By Emma Ujah, Abuja Bureau Chief
“At interest rates of between 25 and 32 per cent, what on God’s green earth can you do?”
These were the words of the Minister of Agriculture, Chief Audu Ogbeh, as he raised the alarm over the high interests rates in country, ahead of today’s meeting of the Monetary Policy Committee, MPC, of on interest rates.
In a paper sent to media houses, yesterday, Chief Ogbeh, said with rates of between 25 per cent and 32 per cent, there could be no significant job creation or economic growth in the country.
The minister challenged the Central Bank of Nigeria, bankers and policy makers to a national debate with farmers, agricultural engineers, input producers, manufacturers on the matter.
He also said with global rates peaking at a mere 3.5 per cent, Nigerian farmers and manufacturers would never be able to compete, if nothing was urgently done.
Only foreigners, the minister pointed out, benefit from such outrageous rates as they could easily borrow at, as low as, between 1per cent to 2 per cent and to produce and bring their goods to Nigeria and price out locally produced goods.
The piece reads in part: “Nigeria, like every other developing economy, needs quantum of funds for investment, economic growth and industrial development. The way it is, we welcome foreign direct investment (FDI). Every developing country does that. It is a welcome development for a country that wants to grow and grow speedily. But it has other complexities which are not always visible and noticeable to observers. Of course, when they want to come in, they ask for tax holidays which countries are willing to give. But how about dangers they face in local economy in the long run? Take the problem we face now, that is nearly impossible for any Nigerian investor to have access to substantial credit to make any major investment, say in the agro-industrial sector where we operate now.
“At interest rates of between 25 and 32 per cent, what – on God’s green earth – can you do? You can’t do much. But these foreigners can borrow at two per cent, bringing a hundred or two hundred million dollars to invest. Of course they will create some jobs but essentially low level jobs – for outgrowers and others. In a sense, they are jobs. But the way we are heading, what it means is that if these interest rates persist for much longer, the only people who will dominate agro-industry, and indeed major industrialisation, in this country are foreigners.
“Is that necessarily a good thing? It’s good in some ways. But if they take absolute control, then we are in danger. This is the complexity. And I keep complaining, for instance, about the interest rates, although many people don’t seem to agree with me. Where in the world have interest rates remained at over 25 per cent for 30 years and that country still claims the economy is growing? How does it grow?
“Or how does it develop its industries? Where in the world is the MSME industry flourishing when it is impossible to access credit? So, young people are reluctant. Retiring civil servants who want to create something can’t do anything. Those within the productive bracket who want to create and do things can’t do anything. We are facing a problem, and something has to be done very quickly about the entire interest rate regime.
“A massive nationwide debate has to take place between the bankers, the CBN, businessmen, manufacturers’ association, agricultural engineers, input producers and suppliers, policy economists and others. Questions on FDIs and interest rates need to be pondered upon. Are we doing the right thing? Or, why is it then necessary to have preferential interest rate for agriculture at nine per cent? We seem to agree that if it hadn’t happened, some of the progress made in the last two years would have been impossible.
“Even the nine per cent is still too high. The highest in the world today is India, at 3.5 per cent. In the rest of the world, it is two per cent, or 2.5 per cent. So these are very serious problems, although people may skip over them and pretend that all is fine, but all is not really fine. All is not fine; especially as our population is growing and our credit is still a crucial issue. We thank God power seems to be stabilising. That is a very good news for us. But credit is a crucial part of the effort we want to make to stabilise the economy.’’