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Tough times for businesses as CBN raises lending rate to 13%

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NIGERIA’s small and medium enterprises are in for more difficulty in access to finance for their businesses as the Monetary Policy Committee (MPR) of the Central Bank of Nigeria (CBN), on Tuesday, May 24, 2022, raised lending rate to 13 per cent, citing rising global inflation.

The new rate puts businesses in dilemma in borrowing from banks to grow their businesses.


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The CBN had until the Monetary Policy Committee (MPC) meeting this morning pegged the MPR at 11.5 per cent since September 2020.

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The MPR is the baseline interest rate on which other rates in an economy are built.

Commercial banks in Nigeria often lend at above 25 per cent interest rate, which puts repayment of such loans by businesses in difficult situations.

The CBN Governor, Godwin Emefiele, who spoke on the lending rate at the end of the MPC meeting, said the apex bank would not be overwhelmed on inflationary pressures to the economy.

Emefiele stressed that the apex bank was using different monetary policy tools to control the impact of inflation on the overall economy.

He said, “In Nigeria, we need to confront inflation and tough choices need to be made. At the CBN, we are using various development finance interventions to ensure price stability. We will use that to drive growth.

“The global economy has put inflation growth on the rise. 90 basis points increase in inflation is a concern. The Central Bank and the National Bureau of Statistics are working on drastic measures. We expect that lending rate will go up, but we will manage it to control price stability.

“At CBN, we are giving out loans at single-digit interest rates with few years of moratorium to be able to tame inflation.”

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He said that because of the current Nigerian inflation rate at 16.82 per cent, the apex bank had been using its discretionary powers to control liquidity to avoid inflation surge or even hyper-inflation.

He added that the committee also voted to retain the asymmetric corridor at +100 and -700 basis points around the MPR, and liquidity ratio at 30 per cent.

Emefiele posited that even advanced countries were not spared from the inflationary pressures on the global economy.

“America’s inflation rose to 8.3 per cent, in the United Kingdom 9 per cent, and in India it is 7.79 per cent,” he pointed out.

On concerns of delisting of Nigeria by JP Morgan, an American rating agency, the CBN Governor said, “We were only re-classified from overweight to market rate. Nigeria has not been delisted from the JP Morgan list as has been widely reported.”

He said the JP Morgan report did not fault CBN approach, stressing that the report was reclassification from overweight and not total delisting.

 

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