Concerned about the country’s gnawing economic challenges, Lai Omotola, group managing director, CFL Group of Companies, at the weekend proposed the establishment of Collateral Bank, which could help over 10 million businesses access capital.
Omotola, an infrastructure development financier, said the establishment of the bank became imperative “to unlock access to capital by businesses and entrepreneurs in Nigeria.”
He advocated for the establishment of the collateral bank in a letter he addressed to President Muhammadu Buhari and Godwin Emefiele, governor, Central Bank of Nigeria (CBN), on February 29.
In a two-page document he signed, he lamented the diverse difficulties the lack of collateral securities had created for businesses, entrepreneurs and high-net individuals in the country, which he said, had contributed “to our prevailing economic crisis.”
He noted the case of various intervention funds that the CBN “has provided for different sectors of the economy,” also citing the case of thousands of individuals, who have beautiful business plans, but could not access capital to execute their business plan.
He thus said the need to provide collateral securities to access either the funds or business capital “has remained a huge challenge. This is not only for the intervention fund, but also the bank loan and other capital.”
According to Omotola, 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.”
He further explained the market worth of the collateral bank, noting 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.”
More than 10 million businesses “are still looking for credit or capital, which they cannot access due to the lack or outright absence of collateral securities,” he said.
If finally set up, he assured that “institutions like Nigerian Pension Funds, Asset Management Corporation of Nigeria (AMCON), high-worth individuals, government agencies and state government will have collateral securities that can be deposited for this cause.”
