Reps call for downward review of interest rate
• Query 30 per cent current interest rate
The House of Representatives, on Wednesday, unveiled plans to hold a roundtable meeting with Central Bank of Nigeria (CBN), commercial banks, Manufacturers Association of Nigeria (MAN) and industry experts with the view to usher in a new fiscal and monetary policy regime.
The resolution was passed sequel to the adoption of a motion on the ‘Need to investigate banks’ lending practice, protect borrowers from exploitative interest rates and promote economic development,’ sponsored by Honourable Fatoba Steve.
On his part, Honourable Saidu Musa called on all the commercial banks operating in the country to also lend their loan services to the small and medium enterprises instead of exclusively to big-time businesses.
In his lead debate, Honorable Steve frowned at the current 30% interest rate imposed by commercial banks on funds borrowed by customers, thereby making Nigeria one of the countries with the highest lending rates in Africa and probably the world.
“That lending rates are largely determined by the Monetary Policy Rate (MPR) set out by the CBN, hence the higher the MPR, the higher the interest rates charged by commercial banks.
“The House further notes that the MPR is held at 14% while that of South Afric, the longtime economic rival of Nigeria is at 6.5%, thus making Nigeria one of the top 5 countries in Africa with the highest interest rates.
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“The House is concerned that the lending rates of banks restrict lending, particularly to Small and Medium Enterprises (SMEs), Manufacturers and industrialists, all belonging to a sector which employs a large percentage of the workforce in Nigeria.
“The House is worried that the lending rates impede economic growth as they impact negatively on the performance of the manufacturing sector due to the difficulty of accessing loans from banks.
“The House is cognizant that banks are the primary sources of capital for manufacturers and industrialists, but when lending is at a high-interest rate, profits in the manufacturing process are eroded which makes it difficult or unattractive for manufacturers to continue in business.
“The House is also concerned that the resolve of President Muhammadu Buhari to lift 100 million Nigerians out of poverty may be difficult to achieve if the issue of high lending rates and the challenges of having access to loans are not critically addressed;
“The House is also worried that when interest rates are high, investors and banks are often willing to invest in government securities only which pay high returns, a phenomenon known as crowding out, as high-interest rates on government securities draw investments away from other areas of the economy.
“The House further concerned that high-interest rates cannot both contain inflation and stimulate economic growth at the same time, while in reality citizens, Small and Medium Enterprises, manufacturers and investors are bearing the brunt of the ‘cut-throat’ lending rates where the banks and their directors remain the major beneficiaries of the high lending rates,” he retorted.
To this end, the House urged the apex bank to review the Monetary Policy Rates and its implementation, putting into consideration the cost of doing business by banks.
The lawmakers also tasked National Economic Council (NEC) to critically consider how to reduce the cost of doing business in Nigeria in a manner that the common man will feel the impact, just as it mandated its 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.