The Lagos Chamber of Commerce and Industry (LCCI), has tabledÂ ten intervention areas for the new Governor, Central Bank of Nigeria (CBN),Sanusi Lamido Sanusi.
In a document tagged Agenda for the CBN Governor, made available to Vanguard, LCCIâ€™s President, Chief Solomon Onafowokan said.: We demand that the Governor should urgently and critically examine the problem of high cost of fund in the economy, SMEs credit, SMEs Credit Guarantee Scheme, Exchange Rate Management, Creditor Rights and Access to Collateral, Sustenance of Expanded Discount Window, Review of the CBN Act,Â Rural Banking as well as and Tenure of Funds in the Financial System.
LCCI congratulates the new Central Bank of Nigeria(CBN) Governor, believing that his appointment was a well deserved one.
With his professional pedigree, intellectual disposition and banking industry experience, we believe he has what it takes to give the right leadership to the regulatory body of the Nigerian banking sector.
According to the Chamber, the Soludo era brought about major improvements in the industry, but there is evidently room for improvements , for instance, cost of funds is one of the major disconnecting points between the banks and the real economy.
In most advanced economies of the world, single digit interest rate is the rule.Â A situation in which investors in the economy are borrowing at 25-35 per cent interest rate per annum is unbearable and not in the best interest of the economy.Â It does not help the competitiveness of the private sector and the advancement of the economy as a whole.Â The obvious inevitability of the forces of globalization is a major issue for domestic investors, especially those in the real sector of the economy, said LCCI.
The Chamber, he further stated, also called for an urgent review of the CBN Act to make it compatible with current trends and global best practices in the financial industry.
ON SME Credit, he noted that the cost and access to credit by the small businesses is a major problem in the economy.
This group pays as high as 80 to 100 per cent interest rate per annum on loans.Â Most of the credit they get are from the micro finance banks, finance companies or the informal financial markets.Â The rates in these outlets are often atrocious.
He stressed that related to the issue of access to credit is the imperative of Credit Guarantee Scheme for the small businesses.
The proposal for the introduction of the scheme was put forward about three years ago by the CBN.Â This is yet to be translated to policy. We request the governor to revisit the issue for the following reasons:
Problem of access to credit by the SMEs is due partly to the risk associated with them. A credit guarantee scheme would mitigate the risk and improve their access to credit.
A Guarantee Scheme for SMEs would have a moderating effect on the cost of funds to them as the risk premium component of the interest rate would be reduced considerably.
Lending intuitions would feel more comfortable lending to small business.
Needles to say, the SMEs more than any other economic group, have the capacity to create more jobs, promote equitable income distribution and alleviate poverty.Â This is a core developmental objective for the CBN.
Furthermore, the CBN should quickly work towards a convergence of the official and parallel market rates.Â The current premium is excessive and could encourage round tripping, which is very harmful to the economy.