The Senate has said, that the present 25-30 per cent interest rate regime has become a yoke too hard for any real sector business to bear, stressing that it would be extremely difficult for an investor anywhere to survive on these rates.
The Senate said the Central Bank of Nigeria, CBN, has retained the 14 per cent Monetary Policy Rate, MPR, unlike other developing countries which have lower MPR, such as Kenya (10 per cent), Brazil (10.25 per cent), South-Africa (7 per cent), Rwanda (6.25 per cent), Bangladesh (6.75 per cent and in many sub-Saharan countries with single digit to as low as 2.95 per cent in Cameroon.
The Senate also accused the CBN of mopping up about N5.784 trillion in interest expenses for liquidity management, thereby sacrificing economic growth, development and employment in the name of targeting inflation.
Senate chamber But the governor of CBN, Mr. Godwin Emefiele, said the apex bank was targeting to bringing down inflation to between 10 and 11 percent before end of year, adding that it was also working with commercial banks to focus more on lending to SMEs.
The Senate also raised alarm that in spite of the high interest rate and the bad economic situation, Nigerian banks continued to declare huge earnings and profits, which as at 31st March, 2017, increased significantly by 151.02 per cent as profit before tax (PBT) stood at N186.155 trillion against N74.160 trillion in December 2016, adding that these huge profits are derived from investment in risk-free government securities such as Bonds and Treasury Bills.
We ‘re targeting 11% inflation end 2017— CBN Gov But Governor of the Central Bank of Nigeria, CBN, Mr. Godwin Emefiele, in an apparent response, said the bank was targeting an inflation rate of between 10 and 11 per cent at the end of the year.
He spoke, in Abuja, yesterday, at a meeting with the Senate Committee on Banking on the high interest rates in the Nigerian banking industry.
According to the governor, although the inflation rate has been trending downwards, it remains very high at the current 17. 24 per cent. He disclosed that the Deposit Money Banks have contributed N27 billion to the pool of funds they decided to set aside for exports business.
Nigerian banks had in February, agreed to dedicate five percent of their annual profit-less tax balances as equity capital for export driven businesses as well as those which commit to helping government’s import substitution drive.
Emefiele said the apex bank was ready to increase its financing of agribusiness, especially in the production and processing of tomato, dairy and poultry. The governor said the CBN was also working out an arrangement with banks on how to focus more on lending to the SMEs sub-sector of the economy.