By Richard Nzubechukwu
The World Bank Country Director, Onno Ruhl, has encouraged commercial banks in the country to grant credit facility to  the Small and Medium Enterprises (SMEs) company, asserting that the sector is crucial to the survival of the real sector.

The real sector comprises manufacturing, solid minerals and agriculture.

Delivering a lecture on “Impact of the Banking Reforms on the Real Sector”at the 50th Annual General Meeting and Conference of the Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture,  in Lagos, Onno said that in as much as the reforms in the banking sector was in order, “Bank lending to SMEs was the recipe for long term growth in the real sector as fiscal stimulant may rather be unsustainable”.

Onno Ruhl

“Lending to the Small and Medium Enterprise SMEs by the banks is crucial to the survival of the real sector. In consideration of the importance of the SMEs and the role of banks in any economy, the financial intermediation from the banks outweighs the fiscal stimulus which the Federal Government provides through the release of excess crude proceeds to the three tiers of government to aid them in mitigating effects of the global economic crisis. Bank lending to the real sector can reverse slow economic trend, stimulate growth, increase productive capacity, minimize incidence of unemployment and save companies and individuals from daily huge cost of operations.”

He commended  the Federal Government saying that “It was passionate about the real sector’ and for the steps it had already taken in revamping this all important sector.

“A renewed effort by the government to get the economy moving is the passing into law of various bills by the Senate, such as the Bill establishing AMCON, which will take care of the toxic assets in the Nigerian banks, The Local Content Bill which would increase the employment situation in the Oil and Gas sector, Power Sector Reform Bill and various others soon to come.” He noted that the x200 billion Commercial Agriculture Credit Scheme(CACS) by the Government and some banks and the x200 billion re-financing and restructuring of bank loans to the manufacturing sector aimed at improving access to SME finance.

He also laid emphasis on the ‘revised Prudential Guidelines released by the CBN in 2010 saying that the guideline supports long term project financing and also enables banks to restructure some of their challenging non-performing loans accordingly.’

Onno called for the need to expand credit to the agriculture and agro-allied activities, as a large percent of the population depend on it both for livelihood and for sustenance. He encouraged banks to place greater reliance on cash-flow based lending, building capacity for credit and risk management.