Government Borrowing Reason Banks Lend At Double Digit, Says CBN Deputy Governor

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“If the government in its self is willing to borrow at 18 per cent from the banks through treasury bills, why should any bank lend to anybody at a single digit? So, that is the problem. If government can stop borrowing and start living within its means, liquidity will be there and banks will be constrained to lend at single digit.”

Josephn Nnanna, Deputy Governor, Economic Policy of the Central Bank of Nigeria (CBN), says Nigerian banks lend money at double digits because the government borrows at 18 percent from the banks through its treasury bills.

Speaking on a theme around factoring financing at the African Export-Import Bank’s annual conference held in Abuja on Thursday, Nnanna said if the government borrows less from local financial institutions, the banks will have more funds to lend businesses — small, medium and large-scale.

“Banks have some challenges at lending at a single-digit interest rate not because they don’t want to do so, but because there are compelling needs, and I am saying this without any fear of contradiction,” he said.

“If the government in its self is willing to borrow at 18 per cent from the banks through treasury bills, why should any bank lend to anybody at a single digit? So, that is the problem. If government can stop borrowing and start living within its means, liquidity will be there and banks will be constrained to lend at single digit.

“Now, see what is happening; the government has decided to finance part of its budget externally; they are offloading treasury bills and treasury bills rate have now dropped from 18 per cent; and as I speak to you now, it is 10 per cent.

“So, banks will be awash with liquidity and they will look out for MSMEs and lend the money to them. So, let us put our fiscal house in order; once we do that, all will be well.”

Also speaking on the availability of funds for MSMEs, he said the apex bank and the commercial banks had agreed to set aside N30bn for MSMEs in the agricultural sector to access to loans.

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