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Credit squeezes slide down businesses in qtr 1

By Franklin Alli
Businesses slide down in the first quarter of 2010, Lagos Chamber of Commerce and Industry (LCCI) President  Otunba Femi Deru, said Tuesday, blaming credit squeeze during thace period under review.

According to the LCCI Chief, the economy in the first quarter witnessed sever credit squeeze as a result of reluctance of the banks to lend, and for most businesses, performance was generally sub optimal.

“The credit conditions took its toll on businesses in the first quarter, manifesting in the following areas: reduction in capacity utilisation of many manufacturing concerns as a result of lack of access to working capital from the banks. Also, many consumer product distributors could not access credit to order for products, and there was abandonment of projects in the construction industry by contractors who could not get funds to complete the projects.  Many of them could also not be paid by their clients,” he lamented

He warned that if this trend continues in the second quarter, the consequences for the economy would be devastating.
“The outcome of our recent survey on the impact of the banking sector reforms on credit lends credence to this position. Over 95 per cent of the respondents claim that access to credit was impaired in the first quarter.  There is therefore an urgent need to unlock the credit market for economic activities to regain momentum,” said Deru.

The banks, he said, have taken risk management to the extreme; there is now a phobia for lending and zero tolerance for risk.  This outlook is neither in the interest of the banks, the investors or the economy.  We are faced with the paradox of liquidity glut and credit squeeze occurring at the same time in the economy.  This is a contradiction. We need therefore to act quickly to get the economy back on track.. He said that the chamber will continued to sustain its monitoring and surveillance of the economy and respond as and when necessary.


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