Dr. Muda Yusuf, Managing Director/CEO of the Heart for the Promotion of Non-public Enterprise (CPPE) has criticized Nigerian banks for prioritizing revenue era via commissions and costs over their major function of driving financial progress.
Dr. Muda disclosed this on the Treasury 360 Convention and Exhibition themed Coverage Implications and Constructing Sustainable Treasury Methods: Nigerian Views on Tackling Inflation and Curiosity Fee Uncertainty.
Dr. Yusuf defined that the monetary sector’s deal with excessive commissions and funds, somewhat than supporting companies with inexpensive credit score, is exacerbating the nation’s financial challenges.
“More and more, we’re having a banking monetary system that’s disconnected from the actual economic system. And that isn’t the first operate of the financial institution. The first operate of the financial institution is what we name monetary intermediation. You channel assets from the excess finish of the economic system to the deficit finish of the economic system is the first function of the financial institution. However we’re failing in that.
What we at the moment are seeing, particularly in our banking, is simply managing the funds and charging commissions right here and there and imposing big income. As a result of it doesn’t matter what you say, cash will nonetheless move via there. Even if you’re making losses, your cash will nonetheless move via there,” he said.
Dr. Muda Yusuf highlighted the extreme affect of Nigeria’s excessive rates of interest, which have surpassed 30%, on key sectors similar to manufacturing, agriculture, and actual property.
“Rates of interest have gone to 30% and above. Now what number of sectors can fund their enterprise with the present stage of rates of interest? Can the manufacturing sector assist manufacturing funding?
“Banks are advising corporations that they’ve, because of the final MPC. Rates of interest have been revised to 38%. After all, there isn’t a manner the monetary sector can assist manufacturing, underneath that sort of framework. The identical factor in agriculture, how will you, as a farmer, go and borrow cash at 30%? Identical with the actual property, which is crucial for any economic system.”
Yusuf famous that the return to orthodox financial insurance policies underneath the brand new management of Central Bank of Nigeria (CBN) Governor Olayemi Cardoso contrasts sharply with the unorthodox approaches carried out by former CBN Governor Godwin Emefiele.
Whereas the previous regime relied on heavy state intervention, the brand new CBN coverage is leaning in the direction of extra market-driven options.
Nonetheless, Yusuf warned that the present orthodox strategy, whereas obligatory for fiscal self-discipline, shouldn’t be with out its challenges. The excessive rates of interest ensuing from this coverage have gotten a significant impediment for companies, significantly in sectors that rely upon credit score for progress.
Yusuf famous that extreme adherence to market ideas with out sufficient state intervention might result in market failures.
He cited examples from world economies the place the state performs a vital function in steering progress and addressing financial imbalances.
“Whereas markets are important for progress, authorities intervention is critical when market failures happen. Nigeria wants to make sure that its financial insurance policies strike a stability between free-market ideas and focused state assist for key sectors,” he stated
