Chief Femi Deru, President, Lagos Chambers of Commerce and Industry (LCCI) on Wednesday said the prevailing high banks interest rate has hindered the nation’s economic growth.
Deru told the News Agency of Nigeria (NAN) in Lagos that the interest rate on banks loan was about 20 per cent, saying that this was a challenge to operators. He urged the banks to reduce the rate and encourage access to loan facilities for economic development.
The LCCI chief said that the banks had crash deposit rates, adding that it has not reflected in the lending rates. “Deposit rates have collapsed to less that 5 per cent in virtually all the banks. In fact, some banks are not willing to pay interest on some level of deposits. Whereas, lending rates are still well above 20 per cent in most banks. Currently, the spread between deposit and lending rates is between 19 and 20 per cent,” he said.
According to him, there is something inequitable about this situation. If banks have access to cheap funds, we expect that the cost of funds should drop correspondingly. This spread is about the largest in any financial market in the world,” Deru said. He said that besides the high interest rate, operators were faced with the challenges in accessing credits.
The issue here is not that of scarcity of loanable funds or absence of liquidity, it is a case of tight credit criteria. Risk assessments and criteria for credits have become more stringent and rigorous. Besides, the banks still have not gained sufficient confidence to lend to the sector,” he said.
Deru said that entrepreneurs that were taking the calculated risks deserved the support of banks. “ We should not forget that banking is basically about financial intermediation.
If the banks are no lending and yet continue to take deposits, they will be failing in their core mandate as financial intermediaries,” he said. He lauded the Federal Government on the N75 billion loan facility for the SMEs aimed at supporting the economic growth and creating jobs