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Chamber of Commerce commends CBN on financial stability

By BusinessNews Staff on October 28, 2013

The Lagos State Chamber of Commerce and Industry (LCCI), on Friday said that the Central Bank of Nigeria (CBN) had achieved its goal of financial stability, within the last four years.

The LCCI Director-General, Muda Yusuf, said that the bank was able to achieve that through effective fiscal and monetary policies.

He added that the absence of any untoward incident during the period which would have resulted in the loss of depositors’ funds was an indication of the positive development in the sector.

According to him, the major benefits of the CBN reforms included: improvement in corporate governance, stability of the financial system, intervention funds to support the real sector, power sector, and the aviation sector.

Mr Yusuf said that the introduction of the Asset Management Corporation of Nigeria (AMCON) had saved the financial system from collapse and the cashless policy had enhanced the payment system in the country.

The LCCI boss stressed that most banks recorded stronger balance sheets, while incidences of non-performing loans were reduced, saying that that had made depositor’s funds safer.

He also added that the scrapping of the universal banking system was a welcome development which had made banks to focus more on the core business of banking.

“During the universal banking era, they were involved in all manner of businesses, including real estate, importation of consumer products, insurance, leasing, and printing, and so on,” he said. “These various channels made the banks to put depositors’ funds at great risks. Therefore, the scrapping of the universal banking system brought some focus and stability to the financial system.”

Mr Yusuf said that the CBN had been effective in the realisation of its core mandate, to ensure monetary and price stability.

The process, he said, led to single digit inflation, a stable exchange rate for the past three years and increased foreign reserves, with occasional fluctuations.

He, however, said that the persistent monetary policy tightening by the CBN had hurt the economy, as interest rates remained high, while liquidity in the economy remained increasingly tight.

He said that that was the negative outcome of the policy choices made by the current CBN governor.

He also noted that a major failure of the banking system under the CBN Governor, Lamido Sanusi, was the disconnection from the real economy.

The LCCI boss noted that it was worrisome that banks were becoming ‘more prosperous’ while the real economy was ‘contracting’ due to challenges of access to funds and the cost of credit.

“This reflects a major failure of financial intermediation which ought to be the essence of banking,” he said. “The structure of funds in the banking system today cannot support the growth of the real sector. Interest rates range from 18 per cent to 25 per cent, tenure of funds is generally less than one year.”

[Telegraph Nigeria]

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