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“FG must reduce the cost of doing business”
– Okechukwu Unegbu, former president, Chartered Institute of Bankers (CIBN)
By Eugenia Okpara
Okechukwu
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WHY are banks finding it difficult to finance industries? What actually is the problem?
It cannot be described as a problem, rather a problem of integration and consolidation, it has not been easy for banks since consolidation exercise was concluded as a lot of them came together under one umbrella. There is a lot of money in the Banking industry now but they have a problem of integrating fully in terms of personnel, differences in salary, cultural differences which is not easy to handle and is not a short term affair, but takes longer to solve. However, the affected banks are grappling with the problem. There is also the problem of information and communication Technology as different banks use different types. They have to integrate these aspects and this is why banks are finding it difficult. To fund industries this time. Also there is the problem of ensuring that banks capture the market in terms of investment. Many banks are insisting on 16 and 17 per cent’ interest rate with the minimum being 12 or 13 per cent. This is a problem that banks are grappling with now So, it is not true that banks are not willing to finance industries rather it is the problem of integration and consolidation of personnel, harmonising information communication technology and capturing the market. It is only after these problems have been solved that banks can balance and look at industries. Apart from these problems, the absence of infrastructure is not helping matters because even if you give N100 billion to the industries today, it would not solve the problem created by lack of basic infrastructure like power supply, water road and security. The only area where we have reprieve is in telecommunication. There is no way that banks would first
of all start with the procurement of power generating set, drilling boreholes for the industry before the actual financing of the project begins. In all other areas of infrastructure provision, there is a problem. There is also the problem of security, access to human resource, which is not easy to come by. For an industry to have something going for it, it must have this entire basic infrastructure, as banks cannot finance the provision of infrastructure. This is exactly the problem, not that they are not willing to finance industries.
Let us narrow it down to the Small and Medium Equity Investment Scheme [SMEIS] funding. I am aware that most banks return money to the Central Bank of Nigeria at the end of each financial year. So, why was the fund not channelled to its original use?
Yes, Banks return 10 percent of their profit to the Central Bank of Nigeria at the end of the year. In fact, nearly $35 billion have been accumulated for the funding of SMEIS but only less than $12 has been cleared by industries. Almost 75 per cent of these industries are in Lagos with the rest in Ogun State. The problem is that most of these funds are not free. The inability or refusal of businessmen to hire a consultant to package their business for them makes the entire package faulty. They want to get everything so cheap but it is not possible. For instance, former Manufacturers Association of Nigeria (MAN) President, Engrineer Charles Ugwu, was saying just give money to industrialists but it is not done that way. We do not just give out money. You must have the foundation so that the business will succeed and employ people. Our thinking is that It would generate employment. That is why we are happy with the coming on stream of Micro Finance Banks and with various reforms in the next six months, these funds would have been disbursed. These Micro Finance Banks have a means of getting their business going, and in one way will take all the funding. They just want the funds. They are not thinking about setting up industries to create employment. They just want to import, which does not employ more people, may be one or two people. But if you set up an industry, there is so many things you can do. The Industrialists themselves are not prone to opening up; they just want to hold on to it. It is based on equity, come in and hold part of the company and after five years when you have made your money, you leave them to go on. These Industrialists insist on clutching the management of their holdings and do not in any way want to open up, which in the long run will not benefit them. Closing up is not the best, as it stalls the growth of the industries. So they must open up and admit more people to enable various ideas on how to run their business to come in. But I believe that SMEIS is something that started about three or four years ago, it will take some time for Nigerians to embrace the change. However, with $12 billion invested, it is something good but we are saying that the entire $35 billion should be used. It is not easy to accept change particularly in such vital area as relinquishing the management of your company, so it will take some time to get the desired change. But I know that they would eventually see the need for the reform, especially when those who opened up tell their success stories.
We are also aware that some businessmen, who want to access these funds, have even asked Banks to come in and participate, and possibly appoint their own people to supervise the running of the affairs of the company but most banks have allegedly turned down the offer.
This is very correct, that is the essence of participating, to come in on board and supervise. But there must be other facts, which you have not gotten. For instance, is the man ready to relinquish his hold on the chairmanship position, which is the bottom line? Look at the Nail Factory in Ogbe, Ahiazu Mbaise local government area of Imo State. Various banks have come several times, I have even had the opportunity to talk to some to take a look at the factory and invest. But do the people involved have the open and broad mind to allow other people to come? Banks would want to invest because if they do not invest, they would lose it to the Bank Of Industry (BOI). Even for BOl, it is not easy for them to give out loan, What we are talking about is that there must be some fundamental problems with some of these institutions that gave rise to the slow pace in the movement of these funds. But I believe that over time, I am confident that these funds would be Lised particularly with the role being played by Small and Medium Enterprises Development, a baby of Federal Government. There is also the problem that SMEDAN would be bugged down by bureaucracy which is what we fear but theirs is to train the manpower. The Businessmen have attended courses but, did they put these courses into some of these things? So, it is a fundamental problem in our economy. It is a fundamental problem, in the sense that both human resource and infrastructure are not in the proper place for it to be accessed. If it were in developed economy, all the funds would not last more than a day before they are taken and business would be running. Moreover, there is this fear. In equity, you must increase your equity from what it was for somebody to come in and the cost of doing it is too high. And that was what banks faced during the consolidation exercises. We begged Federal Government to relax the cost of paying to Corporate Affairs Commission [CAC], Security Exchange Commission [SEC], and Stock Exchange, that it is too high. May be this is what people are fearing or afraid of spending such amount of money when they are not sure of operating. Government must have to come in; it must have to help the small business to grow. The Federal Government must reduce the cost of doing business with government. You must not give with your right hand and at the same time take it away with the left hand, which is what government is doing. They should reduce the cost of doing business with them because you cannot increase your equity without going to government department. This is another area, which the media should let the Federal Government to be aware that ensuring that these businessmen survive because small business engender more and high level of employment in any economy. The big businesses hardly create employment like the small ones. Government should know that if a small business venture employ 5 people, it would impact positively on the economy, which the big, companies hardly do. Look at the number of people being sacked now in the banking industries . Where are they going to?. These are the people you are going to train in entrepreneurship so that they would be able to know what they are doing. Government must provide the avenues, the environment for small-scale businesses to grow As at now, the environment is not suitable for small-scale business to grow.
How would you assess the economy generally vis-a-vis inflation and the proposed reintroduction of lower currency?
It is beautiful idea but inflation is not tackled by the currency you introduce. The level of employment heaviness in the economy and the level of what you call Gross Domestic Product [GDP], Net Domestic Product and the amount of savings that people can do, tackle inflation. Thank God we are getting positive reports from the international Community. I think we need it. On the whole, the economy has improved positively. But Government should realise that it cannot do without the people. The people own the economy and they must have to listen to them. Really, though there is inflation out there, we must have to exercise patience for us to reap the benefit of what has happened so far. However, I do hope that nothing political would truncate it again so that the economy will continue to grow positively.
Are there things you would honestly have done if you were to go back as President, Chartered Institute of Bankers.
No, I have no regrets at all. I think I enjoyed serving some colleagues because if you go to a place, you must try and do one or two new things to show that you were there. Right now, I am still in the Board, if there was a thing I did not do; I can suggest it for some other person to do. |
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