Despite banking reforms, SMEs, manufacturers still face severe financing costs — LCCI

In spite of the successful reforms in the nation’s banking space, access to affordable credit has remained a major constraint, with manufacturers and SMEs still facing huge financing costs, the Lagos Chamber of Commerce and Industry (LCCI) has said.

The Chamber stated this in its 3rd Quarter Report on the State of the Nation’s Economy.

It  noted that while macro- economic stabilization and banking sector reforms remain critical, many businesses have  not been able to invest, expand and create jobs, due to severe financing costs confronting them.

According to the business advocacy  group, the challenge was not simply  whether the nation’s banks have the capital, but whether viable business could obtain credit at rates and tenors that support productive investment.

It therefore urged the monetary authorities, development finance houses and commercial banks to strengthen credit intermediation for the real sector, by giving priority to working capital, equipment acquisition, agricultural  value chains, export-oriented manufacturing, technology adoption and SME expansion.

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“Nigeria can not attain the scale of industrial growth and employment creation it needs if the cost of productive capital remains prohibitive,” it stated.

On the nation’s debt rising to N166.79 Trillion, LCCI described the rising debt stock as heightening concerns about debt-servicing costs, fiscal sustainability and the potential crowding of private sector credit.

According to the organisation, higher  government borrowing  could sustain elevated interest rates, increase financing costs for businesses and limit access to affordable  credit, particularly MSMEs and manufacturers.

“External debt also exposes public finances to exchange  rate risks, while  increased debt-service obligations could constrain spending on infrastructure, power, transport and other growth-enabling investments,” it argued.

The Chamber identified high energy costs, especially the sharp increases in petrol and diesel prices, in the third quarter,  as one of the most significant concerns  confronting members’ businesses.

It noted that sharp increases in the prices of those items, during the period, have raised the cost of operating generators, transporting goods, distributing products and providing essential services.

On the proposed petrol price-stabilisation mechanism, by the federal government, the Chamber argued that while the proposed ceiling might moderate the immediate transmission of international oil price and exchange rate shocks, it however believed such policy would not bring down petrol prices to levels that would provide meaningful relief to businesses and consumers.