Nigeria’s Senate committee on Banking, Insurance and other Financial Institutions is to organise a round-table session with relevant stakeholders in the financial services sector, with a view to finding immediate, sustainable and lasting solutions that would help usher in a new interest rate regime that supports enterprise development in the country.
The stakeholders expected to participate at the roundtable session include, the Central Bank of Nigeria (CBN), commercial banks, Nigerian Deposit Insurance Corporation (NDIC), other relevant stakeholders and industry experts.
In a motion sponsored by Senator Rafiu Adebayo and tagged “The dire need for a Stakeholders Round Table to address increasing interest rates in Nigeria”, the Senate said the current Monetary Policy Rates (MPR) of 14 per cent has remained high compared to other developing nations, and many West Africa countries with single digit rates.
Senator Adebayo said despite all the negative indices, banks continue to declare huge earnings and profits which as at 31st March 2017 increased significantly by 151.02% as profit before tax stood at =N=186.155 trillion as against =N=74.160 trillion in December 2016.
He further said “Most of these profits are derived from investment in risk free Government securities such as Treasury Bills and Bonds. The CBN is now faced with difficulties in decision- making on some of its core mandates of controlling the inflation rate, exchange rate and interest rate”.
“Available and reliable records indicate that between January to December, 2016, the CBN as regulator of the banking industry had mopped up about N5.784 trillion in interest expenses for liquidity Management thereby targeting inflation at the expense of economic growth, development and employment.”
The current regime of high interest rate continues to place a major burden on business investments and household consumption spending in Nigeria, thereby negatively impacting on the survival of Nigerian businesses.
“This is perpetuating the indicator which shows that only about 3% of SMEs starting up in the Country having access to credits from banks which ironically employ about 88% of our work force and therefore the backbone of the economy.”
Deputy Senate Leader, Senator Bala Ibn Na’Allah, who came hard on commercial banks in the country and the Central Bank of Nigeria (CBN), accusing them of strangulating Small and Medium Enterprises (SMEs). Senator Na’Allah who made the claims in his contribution, wondered why the interest rates are high, despite the fact that the country is yet to get out of its economic recession.
“The banks are run by a powerful cartel. They do what they like and jerk up interest rates. Over the years, we have seen the exchange rates go up but it is not the same in other economies of the world. Nigeria has the most unpredictable economy in the world and we have to be worried about this,” Na’Allah said.
President of the Senate, Dr. Bukola Saraki, while criticizing what he described as the twin evil of interest and exchange rates, said it is unreasonable for companies to continue laying off staff, while declaring huge profits annually declaring that the Senate will step in and ensure that the right thing is done.
According to him, “There has always been the twin evil of exchange rate and interest rates. We cannot live in a country where companies are folding up, yet organizations are declaring mega profits. The committee should swing into action. Whatever comes out of the committee’s work, we must see to it that it is implemented to the fullest by the Senate.”
Senator Saraki assured Nigerians that the National Assembly will do all within its powers to ensure that the trend does not persist.