One of Nigeria’s umbrella business and manufacturing groups has urged the federal government to increase its intervention fund for re-financing the manufacturing sector from 200 billion naira to 500 billion naira, so that more people can benefit from the fund (US$1=160 Naira).
The call was made by the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf.
The local media reported Monday that most Small and Medium Enterprises (SMEs) operators were yet to benefit from the fund.
The LCCI boss urged both the Central Bank of Nigeria (CBN) and the Bank of Industry (BoI) to relax their tight monetary policy stance to encourage banks to boost credit delivery to the economy.
“The manufacturing sector is one of the most vulnerable in the economy because of competitiveness issues. Its contribution to Gross Domestic Product remains very low, at less than five per cent.
“The usual challenges of the sector persisted as high energy cost remains top on the list of the challenges facing manufacturing; market access is an even bigger challenge for most manufacturing firms,” he said.
Mr. Yusuf decried the dearth of credit facilities to investors, adding that it is more attractive now to invest in government securities than to invest in ventures that would create jobs.
“Even banks would rather buy treasury bills and government bonds than give loans to investors. This credit and interest rate structure would continue to create distortions in the economy, which will only perpetuate the phenomenon of jobless growth and further depress the stock market,” he added.
Mr Yusuf said the commercial banks’ tolerance of the manufacturing sector continues to decline due to the perception of the sector as very risky, as many SMEs lack the capacity to package bankable credit requests, adding that some are even too small to access credit individually.
“Many entrepreneurs cannot meet the banks’ credit requirement, especially collateral; experience of the banks with loan quality of manufacturing and other real sector investors would not dispose them to give further loans; monetary policy tightening of the CBN has pushed up cost of fund; risk asset provisioning requirements of the CBN is a disincentive to lending” the LCCI boss said.
He also observed that there are too many regulatory agencies in the economy, some of them with overlapping functions.