Business

LCCI: Insufficient credit facilities stiffling investment

Despite the Central Bank of Nigeria (CBN)’s total gross credit to the private sector standing at N18.90 trillion at the end of half year, representing about 13 per cent of the country’s Gross Domestic Product (GDP), the Lagos Chamber of Commerce and Industry (LCCI) has disclosed that size of credit to private sector from Nigerian banks is still largely insufficient. President of LCCI, Mrs. Toki Mabogunje, disclosed this in a chat in Lagos, saying that evidence had shown that lack of access to capital for the private sector was creating a huge funding gap and liquidity challenge for the operators.

The LCCI president, who was speaking on access to international capital and funding solutions for Nigerian businesses in the country, underscored the importance of access to capital and finance to the development of the Nigeria economy given the large number of businesses in the country and the important role of private sector in facilitating economic growth and development post-COVID-19. She said that the outbreak of COVID-19 further worsened the risks and uncertainties around capital and finance availability generally in view of deteriorating business and economic outlook.

Mabogunje alluded to the fact that recent report by the World Bank statistics showed that Nigeria’s 10.5 per cent, Domestic Credit to Private Sector (percentage of GDP) in 2019 was one of the lowest in world. According to her, Nigerian businesses have been facing challenge of access to credit from the commercial banks prior to COVID-19 in the country.

The LCCI president, however, solicited the need for businesses to explore alternative funding solutions available on global as well local space for reinforcement of businesses in the country. She said: “On access to international capital and funding solutions for Nigerian businesses, this underscores the importance of access to capital and finance to the development of the Nigeria economy given the large number of businesses in the country and the important role of private sector in facilitating economic growth and development.

“According to the Central Bank of Nigeria, total gross credit to the private sector stood at N18.90 trillion at end-June 2020, representing about 13 per cent of the gross domestic product. “Similarly, the World Bank statistics shows that Nigeria’s 10.5 per cent, domestic credit to private sector (percentage of GDP) in 2019 was one of the lowest in world.

“It is, therefore, evident from the statistics above I mentioned that the size of credit to private sector (as percentage of GDP) is largely insufficient to meet the demand for finance by private sector thereby creating a huge funding gap and liquidity challenge to meet working capital requirements and finance new projects and expansion of existing ones. “Prior to the COVID-19 outbreak, businesses were increasingly finding it difficult to access finance through the domestic financial system given the high borrowing costs associated with credit facility in conventional banking system.

“Moreover, the COVID-19 has elevated the risks and uncertainties around capital and finance generally in view of deteriorating business and economic outlook. “This scenario therefore reinforces the need for businesses to explore alternative funding solutions available on global as well local space.” Speaking further, the LCCI president emphasised that the chamber commended the role of Central Bank of Nigeria in areas of expanding the frontiers of finance for businesses through policies in the country. To her, the apex bank’s intervention funds otherwise known as stimulus funds have really impacted positively on Nigerian businesses I terms of growth and development.

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