Concerns have been expressed by the Manufacturers Association of Nigeria (MAN) regarding the 35% aggregate lending rates that commercial banks charge. It opined that this will exacerbate inflationary pressures and deter industrial sector investment.
It stated that after rising from a 28.6% interest rate in the first three months of 2024 to a 6.4% rate in the second quarter, loan rates increased.
The association made this known in its second quarter Q2 “24 MAN CEO’s Confidence Index (MCCI)” entitled “MAN Position on the Incessant Increase in Interest Rate”.
The MCCI compiles the opinions of 400 CEOs of manufacturing companies from each of the six geopolitical zones regarding macroeconomic shifts in the nation, such as employment and business environments, output levels, and working conditions.
The research said that the index dropped from 53.5 points in Q1 to 51.9 points in Q2 as a result of macroeconomic difficulties.
According to the research, Zenith Bank’s average loan rate to manufacturers in the second quarter was 30%, whereas Access Bank and the United Bank for Africa had rates of 32%.
MAN further said that First Bank of Nigeria and Ecobank maintained their interest rates at 35 percent during the reviewed period.
The monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) was criticized by MAN for its “erroneous disposition” to combat inflation by continuously raising the monetary policy rate (MPR), which serves as the benchmark interest rate for banks.
In a traditional move to control inflation and stabilise the naira, the monetary authorities raised the benchmark interest rate by an additional 50 basis points to 26.75% at the most recent MPC meeting in July.
After the strong monetary boost in May 2022, the nation’s interest rate was hiked by 1,525 basis points; nonetheless, inflation is still high and is almost at a three-decade high.
According to the manufacturers, prior to the latest hike in the MPR, all five of the leading banks had maximum lending rates that were below 30%.
Furthermore, MAN issued a warning, stating that the MPC’s decision will increase borrowing costs, restrict credit availability, and deter investment in the manufacturing sector.
However, it expressed concern that the manufacturing sector’s capacity to play its strategic role of stimulating economic growth has been further constrained by the increase in interest rates.
TimesNow.com.ng reported that the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) has increased the benchmark interest rate to 26.25% from 24.75%.
The new rate is a 150 basis point increase from the previous rate and the third consecutive hike implemented in 2024 by the CBN to fight inflation.
Olayemi Cardoso, the CBN Governor and MPC Chairman, disclosed the new interest rate at the end of the 295th MPC meeting held in Abuja on Tuesday, May 21, 2024, Punch reports.
Source: TimesNow.com.ng
