The Lagos Chamber of Commerce and Industry (LCCI), has urged the Federal Government to peg maximum interest rate of commercial banks loan to a single digit of nine per cent.
Its President, Mr Babatunde Ruwase, while speaking at the Lagos State University (LASU), Ojo, 2019 International Conference on Accounting, Finance and Insurance, also called for a long term repayment schedule.
Speaking on the Theme: “Financial Institutions and Sustainable Development; Perspective of Accounting, Finance and Insurance.”
Ruwase, who was represented by Mr Muda Yusuf, LCCI Director-General, said reduction of the interest rate would ensure an affordable credit for investors and in turn facilitate economic recovery .
He said there has been a major disconnect between the banking institutions and the real economy as the focus of most lenders was on profit making.
According to him, for as long as the banks continue to focus on profit making, development of other sectors of the economy in the country would not be possible.
Ruwase argued that with their profit making mandate, key projects like Agriculture, Manufacturing, Real Estate, Transportation, Solid Minerals, among others that could drive development and required low cost and long tenure funds would not be adequately supported.
“There is no way you can develop an economy, if you do not invest on infrastructure such as agriculture, manufacturing, real estate, education, healthcare and transportation.
“These are the sectors that drive development in a country, and the type of funding they need does not require short term fund that would be costing about 25 or 30 per cent interest rate.
“It is not ideal for banks to declare billions of naira yearly as profit, in a country where other sectors of the economy are collapsing.
“The banking system should be better aligned with real life challenges and be more supportive of the economy, as consumer credit is what drives the economy of developed countries.
“Some people have developed high blood pressure because they took bank loans and have been unable to repay due to the interest rate,” he said.
The LCCI boss also lamented the nation’s infrastructure deficit of about N3.4 billion, adding that only the private sector, through access to affordable credit, can intervene to address it.
He said there was a need to develop the right model of fiscal and monetary policies to ensure the flow of resources from the financial system to developmental projects and the real economy.
“We can have a framework of credit guarantees to minimise the risk of borrowing, because one of the reasons banks do not lend money to the real sector and SMEs, is because of the high risk,’’ he said.
Ruwase, however, called for a better reward system for farmers in the agricultural sector, if the country is committed to reducing poverty since the current reward template for farmers is not commensurate to their inputs and efforts.
He noted that the regulatory and intervention role of the Central Bank of Nigeria (CBN) and a credit guarantee scheme could ensure that the financial institutions supports the development processes better than what it was presently.
In his remarks, Prof. Taiwo Asaolu of the Obafemi Awolowo University (OAU), Ile-Ife, called for an integration of the old or disruptive form of technology and the new technology to advance an improved course for finance and other sectors.
Asaolu, represented by Prof. Kolawole Subair of Global Research Fellow, Centre for Entrepreneurship and Sustainable Development, Indiana University, USA, said Nigeria was still backwards in several areas in terms of technology advancement.