Godwin Emefiele
CBN Governor, Godwin Emefiele

Governor of CBN, Mr. Godwin Emefiele

By Obinna Chima

The Group Managing Director of CFL Group of Companies, Mr. Lai Omotola, at the weekend proposed the establishment of Collateral Bank which, he said, could help over 10 million businesses in the country access capital.

Omotola, an infrastructure development financier, stressed that the establishment of the bank became imperative “to unlock access to capital by businesses and entrepreneurs in Nigeria.”

He advocated the initiative in a letter he addressed to President Muhammadu Buhari and the Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele respectively dated on March 4 and February 29, this year.

In a two-page document he personally signed, the chief executive lamented 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.”

Omotola cited the case of various intervention funds that the CBN “has provided for different sectors of the economy.”

He also cited 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.”

The chief executive therefore 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.”

He further put the country’s total exposure of banks, governments and organised private sectors at N12 trillion, adding that “currently, we do not have up to 10 per cent people and businesses that should have access to capital.”

The chief executive noted that 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 explained that 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 issue a bank guarantee on behalf of the borrower.”

He said it “is more like a collateral leasing. The benefits are to all parties. The borrower will 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.”

The chief executive added that the collateral bank would charge commission, which he said, would not be above five per cent of principal sum and operate on a lean staff strength, but big balance sheet.

If finally set up, Omotola said 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.