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Government to crash interest rates with special bank

By on August 27, 2013

The Federal Government has unveiled plans to establish a special finance institution that will attract funds into the economy at lower interest rates.

The Minister of Finance and the Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, stated this on Friday in Ilorin during her visit to KAM Industries Nigeria Limited’s multi-billion naira cold steel rolling mill.

She said the bank, which could be established in the next 15 to 18 months, would lend funds to the Bank of Industry, Bank of Agriculture and commercial banks to ensure that interest rates were reduced to a sustainable level for indigenous industries to grow.

Okonjo-Iweala said the government was concerned about the high interest rates being charged by banks and was working to provide an enabling environment that would assist the banks to reduce the rates, especially for indigenous manufacturers and industrialists.

Although she acknowledged the contributions of the banks to the national economy, the minister said the high rate of 20 per cent and above was not favourable for industrial growth.

Okonjo-Iweala said, “We are going to build a development finance institution maybe in the next 15 months to 18 months, a wholesaler that will bring funds and more liquidity into the economy at a lower rate so that it can lend to  the BoI and BoA, other industries and even straight to the commercial banks.

“In the meantime, let our industries not be killed because I have looked at the structure of the economy, it does not warrant 20 per cent interest rate. Government wants the interest rate to come down because we believe that we cannot have sustainable investments at such a high interest rate.

“We are not saying that the banks should not make profits. They are there for profit-making. It must be a commercially viable enterprise but why must they charge 20 per cent? Our inflation has gone from 12 per cent in January this year to 8.7 per cent now, meaning that interest rates, can also go down.”

She also said that the steel sector was critical to the industrialisation of any nation.

The minister noted that in recognition of its importance, President Goodluck Jonathan in January 2012 granted an approval for new and existing industries in the steel sector to import their machineries, equipment, spare parts and raw materials for the establishment of cold roll steel plants at zero per cent duty.

“A 700-tonne capacity per annum cold steel roll mill by Messr. Swesterm Products Company Limited, WAPCO was inaugurated by  President Jonathan early this year and the plant has commenced production and generates 3,000 jobs, Okonjo-Iweala said.”