Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), says interest rates will moderate over time as ongoing economic reforms deepen, expressing optimism that commercial banks will expand lending to small and medium enterprises (SMEs).
Cardoso spoke on Wednesday during a fireside chat with Ngozi
Okonjo-Iweala, director-general (DG) of the World Trade Organisation (WTO), at
the seventh Africa Emerging Markets Forum in Abuja.
Responding to concerns over access to finance for SMEs, the
CBN governor acknowledged that high borrowing costs remain a challenge but
described them as a temporary consequence of reforms aimed at restoring
macroeconomic stability.
“Interest rates are high. Exchange rates have moderated and
are stable,” Cardoso said.
“Into the future, my expectation is that over time, interest
rates will begin to moderate. Over time, they will begin to moderate.
“It’s a price, unfortunately, we are having to pay because
of these policy flip-flops.”
The CBN governor said the apex bank had taken steps to
strengthen development finance institutions by giving them greater flexibility
to lend to businesses while maintaining stricter oversight of commercial banks.
He added that the ongoing banking recapitalisation exercise
would also improve credit flows to the real sector.
“Now that we have finished a banking recapitalisation
exercise and the banks have a lot of money at their disposal relative to
previously, you’re likely to find that there will be more interest in SMEs as
rates begin to drop,” he said.
“Some of the quote-unquote arbitrage opportunities, easy
money-making opportunities that used to exist have disappeared.
“Banks are in the business to make money. They will look at
how they can tweak their risk models and ensure they can support those areas,
the SMEs, and we will encourage them.”
Cardoso further said the central bank was already working on
measures that would support increased lending to smaller businesses.
“So it’s not lost, please. I know it sounds a little bit
hard, but I am confident that these are all temporary issues,” he said.
“We will get out of it. We will get to a situation where
rates will become more moderate, and where it will be easier for SMEs to access
credit not only from the development institutions but also from the banks.”
Cardoso also defended CBN’s decision to scale back
intervention lending, arguing that development finance was never meant to be
the primary responsibility of a central bank.
“Much of the fiscal functions were put on the central bank,”
he said.
“That’s what it is, and quite frankly, that’s one side of
it… the extent of the misapplication of intervention on the central bank was so
humongous that the capacity to do these things is limited.”
Cardoso said the return to orthodox monetary policy had
helped restore stability to the financial system and laid the foundation for
sustainable economic growth.
‘CBN TO PUBLISH DOCUMENT DETAILING NIGERIA’S ECONOMIC REFORMS’
Cardoso also said the apex bank will soon publish a document
detailing the reforms undertaken under the current administration.
He described the changes as a “fundamental shift” in the
country’s economic management.
“In fact, we’ve finished a draft, and in due course we will
document and we’ll publish it, and let people know that these are the things
that we have done that have taken us to a particular place,” he said.
The CBN governor said it is also important that “we avoid
the policy mistakes of the past, so that in future you can always have
reference to a particular book or document which lays it out extensively”.
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