Ayodele Attributes Cost of Transactions to High Lending Rate

Mrs. Sola Ayodele, managing Director, Spring Bank Plc has attributed the high lending rate charged by banks operating in the country to the high cost of transactions.
Ayodele at the recent 2010 banking review report by Afrinvest Limited said, the Central Bank of Nigeria Governor, Mallam Sanusi need to be commended for his effort in ensuring that the real sector are funded.
She pointed out that “the three critical areas that needed to be tackled are power, transportation and agriculture. Once these sectors are taken care of the lending rate are bound to drop.”
She called on both the private and public sectors to collaborate by investing in these sectors because of the significant ripple effect on the economy, adding that banks have started the process of negotiating with stakeholders to find ways it can be of help.
Mr. Ike Chioke, managing director, Afrinvest Limited in his review of the banking sector reform stated that the banking system has undergone remarkable changes over the years in terms of the number of institutions, ownership structure and the depth and breadth of operations.
According to him, “The changes have been influenced largely by opportunities presented by the deregulation of the financial sector, globalization of operations, technological advancements and adoption of regulatory guidelines that conform to international standards”.
He recalled how the CBN prone the banks from 89 to 25 and later 24, stressing that some of the perceived temporary dislocations evident in the nation’s financial system, from the crash in deposit rates to falling yields on government paper, are symptomatic of a longer term structural re-balancing currently taking place. According to him, “Afrinvest Research believes that ultimate objective behind the various reforms initiated by the CBN is to move the industry towards an environment where single digit interest rates are the norms rather than the exception. Should Nigeria get to that promised land, Sanusi in his capacity as the nation’s treasurer would have won the battle to save the economic soul of the country by creating an environment wherein the real sector can access sustainable long term finance for economic development”.
Commenting on the shrinking credit to the private sector, Chioke said that the lingering effect of the special audit conducted by the CBN on the banks are that credit to the private sector has practically thinned out as banks have directed focus on debt recovery.