na’Allah, disclosed this, while contributing to a motion, “The dire need for a Stakeholders Round Table to address increasing interest rates in Nigeria”, sponsored by Senator Rafiu Ibrahim. Na’Allah wondered why interest rates are outrageously high, despite the fact that the country was yet to get out of the economic recession.
He alleged that a cartel in the industry, in connivance with the CBN, has refused to review interest rates downwards in the prevailing circumstances to reflect the current economic realities in the country.
“Over the years, we have seen the exchange rates go up, but it is not the same in other economies of the world. Nigeria has the most unpredictable economy in the world and we have to be worried about this,”he noted.
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Presenting the motion, Senator Ibrahim noted that the current Monetary Policy Rates (MPR) of 14 per cent had remained high compared to other developing nations such as Brazil which has 10.25 per cent; Kenya 10 per cent, South Africa 7 per cent, Rwanda 6.25 per cent, Bangladesh 6.75 per cent, Bostwana 5.50 per cent and many West Africa countries with single digit rates.
He lamented that despite all the negative indices, banks continued to declare huge earnings and profitability which, as at March 31, 2017, increased significantly by 151.02 per cent as profit before tax stood at N186.155 trillion as against N74.160 trillion in December 2016.
“Most of this profitability are derived from investment in risk free government securities such as Treasury Bills and Bonds. The CBN is now faced with difficulties in decision-making on some of its core mandates of controlling the inflation rate, exchange rate and interest rate,” he stressed.
Available and reliable records indicate that between January to December 2016, the CBN as regulator of the banking industry had mopped up about N5.784 trillion in interest expenses for liquidity management, thereby targeting inflation at the expense of economic growth, development and employment.
“The current regime of high interest rate continues to place a major burden on business investments and household consumption spending in Nigeria, thereby negatively impacting on the survival of Nigerian businesses.
“This is perpetuating the indicator which shows that only about 3 per cent of SMEs starting up in the country having access to credits from banks which ironically employ about 88 per cent of our work force and therefore the backbone of the economy,” Na’Allah said.
Senator Bukola Saraki, the senate president, while supporting the motion, also gave credence to the claims, described interest and exchange rates as the twin evil.
He said that it was unreasonable for companies to continue to lay off staff while declaring huge profits annually; assuring that the Senate would step in and ensure that the right thing was done.
Frontpage September 21, 2018