The deputy governor, Economic Policy, Central Bank of Nigeria, Dr. Joseph Nnanna, has called on the federal government to reduce its level of domestic borrowing so as to drive down the lending rate in the money market.
Nnanna disclosed this at a roundtable event on factoring financing held in Abuja on the sidelines of the just concluded African Export-Import Bank’s annual conference. He said it would be difficult for deposit money banks to lend at a single digit interest rate when the government is borrowing from the banks at an average rate of 18 percent.
‘‘If the government can stop borrowing and start living within its means, liquidity will be there and banks will be constrained to lend at a single digit,’’ he said.
Also, as part of plans to support the search for credit by the Micro Small and Medium Enterprises (MSMEs), the Nigerian Export-Import Bank (NEXIM bank) may soon begin to perform factoring function or support a registered company as a domestic factor.
Experts said factoring means that when a firm makes supplies to a bigger company, he transfers the invoice that has been issued to a third party (the Factor) who himself can then go and collect it when it matures because he has the capacity. In the meantime, the small enterprise has received the money on that same day he issues the credit and removes it from its balance sheet so the Factor takes the risk of the possibility that the obligor cannot be able to pay.
The factoring law is said to be before the National Assembly.
Managing partner, Perchstone and Graeys, Mr Osaro Eghobamien told COLOSSUS GISTS that;
“When the factoring laws is passed, signed and becomes operational, what NEXIM bank will be doing is that they are going to go into what is known as open trade. Afreximbank will provide a lot of money to NEXIM and NEXIM bank will then be able to support a lot of small and medium size enterprises.”
Managing director, Intra- African Trade Initiatives, Afreximbank Mrs. Kanayo Awani, also explained that while factoring is a relatively new concept of funding MSMEs in Africa, it is picking up in fast pace in Nigeria.
Also speaking at the roundtable event, chairman, House of Representatives Committee on Banking and Currency, Jones Onyereri, said that the factoring bill, which is currently before the National Assembly, would receive accelerated passage. He said since it was becoming difficult for small businesses to raise money from banks to finance their operations, there was a need to come up with legislation that would support the use of alternative financing instruments.
No comments