Nigeria’s infrastruture development financier and Group Managing Director of CFL Group of Companies, Lai Omotola, has written to President Muhammadu Buhari proposing the establishment of N15 trillion Collateral Bank that could help over 10 million businesses access capital.
Omotola argued that the establishment of the bank became imperative to unlock access to capital by businesses and entrepreneurs in Nigeria.
In a letter addressed to Buhari and the Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele on 29 February, 2016, he decried diverse difficulties the lack of collateral securities had created for businesses, entrepreneurs and high-net individuals in the country, which had contributed “to our prevailing economic crisis.”
Omotola cited the case of various intervention funds that the CBN had provided for different sectors of the economy, while also citing the case of thousands of individuals, who have beautiful business plans, but could not access capital to execute their business plans.
Omotola said the need to provide collateral securities to access either the funds or business capital had remained a huge challenge as this was not only for the intervention fund, but also the bank loan and other capital.
He noted that the market for the collateral bank “is estimated at N15 trillion. If fully harnessed, it can be a panacea for unlocking capital for the economic growth of Nigeria.”
Omotola further explained the market worth of the collateral bank, adding that the country’s total exposure of banks, governments and organised private sectors to capital “is N12 trillion. Currently, we do not have up to 10 percent people and businesses that should have access to capital.”
He added that more than 10 million businesses “are still looking for credit or capital, which they cannot access due to the lack of or outright absence of collateral securities.
“The collateral bank will be a collateral deposit bank whereby the bank will collect all forms of collateral securities from properties, treasury bills, bonds, fixed deposits certificates and other forms of collateral and in turn issue a bank guarantee on behalf of the borrower.
“It is more like a collateral leasing. The benefits are to all parties. The borrower will be able to get solid collateral securities, which will attract lower interest rate while the collateral owner can make additional income from the idle assets and the lender can be sure of collateral securities, ultimately eradicating the menace of cloned documents.”
According to Omotola, the collateral bank would charge commission, which would not be above five percent of principal sum and operate on a lean staff strength, but big balance sheet.
If finally set up, Omotola assured that institutions like Nigerian Pension Funds, Asset Management Corporation of Nigeria (AMCON), high-worth individuals, government agencies and state government would have collateral securities that could be deposited for this cause. PM