Sanwo-Olu to CBN: Please Help, Interest Rate Tough on Us

•Lubricant operator laments impact of rising inflation, FX instability on local investors

Dike Onwuamaeze and Peter Uzoho

Barely a week after Africa’s richest man and industrialist, Alhaji Aliko Dangote, cried out that the prevailing high interest regime in the country was stifling private sector growth, Governor of Lagos State, Mr. Babajide Sanwo-Olu, has also cried out to the Central Bank of Nigeria (CBN) that pressure of the current interest rate regime was also tough on operators in the public sector.

Also, yesterday, a lubricant entrepreneur and Chief Executive Officer of Oilden Energies Limited, Mr. Oluwatoni Oladiran, decried the adverse effect of galloping inflation and foreign exchange instability on many companies operating in Nigeria.

Sanwo-Olu made the call at the weekend, at the presentation of a book titled “Power of One Man: How the Soludo Engineered Consolidation Transformed Nigerian Banks to Global Players,” authored by a veteran journalist, Dr. Ray Echebiri.

Sanwo-Olu said: “We must say something. We that are in the public sector (and Professor Soludo, an economist, is one of us now) that it is tough for us at the public sector at this time. We all need to belt up.

“I do not know how we are going to survive the kind of interest rate regime that we have now.

“We know it is going to be temporary. But it is a whole lot of pressure on all of us. Please just help us.”

The governor of Lagos State, however, encouraged the central bank to stay on course and finish the ongoing banking consolidation exercise.

The Governor of Anambra State, Soludo, who initiated and executed the 2005 banking consolidation exercise as then Governor of the CBN, was humorous when he commented on the current interest rate.

Soludo said having helped the banks to grow from the level of little financial institutions to becoming a global champion, they would not ask him to pay 30 per cent interest rate when he shows up at their doorsteps.

He said: “And now I say to them, those little, little banks of those days that have now become multi-billion dollar enterprises.

“I am in my second job. When we come back to you just like the governor of Lagos State has said that we need financing, I do not know how you will structure that.

“But for those banks that we just nurtured to become global champions have to remember that when we show up, we are not going to pay the 30 per cent. No! No! No! I can see some of them (bankers) here.” 

However, the Governor of CBN, Dr. Olayemi Cardoso, who was represented by CBN’s Deputy Governor for Financial Stability, Mr. Phillip Ikeazor, said current interest rate hikes would be sustained until galloping inflation was tamed and hyperinflation averted. 

Cardosa said: “It is very important that we do not enter hyperinflation where the transmission of monetary economic tools will become completely ineffective. It is important that we avoid that.

“So, we will maintain interest rate hike as long as it takes to control and stabilise our galloping inflation. It is important that we tighten and hold on a little while and expect that in no distance future we will be able to slow down on the rate hikes.”

For his part, Oladiran, decried the adverse effect of inflation and foreign exchange instability on many companies operating in Nigeria.

He specifically said the situation was eroding returns on investment, profitability and competitiveness in the Nigerian lube industry.

Oladiran, made the assertion in Lagos during an interactive session with select journalists.

To change the narrative, Oladiran therefore called on the federal government to consider introducing some tax incentives and other helpful fiscal interventions to boost the capacity and production of the local players in the lubricant sector.

He pointed out that such policy  interventions by government could help in tackling the various challenges facing them as entrepreneurs in the country.

He also urged the government to view the lubricant sector as a critical component of the nation’s economy, pointing out that the FX instability has made them volatile to the rates of base oils on a daily basis.

“Maybe when the refinery starts up, we can now start having extracts from the refinery and we can produce base oil for ourselves. But for now, it’s either we get from the modular refineries or we import and most people will tell you they would rather just import these things. Because the standards that we get from the modular refineries are not even as good as what we get from what we bring from outside.

“So, most of these products are products we have to get elsewhere outside Nigeria. So now we have to search for dollar at the present rates, and you know, that’s a major challenge for us. Tax policies killing most businesses. But that is like a major challenge for this particular sector of business and our profit too,” Oladiran stated.

Giving insights on the issue of adulteration of products in the market, which he said remains a threat to their huge investment, Oladiran explained that it required both government and individual efforts to curb the menace in the country.

“The amount of adulterated products out there actually kills the good products. Now, the only thing I feel we can do to curb this is to monitor the channel of distribution of each products.

“For me, I ensure I take samples of our product to the lab personally and get the results to ensure what leaves our factory is the right products we are selling to customers.”