Date Published: 05/20/10

Banks lending rate drops to 16 per cent

BANK’S lending rate has dropped slightly from 21 per cent to 16 per cent in the week.
According to banks’ treasurers, the drop in lending rate is prompted by the decision of the Central Bank of Nigeria (CBN) to peg the interest it pays on banks’ placement to one per cent.
This, they said, forced banks into cutting their lending rates, adding that “right now some net worth individuals and bluechip companies can borrow as a single digit rate.
A bureau De Change Operator, Mr. Harrison Owoh admitted crash in lending rates.
The banks want to lend out now and they can’t lend at high rate.  Since there is competition, they decided to lower their rates.
So, interest on deposit is now between three, four and five per cent whereas it used to be between 13.5 and 15 per cent.
However, lending rate depends on the bank.  Although, they are willing to lend as there is credit guarantee and their portfolios are changing.
Therefore, while the rate of the CBN is six per cent, banks lending rate lowers between eight or nine per cent, whereas it used to be 12 per cent.
Speaking, Alhaji Aliko Dangote disclosed that interest rate has actually gone down to one digit.
He said that the banks are desperate to lend to credible companies, adding that the Dangote group has gotten an offer from a bank at eight and half per cent.
Dangote disclosed:  “In the market now, the prevailing rate is not more than nine and half per cent especially for assessed serious customers”.
He added that there are prospects of interest rate going down further. “Banks are paying two to three per cent on deposits.  We are getting money at one per cent interest”.  
But, the former President of National Association of Chambers of Commerce, Industry, Mines and Agriculture, (NACCIMA), Chief John Oduyemi are still not being fair to the Small and Medium Scale Enterprises (SMEs), as they still lend at an exorbitant rates.
According to, the banks are still lending to manufacturers, farmers and SMEs at between 20 and 26 per cent depending on the bank.
Oduyemi said that banks tends to grant lower interest rates to some people depending on the strength of the loan, which may be at six to eight percent.
He stressed the need for government to ensure that the manufacturing, agric and SME sectors gets cheaper interest rates, so that they will be able to get cheaper interest.
This, he said, would enable the sector to remain in business, which automatically contributes to the economic development of the country through job creation and poverty reduction.
Corroborating Oduyemi, the President, Manufacturers Association of Nigeria, (MAN), and Alhaji Bashir Borodo stated that the deposit rate in Nigeria is still three to four per cent, while lending rate stands at 12 per cent to thirteen per cent.
He said that it would benefit the country if the rate of lending to the real sector of the economy were reduced to the lowest minimum.
Also, the former President of Port Harcourt Chamber of Commerce, Industry, Mines and Agriculture, Prince Billy Harry condemned bank’s reduced interest rates for big borrowers, leaving the SMEs to struggle with high interest rates.
According to him, the SMEs are still borrowing at 16 to 17 per cent, which, he said, would not help in economic development.
He urged the CBN to stand on its policies on lending rates to SMEs and ensure that the banks are strictly monitored.
He said that the CBN should not only be concerned about creating funds, which are not accessible, but ensure that it monitored it until they are fully utilised.
Interestingly, according to CBN’s Monetary Committee meeting of May, 10, available data showed that in March 2010, aggregate domestic credit (net) grew by 6.1 per cent over the December 2009 level, and by 24.5 per cent when annualized, which is far below the 2010 indicative target of 55.54 per cent.  Credit to government, which grew by 28.4 per cent, was the major contributor to the growth in aggregate credit in March 2010, as credit to the private sector declined, by 1.7 per cent. The annualized growth rate of credit to the private sector of 6.8 per cent was far below the provisional growth benchmark of 31.54 per cent for 2010.  The substantial growth of credit to government reflects the risk aversion of the DMBs to lending to non-government borrowers, implying the crowding out of private sector credit.
Courtesy Guardian