By Franklin Alli
The Governor of Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, has directed commercials banks in the country to advance loans to manufacturers and other private sector borrowers at lower interest rates.
Sanusi gave this charge while addressing Industry chiefs during the â€˜Second Quarterly Business Luncheonâ€™ of the Lagos Chamber of Commerce and Industry (LCCI).
Represented by CBN Deputy Director Economic Policy, Dr. Sarah Omotunde Alade, the Governor said it recently lowered the bankâ€™s monetary policy rate from 8.0 per cent to 6.0 per cent in order to induce commercials bank interest rates, and urged them to lend to manufacturers at a reduced rates, too.
In a presentation: â€˜Encouraging Lending to the private sector through Regulatory Reformsâ€™, Sanusi stated that the apex bank is being repositioned to effectively respond to stability and growth in the economy , particularly the manufacturing sector.
The apex bank, he assured, will continue toÂ work with banks to improve efficiency in the banking system, reduce intermediation spread and lower real interest rate, encourage banks to explore the idea of infrastructure sharing to improve efficiency and reduce operation costs; work with the Bankerâ€™s Committee on what constitute a reasonable margin
He pointed out that what policy makers worry in Interest Rate Spread (IRS) is not its presence or absence but its size.
â€œThe Size of the spread is an indicator of the level of efficiency of the banking system.
High IRS may indicate inefficiency, excessive risk taken by banks and can stall economic activities and growth. Therefore, the factors that affect interest rate and its spread are important to policy makers.
Available data shows that the interest rate spread in Nigeria increased from 15.67 to 19.3 per cent between 2005 and June 2009,Â averaging 16.17 per cent in the period.â€
LCCI President, Asiwaju Solomon Onafowokan, said the chamber believe that an economy can only be as strong and robust as its manufacturing sector.
â€œManufacturing sector is the main creators of wealth, the main providers of employment and the major source of tax revenue for government.Â This fact makes the sector the main driver of the economy.
But for the sector to play its role effectively, it needs a financial system and financial infrastructure that would enhance its performance.Â It is the Central Bank that can create this financial environmentâ€, he said.
He highlighted the concerns of the private sector regarding the nationâ€™s financial system to include some of the following: high cost of funds and general credit crunch, dearth of long term funds in the banks, depreciation and volatility of the naira exchange rate and mounting inflationary pressures.