The Senate, on Tuesday, declared that commercial banks in the country were being controlled by a powerful cartel.
Senate said the cartel was strangulating Small and Medium Enterprises (SMEs) to the detriment of the economy and small businesses operating in the country.
Deputy Senate Leader, Sen. Bala Ibn Na’Allah, in his remarks, wondered why banks’ interest rates are high even at a time Nigeria is in economic recession.
“The banks are run by a powerful cartel. They do what they like and jerk up interest rates. Over the years, we have seen the exchange rates go up, but it is not the same in other economies of the world.
“Nigeria has the most unpredictable economy in the world and we have to be worried about this,” Na’Allah lamented.
President of the Senate, Bukola Saraki, in his remarks, criticised what he described as the twin evil of interest and exchange rates.
He said it is unreasonable for companies to continue to lay off staff, while declaring huge profits annually. He said the Senate will step in and ensure that the right thing is done.
Saraki said: “There has always been the twin evil of exchange rate and interest rates. We cannot live in a country where companies are folding up, yet organizations are declaring mega profits.
“The committee should swing into action. Whatever comes of the committee’s work, we must see to it that it is implemented to the fullest by the Senate.”
In a motion sponsored by Sen. Rafiu Ibrahim and tagged, “The dire need for a Stakeholders Round Table to address increasing interest rates in Nigeria”, the Senate said the current Monetary Policy Rates (MPR) of 14 per cent has remained high.
He compared with other developing nations such as Brazil which has 10.25 per cent Kenya 10 per cent, South Africa 7 per cent , Rwanda 6.25 per cent, Bangladesh 6.75 per cent , Botwana 5.50 per cent and many West Africa countries with single digit rates.
Senator Ibrahim pointed out that despite all the negative indices, banks continue to declare huge earnings and profitability which as at 31st March 2017 increased significantly by 151.02 per cent as profit before tax stood at N186.155 trillion as against N74.160 trillion in December 2016.
He said: “Most of this profitability are derived from investment in risk free Government securities such as Treasury Bills and Bonds. The CBN is now faced with difficulties in decision- making on some of its core mandates of controlling the inflation rate, exchange rate and interest rate.
“Available and reliable records indicate that between January to December, 2016, the CBN as regulator of the banking industry had mopped up about N5.784 trillion in interest expenses for liquidity Management thereby targeting inflation at the expense of economic growth, development and employment.
“The current regime of high interest rate continues to place a major burden on business investments and household consumption spending in Nigeria, thereby negatively impacting on the survival of Nigerian businesses.
“This is perpetuating the indicator which shows that only about 3% of SMEs starting up in the Country having access to credits from banks which ironically employ about 88% of our work force and therefore the backbone of the economy.”
The Senate committee on Banking, Insurance and other Financial Institutions is to organise a round-table session with the CBN, commercial banks, Nigerian Deposit Insurance Corporation (NDIC), other relevant stakeholders and industry experts with a view to finding immediate, sustainable and lasting solutions that would help usher in a new interest rate regime that supports enterprise development.
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