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More reactions have continued to trail the recent reform directive issued by the Central Bank of Nigeria (CBN) to money deposit banks that with effect from September 30, every money deposit bank must maintain a minimum Loan Deposit Ratio of 60 per cent.
Analysts say the new lending policy regime means that commercial banks will no longer maintain deep coffers when businesses are dying of cash squeeze.
In its reaction, the Director General, Lagos Chamber of Commerce and Industry (LCCI), Mr Muda Yusuf, said the beauty of the policy directive is that it will push up activities at the Small and Medium Enterprises sector, retail, mortgage and consumer who want to start genuine businesses.
According to him, “The focus of the policy on SMEs, retail, mortgage and consumer lending under the proposed lending regime is laudable.”
Yusuf recalled that the Nigerian private sector had over the years grappled with issues of credit access, cost of credit and tenure of funds, and noted that the challenges were more severe for MSMEs in the economy with huge financing gaps.
Continuing, LCCI argued that “The economy has been characterised by profound crowding effect of the private sector in the financial markets owing to more attractive returns from credit to government through the instrumentalities of treasury bills and Federal Government bonds.
“These developments created considerable distortions in the financial markets and considerably impeded domestic investment. It created major financial intermediation issues as the banking system became largely disconnected from the investing public. The real sector investors and the SMEs were the foremost victims of this distortion.
“The high and attractive returns on government debt instruments were a major worry because they have zero risk and the earnings are tax exempt”.
Yusuf added that “Naturally, there was a gravitation of capital towards these investment windows, depriving the investment community of funds, posing major constraints to job creation and the advancement of the economy.”
However, he called on the CBN to set up a monitoring system that will tract and supervise the approach, way and manner the commercial banks will be responding to loan applications to avoid the directive facing motion without movement after all.
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