Stanley Nkwazema
5 June 2008
Abuja — Governor of Central Bank of Nigeria (CBN), Prof Chukwuma Soludo has said though the National Assembly's probe of the activities of the banking and financial sector of the economy is desireable, the lawmakers should handle the exercise with caution to avoid eroding customers' confidence in the banks.
Also, he said total banks credit to the private sector grew by 400% between 2003 and 2007, as is evident in the increased credit to the manufacturing sector of the economy from N294 billion in 2003 to N487 billion in 2007.
The CBN Governor spoke yesterday at a sitting of the House of Representatives Committee on Banking and Currency which is probing the unethical practises in the banking sector. He said such an exercise as the House's inquiry into the banking sector "if managed properly could strengthen our banking system and keep the Nigerian public better informed," but cautioned that if not handled with care it may have dire consequences for the banking industry.
"We have to be very cautious with some of these issues and statements by the different stakeholders. I would also be erring if I fail to suggest that given the unique nature of the banking business and the kind of inflammatory and wild remarks, we may at the end of it be undermining the sector," he said.
He said the committee should reflect on whether to conduct the probe in public or in camera, as "it does not take up to 24 hours for a bank to collapse no matter how healthy it is because of remarks and this kind of thing."
He disputed claims that credit facilities extended to the real sector of the nation's economy has been very low, pointing out that there has been phenomenal growth in lending by banks to the real sector, especially in the post-consolidation period.
On the aggregate credits before the banking sector reforms, Soludo confirmed that credit to the private sector has grown 400 per cent from 2003 to 2007 as credit to small and medium scale enterprises (SMEs) has also shot up to 600% while credit from micro finance institutions also rose by about 100%.
"Credit to small and medium enterprises (SMEs) grew by about 600% since 2004 from less than N35 billion in 2003 to over N204 billion in 2007. This is in addition to the funds devoted to the SMEs under the SMEEIS programme, which as at April 2008, stood at about N25 billion invested in 327 projects," he said.
He disclosed that a comparative analysis of banks' credit sectorally showed that lending to the manufacturing sector, for example, grew from N294 billion in 2003 to N487 billion in 2007. Also, during the same corresponding period, credits to the communication sub-sector grew from N293 billion to N1.1 trillion, that of oil and gas from N129 billion to N1.2 trillion, mining and quarrying's credit grew from N95 billion to N490 billion while aggregate credits to other sectors stood at N1.26 trillion.
On the high interest rates charged by Nigerian banks, which is allegedly the highest in the world, the CBN Governor told the committee that "in real market economies real interest rates are usually positive (that isnominal interest rates less expected inflation rate) thus whether interest rate is high or low depends on the above factors and particularly relative to the expected inflation."
He disclosed that the CBN will soon submit nine Executive Bills, which will take care of the several issues being raised by the House and urged that it be given accelerated hearing as soon as it gets to the lawmakers.
Chairman of the Committee, Ogbuefi Ozomgbachi said the committee was conducting the investigative hearing in compliance with House resolution of March 12, 2008, which mandated the committee to probe unethical practices in post-consolidation banking sector.
He stated that the banking public have raised concerns against some alleged unethical practices by banks, which has posed negative consequences on the development of the real sector and ultimately on the lives of the people.
Ozomgbachi, however, acknowledged that in less than three years of post-consolidation banking, the industry has recorded several feats, which could not have been achievable before the period.
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