The House of Representatives has called on the Central Bank of Nigeria (CBN) to review the Monetary Policy Rates (MPR) in order to curb high lending rate, this will help usher in a new interest rate regime to support enterprise development in Nigeria. The call was made yesterday by Reps following the adoption of a motion brought by Hon. Fatoba Olusola, on the need to investigate banks’ lending practices, protect borrowers from exploitative interest rates and promote economic development.
Fatoba said the current lending rate of commercial banks were as high as 30 percent, making Nigeria one of the countries with the highest lending rates in Africa, and probably the world. According to him, the lending rate is largely determined by the MPR set out by the CBN, hence, the higher the MPR, the higher the interest rate charged by commercial banks. Fatoba further noted that the MPR is held at 14 percent while that of South Africa, the longtime economic rival of Nigeria is at 6.5 percent, making Nigeria one of the top five countries in Africa with the highest interest rates.
He expressed concern that the lending rate of banks restricts lending, particularly to Small and Medium Enterprises (SMEs), manufacturers and industrialists, all belonging to a sector that employs a large percentage of the workforce in Nigeria. The lawmaker lamented that the lending rate impedes economic growth as it impacts negatively on the performance of the manufacturing sector due to the difficulty of accessing loans from banks. He stated that the resolve of President Muhammadu Buhari to lift 100 million Nigerians out of poverty might be difficult to achieve if a high lending rate and the challenges of having access to loans are not critically addressed.
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He said with a high-interest rate, investors and banks were more willing to invest in government securities only, which pay high returns, a phenomenon is known as crowding out, adding that high-interest rate on government securities draw investments away from other areas of the economy. According to him, high interest rate cannot both contain inflation and stimulate economic growth at the same time, while in reality citizens, small, medium enterprises, manufacturers and investors are bearing the brunt of the “cut-throat” lending rate where the banks and their directors remain the major beneficiaries of the high lending rates.
After the debate, Reps called on “the Central Bank of Nigeria to review the Monetary Policy Rates (MPR) and its implementation, putting into consideration the cost of doing business by banks; “Urge the National Economic Council to critically consider how to reduce the cost of doing business in Nigeria in a manner that the common man will feel the impact; mandate the Committee on Banking and Currency to interface with commercial banks to ascertain the justification for the big gap between the MPR and the lending rates.”
The House also mandated the Committees on Banking and Currency, Finance, and Industry to organise a round-table session with the CBN, Banks, the Nigerian Deposit Insurance Corporation (NDIC), Small and Medium Enterprises (SMEs), the Manufacturers Association of Nigeria (MAN), industrialists and industry experts with a view to finding immediate, sustainable and lasting solutions that would help usher in a new interest rate regime that would support enterprise development in Nigeria.
Juliet Ekwebelam
