ABUJA—THE Senate yesterday raised alarm that an unnamed cartel has taken over control of commercial banks in Nigeria, to the detriment of the economy and small businesses operating in the country.
The Senate also accused the Central Bank of Nigeria, CBN, and commercial banks of killing the Small and Medium Enterprises, SMEs, with high interest rate, adding that indicators have shown that only about 3% of SMEs starting up in th country had access to credits from banks, despite employing about 88% of the nation’s work force.
Consequently, the Senate mandated its Committee on Banking, Insurance and Other Financial Institutions to organize a Round-Table with CBN, banks, NDIC, other relevant stakeholders and industry experts to find immediate, sustainable and lasting solutions that would help usher in a new interest rate regime that would support enterprise development in Nigeria.
In his remarks yesterday, Deputy Senate Leader, Senator Bala Ibn Na’Allah, who wondered why interest rates were high, despite the fact that the country was yet to get out of its economic recession, said the cartel, working with the CBN, refused to review the interest rates downwards to reflect the economic mood of the country.
Senator Na’Allah said: “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.”
In his remarks, Senate President, Bukola Saraki, agreed with the position of the deputy Senate leader, and criticised what he described as the twin evil of interest and exchange rates.
He also noted the fact that it was unreasonable for companies to continue to lay off staff, while declaring huge profits annually, adding that the Senate would step in to ensure the right thing was done.
Saraki said: “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 of the committee’s work, we must see to it that it is implemented to the fullest by the Senate.”
Both Senate President Saraki and Deputy Senate Leader, Na’Allah were responding to a motion by Senator Rafiu Adebayo Ibrahim, APC, Kwara South, entitled, “The dire need for a Stakeholders Round Table to address increasing interest rates in Nigeria”
Earlier in his presentation, Senator Rafiu Ibrahim explained that the current Monetary Policy Rates, MPR, of 14 per cent had remained high, compared to other developing nations, such as Brazil, which has 10.25 per cent; Kenya 10 per cent; South Africa, 7 per cent; Rwanda 6.25; Bangladesh 6.75; Botswana, 5.50; and many West Africa countries with single digit rates.
According to him, despite all the negative indices, banks continue to declare huge earnings and profitability which as at 31st March 2017 increased significantly by 151.02 per cent as profit before tax stood at N186.155 trillion, as against N74.160 trillion in December 2016.
Senator Ibrahim said: “Most of this profitability 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, exchange and interest rates.”
“Available and reliable records indicate that between January and 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.