Unstable economic environment stifling businesses, says Fashola

Governor Babatunde Fashola of Lagos State has linked failing businesses, especially in the transportation sector, and the slow pace of infrastructural development in the country to unstable economic and financial policies.

Fashola made the assertion at the rollout of 100 air-conditioned high capacity mass transit buses by Metro Bus, a licensed private transport services operator in Lagos. BusinessDay learnt that the buses would be deployed on eight different routes within the Lagos metropolis.

Fashola citing the Bus Rapid Transit (BRT) operated by the National Union of Road Transport Workers (NURTW) under the regulation of Lagos Metropolitan Area Transport Authority (LAMATA) as example, said, “The environment which the investors started with has begun to change.

At the time we started the BRT system, the private investors were borrowing at about $1 to N118. And interest rate at that time was about 10 percent. So when people saw aging buses that weren’t repaired, it was not that the Lagos State government is not efficient. “It was because the private individuals who invested in the business were been incapacitated by financial regulation and economic policies that isn’t helping them to grow. We expect them to borrow money at N210 to $1 and at 25 percent interest rate. And we expect them to buy buses and keep the old transport fare. What type of economics is that?

Read also: Foreign investors renew interest in May & Baker

“The Federal Government has also announced plan to increase tariff for buses. And it is an environment in which the bus operators do business. And it is an environment we need to pay attention to if we must see growth in this industry.” “The banks will tell you how much profit they make from our borrowing annually. And with that, they maintain profitability; if we stop borrowing, many banks will give up. This is how an economy should function. And that is why it is worrisome that lending by banks now is no longer based on commercial viability. “But the central government has started interfering in the process. They have instructed banks who they should lend money to. And I don’t know what type of economic management policy that is. This is because slowly and gradually, they are squeezing life out of this economy. “They are taking the in- dependence away.

Why should a bank need a minister before lending loan to a customer? If the customer credit is good, why should he not borrow money? That is what is happening today. It is becoming difficult to get foreign exchange and transact legitimate deals.” Fashola cited another ex- ample of how this is affecting development of infrastructure in Lagos, saying “right now we should have remit- ted the fund for our light rail.”