Essential Ndubuisi
Commercial banks in Nigeria have started revising their interest rates after the Central Bank of Nigeria (CBN) raised its benchmark lending rate to 18% last month. The move was intended to contain inflation, which has been fueled by price and exchange rate pressures and expectations of a removal of petrol subsidy.
Addressing newsmen at the bank’s Monetary Policy Committee (MPC) meeting, CBN Governor, Godwin Emefiele, said that the committee had voted to keep the asymmetric corridor at +100 and -500 basis points around the MPR. He also stated that the MPC had voted to keep the Cash Reserve Ratio (CRR) at 32.5% and the liquidity ratio at 30%.
In response to the new MPR, banks such as Access Bank and Union Bank, among others, have sent separate emails to their customers, stating that interest rates on savings accounts and other products have been revised. The banks’ goal is to divert liquidity away from risk-free instruments to the real sector. However, some analysts believe that the new interest rates may not lower inflation and could dampen depositors’ savings appetite.
Stockbroker Mike Eze said that when the interest rate is raised, people who want to borrow money from the bank will have to pay more, which will be added to the cost of production, ultimately affecting the price. For his part, Johnson Chukwu, the Chief Executive Officer of Cowry Asset Management, warned that persistent increases in interest rates could contract economic activities, raise the cost of credit, and drive up the cost of goods.
