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FG BLAMES BANKS FOR ECONOMIC WOES

By NBF News
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The Federal Government yesterday came hard on the deposit money banks in the country for their failure to impact positively on the economy despite substantial support being given them by the government and urged them to adopt new business models to reverse the ugly trends of high lending rates and massive turnover of professionals from the banking sector.

Giving the charge at the 6th Annual Conference of the Chartered Institute of Bankers of Nigeria in Abuja, the Minister of State for Finance, Dr Yerima Ngama, carpeted the banks for contributing little to the Gross Domestic Product (GDP) and encouraging high interest rates on lending which, he said, had made credits inaccessible to farmers, small and medium enterprises and the manufacturing sector.

The minister noted that rather than lend to real sector and farmers, the banks had continued to show preference to financing import trade and by implication, contributing to the crisis in the real sector and the volatility of the foreign exchange market.

Ngama, who represented President Goodluck Jonathan, disclosed that the trend of lending by the banks showed that of the total N6.42 trillion and N7.18 trillion loans and advances of the banking industry as at December 2011 and June 2012 respectively, contribution to agriculture received marginal 3.35 per cent and 3.45 per cent during the same period while Power and Energy sector got a mere 0.39 per cent and 0.81 per cent during the same period.

He however pointed out that general commerce and the importation of oil and gas maintained steady lead, thus making them to support the productive base and capacity of other countries at the detriment of the country.

The minister said: 'Since 1989 the government, through the CBN and the NDIC have intervened to save the banking industry. In fact, it is the most protected industry in Nigeria. It is important that a healthy and strong financial sector is needed in order to have economic growth. To what extent this is true, is a subject of debate.

'Most commentators believe that the banking sector is not supportive of the real sector. It only engages in financing imports at the detriment of the productive sector. For instance,

the Textile Industry, Agriculture and Mining are not adequately supported by the banking sector hence the CBN intervention.