Senate on Tuesday raised alarm that cartel within the system had taken over control of Nigerian commercial banks, to the detriment of the economy.
Senate however directed its committee on Banking, Insurance and other Financial Institutions to organize round-table session with the Central Bank of Nigeria (CBN), commercial banks, Nigerian Deposit Insurance Corporation (NDIC), other relevant stakeholders and industry experts to find lasting solution to the issue.
Senate resolutions was sequel to a motion sponsored by Senator Rafiu Adebayo lbrahim titled “The Dire Need For Stakeholders To Round Table To Address Increasing Interest Rates ”
Leading debate on the motion, Senator Rafiu said that the current Monetary Policy Rates (MPR) of 14 per cent had remained high compared to other developing nations such as Brazil which has 10.25 per cent; Kenya 10 per cent, South Africa 7 per cent , Rwanda 6.25 per cent, Bangladesh 6.75 per cent , Botwana 5.50 per cent and many West Africa countries with single digit rates.
Senator Ibrahim stated that despite all the negative indices, banks continued to declare huge earnings and profitability which as at 31st March, 2017 increased significantly by 151.02 per cent as profit before tax stood at N186.155 trillion as against N74.160 trillion in December 2016.
According to him “most of this profitability are derived from investment in risk free Government securities such as Treasury Bills and Bonds.
“The CBN is now faced with difficulties in decision- making on some of its core mandates of controlling the inflation rate, exchange rate and interest rate.
“Available and reliable records indicate that between January to December, 2016, the CBN as regulator of the banking industry had mopped up about N5.784 trillion in interest expenses for liquidity Management thereby targeting inflation at the expense of economic growth, development and employment.
“The current regime of high interest rate continues to place a major burden on business investments and household consumption spending in Nigeria, thereby negatively impacting on the survival of Nigerian businesses.
“This is perpetuating the indicator which shows that only about 3% of SMEs starting up in the Country having access to credits from banks which ironically employ about 88% of our work force and therefore the backbone of the economy.”
In his contribution the Deputy Senate Leader, Senator Bala Na’Allah, mentioned the increasing interest rates in Nigeria.
He said that there is a “dire need for a Stakeholders Round Table to address increasing interest rates in Nigeria”.
Na’Allah alleged that the cartel, in connivance with the CBN, refused to review the interest rates downwards, to reflect the current economic realities in the country.
According to him “the banks are run by a powerful cartel. They do what they like and jerk up interest rates.
“Over the years, we have seen the exchange rates go up, but it is not the same in other economies of the world.
“Nigeria has the most unpredictable economy in the world and we have to be worried about this”.
The Senate President Dr Bukola Saraki, who supported the motion, gave credence to the claims, criticizing what he described as the twin evil of interest and exchange rates.
He said that it was unreasonable for companies to continue to lay off staff, while declaring huge profits annually; assuring that the Senate would step in and ensure that the right thing was done.