Nigeria’s Organised Private Sector (OPS), has expressed confidence in the new lending policy for deposit money banks which prescribes a minimum Loan Deposit Ratio of 60per cent effective September 30, 2019.
The Director General of Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said the focus of the policy on SMEs, Retail, Mortgage and consumer lending under the proposed lending regime is laudable.
He stated that the Nigerian private sector has over the years grappled with issues of credit access, cost of credit and tenure of funds. These challenges are more severe for MSMEs in the economy with huge financing gaps.
Yusuf noted that the economy has been characterised by profound crowding out 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.
According to him, 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.
He explained that the high and attractive returns on government debt instruments was a major worry because they have zero risk and the earnings are tax exempt.
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.
He said that the OPS sees this new lending policy as a timely policy intervention to normalize the credit markets, spur economic growth and broaden the interface between entrepreneurs and the banking system.
“The banks will be obligated to be more tolerant of the entrepreneurs and be more creative in the creation of financial assets,” he added.
He stated that the OPS expects that the new lending policy would impact the economy in the Improvement in purchasing power as consumer credit increases.