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FG stifled states, private investors from borrowing – Fashola

By BusinessNews Staff on February 19, 2015

Lagos State Governor, Mr. Babatunde Fashola, on Tuesday disclosed that the federal government had instructed commercial banks in the country against granting credit facilities to some state governments and private sectors.

The governor also raised questions on a new practice that compelled a bank “to inform a minister (apparently referring to the Minister of Finance, Dr. Ngozi Okonjo-Iweala) before lending loan to a customer.”

He revealed this at the inauguration of 100 air-conditioned buses at the head office of Lagos State Traffic Management Authority (LASTMA) in Oshodi, lamenting undue interference in the process of lending.

Fashola, who led some members of the State Executive Council to inaugurate the new air-conditioned buses, noted that such policies would definitely make life difficult for many Nigerians and investors.

He said the environment, which the investors in the mass transit buses started with about nine years ago, had begun “to change. When the government started the BRT, the private investors were borrowing at about $1 to N118 and the exchange rate at that time was about 10 percent.

However, the governor said the federal government, under President Goodluck Jonathan “has started interfering in the process. They have instructed banks on who they should lend money to. I do not know what type of economic management policy that is.”

He observed that such interference “has grave implications for private investment. This is because gradually, they are squeezing the life out of this economy. They are taking the independence away. Why should a bank need a minister before lending loan to a customer?

“If the customer credit is good, why should a bank not lend money? That is what is happening today. It is becoming difficult to get foreign exchange and transact legitimate deals. Right now, we should have remitted the fund for our lightrail. There is no foreign exchange backing it.

“The naira has been there. The foreign exchange bill we use to take for granted seven years ago, has become a ‘wait-for-your-turn’ process, in order to pay legitimate international obligations and it may get to school fees. That is the reality. Once there is not enough foreign exchange, everyone has to queue. It will aid the black market while the official market suffers.”

He regretted that the dwindling economy “is responsible for the dilapidated state of some of the buses, noting that the private interests, who invested in the business “have been incapacitated by financial regulation and economic policies. That is not helping them to grow.”

The governor explained that not many investors could borrow money at N210 to $1 and at 25 percent interest rate, which he said, would make maintenance of the buses and transport fare difficult.

He said: “As we continue to build roads and provide other facilities, we do all these to keep the economy growing. Our road construction creates job. And the banks will tell you how much profit they make from our borrowing annually.

“With that, they maintain profitability; if we stop borrowing, many banks will give up. This is how an economy should function. That was why it is worrisome that lending by banks now is no longer commercial activity based on commercial viability,” Fashola explained.

Unlike the old buses, the commissioned buses owned by Metro buses ,a franchisee of the state-owned LAGBUS Assets Management Company are fully air-conditioned and had Wi-Fi internet connection for on-the go browsing.

Fashola said his government was putting in place transport solutions “to ensure easy and convenient movement of people and goods within the state. The first phase of the state`s light rail project, covering a total of 27km from Okokomaiko to Marina has reached an advanced stage of completion.

The governor, thus, gave progress report on the light rail project, noting that most of the terminuses had been completed and that the laying of tracks on the distance had commenced.

[ThisDay]

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