No business can survive with current interest rate regime —NACCIMA

The president of the National Association of Chambers of Commerce and Industry, Mines and Agriculture  (NACCIMA), Mr. Dele Oye, has stated that no business in the real sector of the Nigerian economy can borrow money from the banking industry at prevailing high interest rate and survive, “ Not even drug dealers,“ he insisted.

He also said that decisions such as interest rate hikes by the Central Bank of Nigeria (CBN) contradict the president’s campaigns of cheap access to capital for individuals and businesses.

According to Oye, implicit taxes such as security and others that Nigerians pay are far above the current tax rate being charged by the government at all levels.

He stated this while delivering a lecture at the Vanguard Economic Discourse theme, ‘Reforms In The Era of Global Economic Uncertainties: Whither Nigeria? where he stated that the current policy actions of the administration are different from what the President outlined in his manifesto during the campaigns.

He stated “What we mean by implicit tax is, apart from the taxes we pay, there are ones you use to do roads, pay area boys in your area, and have your own security. All of them have to be provided by government.

You look at what happened in Okomu- the investors have to pay for their own security after paying billions in tax. So, the implicit tax is far and above the current tax rate. All of us in this room pay it.”

He referenced what players in the oil industry face when oil companies carry out community development activities in their host communities, saying it’s part of government’s responsibilities.

Furthermore, Mr. Oye criticized the Nigerian Customs Service (NCS) regular changes in the exchange rate for duties collection and other irregular policies in the country like the expatriate levy and cybersecurity levy.

He also called on the Federal Government and CBN to act to protect the real sector of the economy and provide support for businesses across the country. He noted that the MPR hiking spree of the CBN in the last five months should have been done immediately after the subsidy on PMS was removed to suck up excess cash liquidity.

Nigerian Tribune checks revealed some banks with the highest prime lending rates for manufacturing companies in Nigeria, as at March 8, 2024.

Prime lending is the interest rates banks charge on loans and products held by customers with the highest credit rating.

Consequently, when the prime rate is high, liquidity is low and loans are hard to come by, thus slowing the economy down and impacting on firms/ corporate businesses to growth.

The Monetary Policy Committee (MPC) of the CBN had increased the MPR to 22.75 percent in February 2024 amid inflationary and exchange rate pressures.

Again, the MPC increased the benchmark interest rate last week by 150 basis points to 26.25 percent from 24.75 percent.

Stakeholders are therefore worried that with the latest hike in benchmark interest rate last week, the lenders will effect some adjustments in rates to reflect the higher interest rate environment beginning from this week.

For instance, Titan Trust Bank’s Prime lending rate stood at 23.00, while Maximum lending rate was 30.50 percent as of March 2024.

Others are : Optimus Bank, Prime rate – 23.75percent, Maximum rate – 35.00 percent; Fidelity Bank, Prime rate – 24.00percent Maximum rate – 26.00percent;

Providus Bank, Prime rate – 25.00 percent, Maximum rate – 30.00 percent;

Unity Bank, Prime rate – 26.00 percent, Maximum rate – 33.00 percent; Ecobank Prime rate – 26.75 percent, Maximum rate – 35.00 percent; Heritage Bank, Prime rate – 27.00 percent, Maximum rate – 35.00 percent.

Similarly, for United Bank for Africa (UBA), it is Prime rate – 28.50 percent; Maximum rate – 32.00 percent; Wema Bank: Prime rate – 30.50 percent; Maximum rate – 31.50 percent; Keystone Bank Ltd: Prime rate – 31.00 percent and Maximum rate -36.00percent among others.

Analyst are of the view that there is no manufacturing sector which could be globally competitive at these rates.

NdubuisiEkekwe, Chairman of FASMICRO Group, and the Lead Faculty in Tekedia Mini-MBA said that a typical central bank does two main jobs – boost employment through interest rate management and stabilize national currency through the control of inflation. “Nigeria’s consistent high rates are designed to manage inflation which remains stubbornly high, and as that happens, the other part of boosting employment is largely neglected.

“Here, I make my point that we may need to try other things, and that could mean boosting Supply (i.e. manufacturing output) via lower rates, if we desire to improve employment and bring inflation down. At lower rates, companies have money to expand production, creating employment along the line.

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