Economic woes reason for massive loan defaults -Experts

According to economic experts, inflation, energy costs, and foreign exchange issues are driving industries and enterprises into insolvency, non-profitability, and the inability to repay loans from the Central Bank of Nigeria, CBN, and other institutions.

The CBN had disclosed that manufacturers and industrialists received over N9.7 trillion loan interventions in the period under review. Despite the interventions to revamp businesses, the apex bank decried the surge in the rate of bad loans across the country.

CBN appealed to Nigerians that loans should not be seen as grants but rather as a facility that needs to be repaid.

The CBN said this in its retreat for the development Finance Department on Monday.

As of September 30, 2022, Nigeria’s total debt stock rose to N44.06 trillion against N42.84 trillion in the prior Month, according to the Debt Management Office.

a don of Accounting and Financial Development at Lead City University, Ibadan, Prof Godwin Oyedokun, said CBN’s loan interventions are cosmetic as long as the root cause of Nigeria’s economic challenges remains unaddressed.

Oyedokun said if care is not taken, more businesses will slip into bankruptcy in the near future.

“With Nigeria’s harsh economic realities, the situation is expected because most businesses struggle to stay afloat. The operational cost now outweighs the profit margin in many cases, affecting businesses’ ability to repay loans.

“How do you want a business barely surviving to repay loans? This period is tough for most investments in Nigeria, as many have been forced to shut down. Except Nigeria addresses the root cause of inflation, insecurity, foreign exchange scarcity, high energy cost among others, the Central Bank of Nigeria interventions through loans are merely cosmetic and would only shun out defaulters”, he stated.

Source: dailypost.ng