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Cost of funds highest in Edo/Delta industrial zone

Cost of funds highest in Edo/Delta industrial zone

Manufacturers in Edo/Delta industrial zone spent an average of 26.8 percent to access credit from banks and other financial institutions between January and June 2014.

This is the highest among 12 industrial zones in the country, latest data from Economic Review obtained from the Manufacturers Association of Nigeria (MAN) have shown.

On the average, manufacturers in all sub-sectors in Nigeria spent 22 percent within the period under review to access finance for their operations, the data show.

“From the interaction with members from the field survey conducted for the reviewed period, most credit facilities obtained by manufacturers range around 17 percent and 24 percent, with an average across the sector and in most areas, 20 percent,” MAN says.

“This rate is limiting the potential of the sector to play its maximum and expected role in diversifying the economy,” MAN says.

The data show manufacturers in Imo/Abia obtained credit at an average of 19.9 percent, while those in Oyo/Ondo/Osun/Ekiti did so at 14.3 percent, the lowest among in all the zones.

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Similarly, manufacturers in Kano/Sharada/Challawa accessed credit at an average of 17.4 percent, while those in Kaduna got same at 23.3 percent.

Furthermore, manufacturers in Ogun, the emerging industrial hub of the country, got loans and other credit within the period at an average of 20.8 percent as those in Kano Bompai did at 21.5 percent.

Manufacturers in Apapa (Lagos) accessed credit at 21.7 percent just as those in Ikeja (Lagos) got same at 24.1 percent.

Moreover, Anambra/Enugu manufacturers got credit at an average rate of 21.7 percent, but those in Bauch/Benue/Plateau did same at 21.2 percent, the data further show. In Rivers industrial zone, manufacturers got loans at 25.1 percent.

Industry players say these rates can hardly spur the real sector to create sufficient jobs and diversify the economy.

In a statement, Remi Bello, president, Lagos Chamber of Commerce and Industry, said the many real sector players and SMEs still have serious challenges in accessing credit owing to high interest rate of commercial banks.

“The tight credit situation is a major inhibiting factor to the capacity of domestic enterprises to take advantage of the robust Nigerian market. A framework for better synergy between the financial sector, the real sector and SMEs is critical,’’ Bello said recently, in an e-mail to BusinessDay.

MAN says most of the issues surrounding non-availability of credit to manufacturing , especially SME operators, cannot be totally be taken as the responsibility of commercial banks, saying that the structure of the financial system has constrained the deposit money banks from giving long-term credit.

MAN says the majority of deposit money banks are skewed in favour of government or public sector, while calling for an establishment of a development finance institution that will take care of real sector credit demand.