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Some finance experts have said that it would require more than the
set of measures prescribed by the Central Bank’s Monetary Policy
Committee meeting to have a turnaround in credit availability for the
private sector.
Renaissance Capital, an international finance firm, said though
liquidity levels may remain adequate, addressing private sector credit
still remains a challenge.

Last week, the Central Bank decided to keep the Monetary Policy
Rate (MPR) unchanged at six percent, and hold the standing deposit
facility and standing lending facility at one percent and eight
percent, respectively.
“This low rate environment, coupled with fiscal expansionary policies,
the depletion of the excess crude account, and the injection of N620
billion into the banking system, has boosted systemic liquidity,
fuelling the rapid drop in interbank lending rates.

As
such, the extension of guarantees on interbank transactions to 30 June
2011 could also help ensure liquidity levels remain adequate,” said
Renaissance.
“Still, the set of measures described above has yet to result in a
turnaround in credit to the private sector. Indeed, lending rates have
remained sticky, as in most Sub-Saharan African countries which went
through a cycle of monetary easing.” Limited influence Similarly,
Afrinvest West Africa, a finance company, has also expressed worry. “In
isolation, the current benchmark rate will have very limited influence
on credit growth to real sector, a situation that is particularly
worsened by the stubbornly high lending rates.

“This view is supported by the 6.8 percent decline in credit to
the private sector by the end of the first quarter of 2010 from the
corresponding period of 2009, amid a 113.6 percent increase in credit
to government. We, however, expect other macroeconomic variables such
as lending rates to trend downwards slightly, exchange rates to
moderate at current levels, and inflation rates to trend upwards
slightly, towards the latter part of quarter two and the early stages
of quarter three in year 2010.”
Lydia Olushola, an economist and consultant at Skytrend Nigeria, said
policy makers need to act fast to create an effective economic
incentive that would spur credit growth and job creation.
“Without an effective credit stimulus of sufficient degree, the economy
is likely to see a decline in growth or even a formal recession,
leading to higher unemployment, declining or stagnant wages, and a host
of other economic problems,” Ms. Olushola said.
She said that there is always a debate over what effective credit
growth measures should look like, as different policies are purported
to stimulate the economy. “It is important to distinguish between those
that will have their effect in the very near-term to offset issues like
rising unemployment and the shrinking of manufacturing capacities and
those policies that have longer-term effects.”
According to her, any useful credit stimulating policy should
strengthen the economic recovery immediately and create more jobs in
the process.

“The
measures should generate growth directly and create jobs directly and
indirectly to offset rising unemployment. It may raise current deficits
but should not affect the long-term budget outlook.”
The Central Bank did not respond to enquiries on this matter as at
press time.