The growing difficulty of resource rich countries in Africa including Nigeria to deploy their endowed resources for the transformation of their respective countries has been blamed on heavy reliance on public sector funds by their financial institutions.
The acting governor of the Central Bank of Nigeria (CBN) Mrs. Sarah Alade, who made the disclosure said the heavy dependence on public sector funds by these financial institutions was crowding out private sectors of the economy, with the attendant strains on the overall economy.
Alade who spoke at a plenary panel session on “Structural Transformation and Private Sector Development in Sub-Saharan Africa” weekend at the just concluded Africa Rising Conference in Maputo, Mozambique, said access to finance becomes difficult as wealth from the natural resources enthrone fiscal dominance with financial institutions depending so much on government at the detriment of the real and productive sectors of the economy.
In order to reverse the trend and focus on the real and productive sectors of the economy, Alade said the CBN had in place guarantees to help the financial institutions lend to risky sectors. She also said the current tightening policies undertaken by the regulatory authorities was geared towards weaning financial institutions off government funds, thereby free lending to the private sector.
“In Nigeria, we have policies to address this issue like guarantees and the raising of cash reserve ratios on public funds for banks, which is geared towards enhancing private sector lending,” she said.
She noted that a transformation agenda was ongoing in Nigeria and that it was geared towards developing the private sector to drive growth in the economy, citing the power privatisation exercise and the agricultural transformation agenda as examples.