Banks to cut lending rates to Micro, Small and Medium Enterprises(MSMEs)

Sanusi Lamido Sanusi, CBN Governor

The Bankers' Committee Tuesday said it will soon outline new strategies for supporting the real sector, particularly the micro, small and medium enterprises (MSMEs) through the reduction of lending rates.

This was just as business owners in Bauchi, Tuesday decried the shortage of lower banknotes for transactions.

The business owners lamented that most of their customers no longer patronise them because of the development.

However, the bankers’ committee expressed optimism that reducing lending rates would reduce social tension by enhancing employment generation in the country.

Addressing journalists after the regular meeting of the committee in Abuja, Group Managing Director/Chief Executive Officer, Diamond Bank Plc, Dr. Alex Otti, alongside other bank chief executives said they had extensive discussions on how to make interest rates cheaper for small businesses given that the sector had the capacity of stimulating economic growth.

He said modalities on how to achieve lower rate for the sector would be made public within the next few weeks, adding that the issue would be adequately ironed out at its ongoing bankers' committee retreat.

There are however, concerns on how such plan would be achieved considering the prevailing monetary policy conditions, especially with the monetary policy rate (MPR) at 12 percent.

"Basically, interest rates have to go down. It is going to happen," he said.
Continuing, THISDAY checks at Bauchi revealed that those mostly affected by this development particularly in Bauchi metropolis were petty traders, business centre operators, transporters, among others.

THISDAY investigation at the ever-busy Wunti, Muda Lawal and Central markets  showed that many businesses were battling to make sales due to the shortage of smaller denominations such N10, N20 and N50.
Alhaji Salisu Umar, who sells yams and potatoes at  Muda Lawal market said: “The first thing our customers do when they come to make their purchases is ask if you have change, and when you answer in the negative, they just go away.’’

“The use of smaller denominations like N20 and N50 is really becoming a problem because its circulation is very limited. Whenever a customer comes with bigger denominations like five hundred and one thousand naira and you tell them there is no change, they just change their mind and refuse to buy anything from you.”
Also, Mr. Danazumi Suleiman, a commercial motorcycle operator complained bitterly over the situation.

But the CBN Director, Banking Supervision, Mrs. Tokunbo Martins, told journalists in Abuja that the apex bank was aware of the scarcity of lower denominations. Martins explained that the scarcity was caused by the recent setback encountered in the suspended currency restructuring programme of the apex bank.

The N20, N50 as well as N200 notes had suddenly become difficult to come by in the economy. She however, assured that a process to release lower currency  as well as improving their quality had already commenced.

Meanwhile, the Bankers' Committee also, Tuesday, expressed concern over the need to further enhance structural reforms to provide conducive conditions for long term investment in the country.

Managing Director, Citibank, Mr. Omar Hafeez, said even though portfolio in-flows were necessary in any economy, long term money is preferred because the exit of  ‘hot money’ could affect rates fluctuation.

But, CBN Director of Communication, Mr. Ugochukwu Okoroafor , said, however, that the apex bank was keeping a close watch of portfolio inflows stressing that the country had significant foreign reserves to meet any shortfall should investors decide to take money out.

Also, the committee once more condemned reports of ATM charge imposed by some banks even when it had unanimously agreed to suspend such charges on customers. The Diamond Bank boss said such practice was unacceptable to the committee.