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18 Banks Resist Push To Lower Interest Rates

The Central Bank of Nigeria, CBN, has for almost a year, been trying to a drive lower interest rates. However, 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.

 

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 that remained at high point interest rate, one bank actually increased its lending. Some of the banks, however, defended their lending rates citing various factors including the Monetary Policy Rate (MPR) which has been at 14 percent since second quarter of 2016, the Cash Reserve Ratio (CRR) which is 22 percent and risk profile of the borrowers. Financial Vanguard analysis of the highest lending rates charged by banks as published by the CBN, showed that during this period the seven banks that reduced their highest lending rates are Citi Bank, Coronation Merchant Bank, Diamond Bank, FBN Merchant Bank, FSDH Merchant Bank, Rand Merchant Bank and Suntrust Bank.

 

On the average the highest lending rates charged by the seven banks fell by 162 bpts between December 8, 2017 and April 13, 2018. Also, the spread between the average deposit rate and highest lending rate of the banks fell on the average by 192 bpts. All the seven banks, with the exception of Diamond Bank, recorded decline in spread between the average deposit rate and highest lending rate during the period. Further analysis revealed that the highest lending rate charged by Citi Bank fell to 23.5 percent as at April 13, from 28 percent on December 8, 2017, while the spread between the average deposit rate and highest lending rate fell by 700 bpts. For Coronation Merchant Bank, the highest lending rate fell to 25 percent from 26.3 percent, while the spread fell by 54 bpts. For Diamond Bank the highest lending rate fell slightly to 31.91 percent from 31.98 percent, while the spread rose by 25 bpts. For FBN Merchant Bank, the highest lending rate fell to 27 percent from 28.95 percent, while the spread fell by 45 bpts. For FSDH Merchant Bank, highest lending rate fell to 24 percent from 25 percent while the spread fell by 95 bpts.

 

For Rand Merchant Bank, the highest lending rate fell to 25.77 percent from 28.13 percent while the spread fell 146 bpts;  while for Suntrust Bank, the highest lending rate fell to 30 percent from 33 percent while the spread fell by 330 bpts. According to the CBN data, the 17 banks left their highest lending rates unchanged. The banks and their highest lending rates are: Access Bank (30.25 percent), Ecobank (30 percent), First Bank (30 percent) FCMB (30 percent), Fidelity Bank (40 percent), GTBank (26 percent), Heritage Bank (33 percent), Keystone Bank (34 percent),  Providus (25 percent), Standard Chartered Bank (27 percent), Skye Bank (36 percent), Stanbic IBTC (36 percent), Sterling Bank (33 percent), UBA (29 percent), Unity Bank (32 percent), Wema Bank (31 percent) and Zenith Bank (34.5 percent). Union Bank, however bucked the trend by raising its highest lending rate during this period.

 

According to the CBN, Union Bank, raised its highest lending rate to 49.05 percent from 42 percent, while the spread widened by 949 bpts. As at April 13, Union Bank charged the highest maximum lending rate of 49.05 percent, which applies to the sector categorised as ‘General’. Fidelity Bank followed with 40 percent, which applies to sectors categorised as ‘General Commerce’ and ‘General’. Stanbic IBTC and Skye Bank followed with 36 percent applied to sectors categorised as Agriculture, Manufacturing, Information Technology, General, Extra Territorial and General Commerce sectors.

Photo Credit: 
skoybus.com

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