As investor confidence and activities pick up in Africa’s largest economy following a successful and peaceful election, the Lagos Chamber of Commerce and Industry (LCCI), has called on the country’s apex bank (Central Bank of Nigeria) to relax monetary conditions to boost lending to the real sector.
Stressing the need for a review of fiscal conditions in the financial sector, the Chamber noted that a better fiscal policy management is the catalyst for accelerated economic growth.
Alhaji Remi Bello, President LCCI, who made this call at the chamber’s 2015 first quarter press conference, Wednesday in Lagos noted that fiscal operations of government needed to be better managed to reduce money supply pressures on macro-economic conditions to create room for a growth oriented monetary policy.
“With the apparent floating of the naira exchange rate, it has become necessary for the CBN to commence the gradual easing of monetary conditions to stimulate growth in the real economy through cheaper credit. High interest rate regime is good for the attraction of portfolio investments, but it penalises the real economy and impedes the capacity to create jobs. We call on the CBN to reduce charges on bank deposits, especially the 0.5 per cent fee to NDIC, and another 0.5 per cent for AMCON. These additional costs are invariably passed on to the investors in form of high cost of fund.” Bello stated.
Besides, he noted that the Money-deposit banks deserve to earn interest from the 20 per cent CRR on private sector deposits because the deposits were mobilised at a cost.
“The same is true of the 75 per cent CRR on public sector deposits. We believe it is only fair for some interest to be paid on account of the withdrawal of these funds from the banking system,” he said”.
Bello further urged CBN to urgently put in place a framework to ensure sustainable intervention in the interbank foreign exchange market, stressing that it has been difficult for investors to access foreign exchange to meet their various international payment obligations in the last couple of weeks.
LCCI Boss Bello lamented that the exchange rate depreciation of about 20 per cent over the last six months has impacted adversely on the profit margins of many enterprises, explaining that it was an indication that businesses were unable to pass-on the cost increases to consumers.
The President stated; “The Monetary Policy Committee (MPC) at the end of its last meeting held on 23rd-24th March 2015 decided to sustain the tight monetary policy regime. The committee retained Monetary Policy Rate (MPR) at 13 per cent; CRR on Private Sector deposits at 20 per cent; CRR on Public Sector deposits at 75 per cent; and liquidity ratio at 30 per cent. The implication is that interest rate would continue to remain high and continue to put pressure on operating costs in the economy.”
“For now, lending rate of commercial banks including fees and charges range between 22 and 34 per cent, depending on the customer profile, tenor and collateral quality. High interest rate is a concern we have expressed at every turn in our advocacy activities engagements.”