Foreign creditors have shunned Nigerian businessmen who have been making attempts to borrow from foreign banks as local interest rates hit the roof.
A survey by The Republic showed that foreign creditors have completely lost confidence in doing direct business with private investors in Nigeria particularly as the debt problem remain largely unresolved and local corporate profit margins have remained on the fall.
A British banker who spoke to The Republic said that further credit to Nigeria would mainly continue on foreign agency and Nigerian government basis, rather than as with uninsured loans that had characterised the past.
He observed hat the trend has already been set as foreign debts opted by private investors have increasingly become sovereign, that is over by the federal government. Meaning that further dealings will mainly remain with the government.
In this light, he highlighted various credit lines that have recently been extended to Nigeria by foreign creditors. These include the $500 million World Bank facility for small scale industries and the $200 million British Export Credit Guarantee Department, ECGD, facility.
He however observed that the big multinational corporation operating in Nigeria are not s badly hit by the continued credit crunch. He hinted that a beverage making firm in Nigeria has been given approval by his bank for a N20 million (about 3.0 million pounds) long term loan which was arranged by the parent company.
In the same vein, Automobile Peugeot (AP) of France which is the parent company of Peugeot Automobile of Nigeria, PAN, is negotiating a N120 million syndicated adjustment loan for PAN.
The banker explained that such moves by parent companies to protect their offsprings abroad is mainly to uphold their own good image indigenous Nigerian companies therefore, cannot have such largesse.
Some Nigerian bankers who were spoken to welcomed the attitude of foreign banks. They observed that a resort to off-shore financing while compounding Nigeria‚Äôs debt problem would not help the problem of high interest rates.
An official of one of the big commercial banks said that by not patronising local banks, local borrowers may force banks to bring down their interest rates and make so little profit to reduce banking operations. But the emergent rates would still be too high to make borrowing viable.
This, he said would have a neverberaing effect on the entire economy and will drastically reduce the Gross Domestic Product. He insisted that the best way out of the credit crunch is for the federal government to reduce the minium discount rate.