Prevailing high lending rate to the private sector has forced the Lagos Chamber of Commerce and Industry (LCCI), to now call on the Central Bank of Nigeria (CBN) to review the Monetary Policy Rate (MPR).
Director, Research and Advocacy at LCCI, Dr Vincent Nwani, explained that a reduced MPR would stimulate the economy through improved access to credit facilities.
The Monetary Policy Committee had on July 26,2016 increased the MPR by 200 basis points from 12 per cent to 14 per cent to combat inflation and stimulate growth.
It would be recalled that MPR is the benchmark rate at which commercial banks can borrow from the central bank to boost the level of liquidity in the economy.
“The private sector has long been chased away from the banking halls. Monetary Committee raised MPR from 12 per cent to 14 per cent in the wake of recession.
“Today, private sector can only borrow between 25 per cent and 35 per cent from commercial banks and if you are borrowing from microfinance banks, it can be as high as 50 per cent.
“Who borrows such money? To do what? Except if you are doing an illegal business; even the ease of getting this credit is cumbersome.
“The challenge of high interest rate in the country has made government’s effort at stimulating the real sector of the economy ineffectual, “Nwani said.
According to him, the challenge had exacerbated the dearth of SMEs, low capacity utilization, staff rightsizing, increased cost of production, reduced purchasing power and increased nonperforming loans.
He argued that the country’s improved ranking in the access to credit indicator, recently released in the 2017 World Bank’s Ease of Doing Business report, was theoretical, saying “I watch the market and economy every day. The improvement in ease of getting credit is not in reality with what is on ground in the country”.
“If we are talking about ease of banks to borrow money to government, it has improved.
Nwani who lauded the various intervention funds of the CBN, however, noted that efforts should be geared toward ensuring that targeted recipients access the funds.
