By Stanley Opara

The Central Bank of Nigeria has said that the possibility of a single-digit interest rate for bank borrowers may not be attainable given the level of operational and overhead costs of banks in Nigeria.

The apex bank listed lack of viable utilities and domestic term financing, among others, as major factors resulting in high cost of funds.

The CBN also said that bank lending for infrastructural development, coupled with the participation of the public sector in terms of project financing, remained crucial for the advancement and progress of the economy.

Delivering a lecture on “Infrastructure, Industrialisation and the Nigerian Economy,” at the second Kresta Laurel Public Lecture in Lagos on Tuesday, the CBN Governor, Mr. Lamido Sanusi, said the future of infrastructure development in the country depended partly on the state of the financial markets.

He said the fiscal space for domestic public sector sources of infrastructure financing was limited.

Sanusi, who was represented by the Deputy Governor, Corporate Services, CBN, Alhaji Suleiman Barau, noted that the private capital sourced from abroad tended to attract high country-risk premiums and often carried the risk of currency mismatch as infrastructure project revenue was typically earned in local currency.

He said, “The domestic financial markets are still emerging, with a dearth of long-term financing with maturity terms commensurate with the long-term horizon of infrastructure projects.

“Nevertheless, there is growing recognition of the need to explore the potential for accessing local and regional sources of private financing in building Nigeria’s infrastructure, particularly as national and intra-regional financial market reforms gather increasing momentum across the countries.”

The CBN governor noted that the public sector funding was insufficient to achieve the desired transformation, and that the role of the financial sector to mobilise funds for investments in infrastructure had become more important.

According to him, the CBN seeks to entrench financial stability as an enabler, catalyst and driver of growth. He added that financial stability was important as it facilitated efficient financial intermediation which was supportive of infrastructure growth.

He said with the CBN’s recent effort to revamp the real sector of the economy through the N500bn intervention funds and the blueprint for sustainable financial sector, there was no doubt that the sector would play more active role in national development in the years to come.

He noted, “The ultimate goals of CBN support is to establish a credible monetary regime that will facilitate the attainment of key mandates of ensuring price and monetary stability, promotion of financial sector soundness and stability, production of goods and services, which promotes sustainable economic growth and employment creation in the medium to long term.

“The achievement of these feats calls for the hard work and cooperation of all stakeholders.”

 

Source: Punch