A former President of the Association of National Accountants of Nigeria (ANAN), Dr Samuel Nzekwe, has called on Deposit Money Banks to further recapitalize, to meet the current rising inflation challenges in the country.
Nzekwe made the call while speaking to newsmen on Monday in Ogun State.
According to him, the current economic situation called for commercial banks to recapitalize as Naira continue falling against the dollar.
He said that the rising country’s inflation rate had eroded the capital base of most banks, thus affecting them from playing their roles as financial intermediaries.
Lack of financial strengths
Nzekwe noted that most banks in the country lacked the financial strength to grant long-term loans to investors as gestations of businesses took between five to 10 years before starting to make profits.
- “There is no bank that offers or grants long-term loans to investors because of their financial capabilities.
- “And the majority of their profits come from other areas like investment in real estate and importation, rather than lending which is their core function,” he said.
The former ANAN president stressed the need for banks to also review their interest rate charging on loans, to attract more borrowers to the financial sector.
Nzekwe urged the Central Bank of Nigeria (CBN) to work in collaboration with the banks to tackle financial fraud in the banking system.
Rising inflation
Nigeria’s inflation rate rose to 22.79% in June 2023, representing 0.38% points increase from 22.41% recorded in the previous month.
This was contained in the recently released consumer price index report by the National Bureau of Statistics (NBS).
On a year-on-year basis, the Headline inflation rate was 4.19% points higher compared to the rate recorded in June 2022, which was 18.60%.
Core inflation increased to 20.27% from 20.06% in the prior month.
The increase in the core index is on the back of the federal government’s petrol subsidy removal announcement, which saw the price of petrol increase from an average of N185/ltr to N500 per litre.
On a month-on-month basis, the core Inflation rate was 1.74% in June 2023. It stood at 1.81% in May 2023, down by 0.07%.
The highest increases were recorded in prices of passenger transport by air, gas, vehicle spare parts, liquid fuel, fuels, and lubricants for personal transport equipment, medical services, passenger transport by road, etc.
