Lack of corporate governance among operators in the real sector has been identified by financial experts as a major reason most of them cannot explore other sources of funding aside the banking industry.
Banks in the country have in recent times cut back on their lending as they grapple with non-performing loans and a recovering economy.
In spite of the improvements in business activities as well as the recovery recorded by the Nigerian economy, banks have continued to be wary of lending to the public as the loan book of most banks declined in the first three months of 2018 said the experts.
As against a total loan book of N15.385 trillion of 11 banks as at December 2017, total loan book of most banks dropped by 6.75 per cent in the first quarter of the year to N14.346 trillion. Total banking sector credit to the public according to data by the National Bureau of Statistics (NBS) stood at N15.7 trillion as at December 2017.
This including the high interest rate which hovers between 35 and 30 per cent leaves the real sector with the option of seeking funding from other sources. However, the funding opportunity of the debt market is yet to be fully utilised.
According to the managing director of Sigma Pensions, Mr. Dave Uduanu, the lack of corporate governance is a major deterrent for companies’ assessing funds particularly from the debt market. With almost N8 trillion pension funds’ assets, said Pension Fund Administrators (PFAs) are seeking to diversify their investments.
Speaking on the sidelines of Sigma Pensions Business Roundtable in Lagos at the weekend, Uduanu said PFAs are lacking diversified investment and seek new ventures in which to invest in. however, due to the regulations guiding the PFAs, he said their options are limited.
This according to him is due to unwillingness of companies to open their books to the public so as to raise funds particularly through the bond market. This he said is a major reason corporate bonds are not so popular in the country.
On his part, financial expert, Dr. Bala Mohammadu Abubakar, likewise identified lack of corporate governance and fiscal responsibility in both private and public sectors of Nigeria economy as the major factor militating against business activities in Nigeria.
This was also the take of managing director and chief executive of Seplat Petroleum Development Company Plc, Austin Avuru, who noted that many indigenous companies have failed because of non-adherence to good corporate governance.
However, the reviewed Code of Corporate Governance which is still at the draft stage is expected to change the tide and bring in investments not only from PFAs but also from foreign investors. According to the executive secretary of the Financial Reporting Council (FRC), Daniel Asapokhai, the Code is expected to enhance the integrity of the Nigerian capital market, by entrenching a culture of disclosure, transparency and accountability.
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