THE Senate, last week, said Nigeria’s banking sector is being run by a cartel which frustrates the monetary and fiscal policies of the Federal Government, adding that bank owners have become so strong that they now manipulate the economy. This came with Senators’ condemnation of the high interest rates which they said were “imposed by banks.”
The Senators were discussing what they called: “The Dire Need for a Stakeholders’ Roundtable to Address Increasing Interest Rates in Nigeria.’’
The lawmakers resolved to organise a roundtable with the Central Bank of Nigeria, CBN, Banks, Nigerian Deposit Insurance Corporation, NDIC, as well as other relevant stakeholders and industry experts.
We share the frustrations of the Senate in the circumstance Nigeria has found its economy, wobbling against a recessionary tide. But before the conference, we draw the attention of the Senators to a few industry factors concerning the issue they want to discuss, especially as they have already expressed their views leading to the proposed conference.
One of these has to do with a remark by one of them that Nigeria’s banking industry is “run by a cartel.” The other is the impression that banks arbitrarily jerk up interest rates. Since we share the concern of the Senators on the need to have interest rates lowered and perhaps the need for a roundtable to make it happen, we first advise that participation for the roundtable should also draw more from the organised private sector, the manufacturers in particular.
Regarding the issue of a cartel, we caution against the demonisation of investors in this critical sector of the economy and call for more civility and understanding of the structure of the industry and ownerships.The Nigerian banking industry ownership and leadership are too diversified with considerable international stakes to be forged into the mundanity of a cartel.
On the issue of interest rate, it is important the Senators understand the variables that make up the cost of funds by which the effective interest rate is determined. We know that most of the factors border on Nigeria’s larger challenges including poor infrastructure (mainly power), and then, the factor of inflation and tax which are largely outside the control of the banks. The involvement of manufacturers and stakeholders would reveal the many challenges that productivity faces in an economy where the cost of funds is not the sole determining factor.
Moreover, alleging the existence of a cartel without proof, and arbitrary fixing of interest rate in a market known for competition is unrealistic. Some of the blame heaped at the doorstep of bankers ought to be addressed to the government of the day for its policy failures.
Let us approach the roundtable dispassionately and without presumptions that could scuttle its noble intendments.