Pressure mounts on Sanusi to reduce interest rate
… Says no need for creation of states
By PETER EGWUATU
Operators in both the capital market and money market, including stakeholders in the manufacturing sector have intensified calls on the Central Bank of Nigeria (CBN) to reverse its tight money supply policy , responsible for the high interest rate regime in the country.
Speaking at the 2nd Capital Market Committee (CMC) Retreat held last week in Warri, Delta State, they called on the CBN Governor, Mallam Lamido Sanusi to reduce the Monetary Policy Rate (MPR, which is the benchmark for interest rate in the economy in order to salvage the real sector from collapsing.
Mr. Nduka Obiagbena. publisher of Thisday Newspaper and President, Newspapers Proprietors Association of Nigeria (NPAN) said, “Why is it that the government cannot reduce half of its Excess Crude Oil Reserves and use it to settle the domestic debts. In that case the economy will open up and there will be liquidity. Also the CBN should reduce the interest rate because with the high cost of private provision of infrastructure, and exorbitant interest rates, it is very difficult for industries to survive, how much more expecting them to expand and create jobs.”
Governor Emmanuel Uduaghan of Delta State also called on Sanusi to reduce interest rate in order to allow ailing industries in the state to access funds from the banking sector. He said, “The cost of funds is too high. If we must access the banking sector and capital market for funds to boost infrastructure then interest rate should be reduced. Ailing industries and the existing industry are also complaining of high cost of transaction. So the CBN should reduce interest rate to enable manufacturers borrow money from the banks at reasonable rate.”
Meanwhile, the CBN Governor, Lamido Sanusi told operators and other stakeholders at retreat that the interest will fall at the appropriate time. The interest rate cannot remain unchanged indefinitely, but for now we cannot reduce interest rate when inflationary rate is still high.”
The CBN Governor also explained the reasons why governments of all tiers must cut their recurrent expenditure and reduce overhead cost.
Sanusi said that ensuring fiscal responsibility and prudence in spending is one way the Nigerian Capital Market and indeed the Nigerian economy can thrive.
The CBN Governor asked the Federal Government to downsize the labour force if it must achieve anything meaningful as far as economic resuscitation is concerned in the country.
He also insisted on total fuel subsidy removal, taking a swipe at the Nigerian political system and asked for an inexpensive government system that will bring down overhead cost and liberate capital for infrastructural development.
According to Sanusi, “It is illogical for a country to have its economy developed when it spends 70 per cent of its revenue in servicing salaries and gratuities of workers. At the moment, 70 per cent of Federal Government’s revenue goes for payment of salaries and entitlement of civil servants, leaving 30 per cent for development of 167 million Nigerians. That means that for every naira government earns, 70 kobo is consumed by civil servants.”
On the way to move the country forward, the CBN Governor said, “You have to fire half of the civil service because the revenue acruing to government is supposed to be for 167 million Nigerians. Any society where government spends 70 per cent of its revenue on its civil service has a problem. It is unsustainable.”
While commenting on the political system, he said, “I wonder what manner of country would elect over 100 senators and about 400 House of Representatives members in the name of lawmaking. A cursory mathematical summation of the expenses of the executive arm of government, the lawmakers and the civil servants would reveal the fact that these three arms of government are the ones taking the lion’s share of the nation’s revenue. There are state governors whose monthly allocation is barely enough to pay salaries. I hear such governors complain and I say ‘why complain when the solution is simple?’ It is irresponsible to use all money to pay salaries and wait for another month’s allocation and pay salaries and after four years you would have done nothing.”
On this ground, Sanusi said, “Is it not better to reduce the number of states than to increase it? I laugh when people are clamouring for creation of more states. Servicing of the 774 local government chairmen, their aides, councillors, among others is a waste of public funds. Do we need 774 local governments? Do we need 36 states, some of which are unviable? Why not just remove them and have only state governments?
On subsidy, the CBN Governor said, “The Federal Government should make fuel subsidy thieves to face the music. People have the right to demand transparency. If you want to remove subsidy, you have to show what happened to those who stole.”
The CBN boss also challenged the Federal Government to halt investments on infrastructure and allow the private sector to handle them so that the Federal Government can concentrate on building social amenities like schools, health centres among others.
In response to the CBN Governor’s proposal to the various tiers of governments, Governor of Delta State and host of the event, Dr. Emmanuel Uduaghan, deferred from Sanusi’s call for mass retrenchment,arguing that the country is already battling with the menace of unemployment.
Uduaghan, during his keynote address, pointed out that the capital market is a means to procure fund for carrying out capital projects for the economic upliftment of the people, adding that the country had sunk into over-reliance on borrowing to finance projects, since the post civil war era.
He observed that “Not that borrowing in itself is necessarily bad, but the management and deployment of such funds is crucial. In fact, I dare say that with the state of affairs today and the paucity of funds, government can hardly do without borrowing.”