18 banks resist push towards lower interest rates

ALMOST one year after the Central Bank of Nigeria, CBN, began a drive towards lower interest rates, about eighteen banks have declined to toe the apex bank’s policy line.

In the fourth quarter of 2017, the CBN had begun the process of influencing interest rates downward, dropping rate of its key monetary instrument, the Nigerian Treasury Bills, NTB, which fell by 284 basis points (bpts) between December 2017 and April this year, a move targeted at forcing the banks to pull back their stockpile of funds in the instrument, thereby pushing up banking system liquidity in favour of lending to the private sector as well as lowering their rates.

Financial Vanguard analysis revealed that interest rate on TBs has been trending downward since mid last year. From 16.5 percent in July 2017, average interest rate on fresh (primary market) TBs fell by 200 bpts to 14.6 percent in December, 2017. From December average interest rate on NTBs fell further by 284 bpts to 11.66 percent in April this year.

But Financial Vanguard investigations have revealed that only seven banks responded in this targeted direction by reducing their lending rates, while in addition to the 17 than remained at high point interest rate, one bank actually increased its lending.

Vanguard, May 15, 2018

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