Concerns as banks starve private sector of loans

THERE are growing concerns on the economy over banks' unwillingness to lend to other sectors, particularly the private sector.Investigations by the Nigerian Tribune showed that despite efforts by regulators and relevant agencies in the financial sector, especially the Central Bank of Nigeria (CBN) and Asset Management Corporation of Nigeria (AMCON), banks were still not lending to the private sector.While analysts and operators who spoke with the Nigerian Tribune attributed the development to the recent policy of the apex bank on liquidity, others maintained that the banks were shifting focus to high yielding government securitiesA risk officer in one of the banks told the Nigerian Tribune in Lagos that the trend would continue for a long time, stressing that banks preferred investing in money market instruments, where there were no risks.'This is quite simple. Banking business is about making wise investment decisions. So they prefer to invest in government's treasury bills and bonds, which carry no risk and have good returns on investment of around 15 per cent, than lend to private sector which, for now, is not attractive,' he said.A renowned analyst, Dr Osaro Obobaifoh, said somepolicy initiatives of the CBN were making the banks to further shut doors against the private sector.According to him, the policy of the apex bank to protect the naira at all cost, through increasing the cash reserve ratio (CRR), had further made lending difficult.Also, a professor of Economics at the University of Ibadan (UI), Adeola Adenikinju, blamed the development on the decision of the CBN to hike CRR to 12 per cent, saying that banks would defer credit outflow to absorb the hike.The don said it was bad that private sector businesses might have to carry the additional burden of the interest rate hike.
Click here to read full news..