The Central Bank of Nigeria (CBN) and commercial banks in the country came under fire yesterday over disparities in deposit and lending rates obtainable in their offices.
The upper legislative chamber lamented that interest rate on loans operated by commercial banks and approved by the CBN remained one of the highest in the world.
Angered by the development, the Senate mandated its Committee on Financial Institutions to investigate and report back its findings to enable it to take a definite position on the matter.
These revelations were made during the consideration and adoption of a motion titled: “Urgent need to bridge the gap between lending interest rate and deposit interest rate among commercial banks and other financial institutions” sponsored by Solomon Adeola Olamilekan.
According to data from the Central Bank of Nigeria, savings deposit rate as at December 2019 was 3.89 per cent, while prime and maximum lending rates were 14.99 per cent and 30.72 per cent in the same period.
“Nigeria’s current lending rate is one of the highest in the world. While the prime lending rate according to the Central Bank of Nigeria Monetary Policy Rate (MPR) is 14.99 per cent, loans are available at the commercial banks and other banks at an interest rate of between 22 and 27 per cent. Nigeria’s inflation rate rose to 11.98 per cent as at December 2019. This is the inflation rate between January and December 2019. Latest data from the National Bureau of Statistics show that the inflation rate further rose from 11.98 per cent in December 2019 to 12.13 per cent in 2020. This development negatively affects the deposits of commercial bank customers in addition to the low interest rates on deposits,” said Olamilekan.
He regreted the CBN was yet to borrow from the good practices of countries like India and the U.S. to improve and protect the interest of depositors in Nigeria, some who are elderly pensioners.
“The CBN is the apex regulatory body for banks and other financial institutions in Nigeria. It is also responsible for setting banks rate upon which all other interest rates are based. The CBN has not done enough in balancing the deposit interest rate and lending with the goal of encouraging savings.
“With higher interest rates, interest payments on credit cards and loans are more expensive thereby discouraging people from borrowing and spending while those who already have loans will have less disposable income because they spend more on interest payments. The low consumption this usually occasions will affect production in the real sectors of the economy,” he said. The Senate also considered a bill to provide the enabling framework to legalise electronic transactions in Nigeria.
The bill, if passed and signed into law, would prohibit and criminalise online fraud, and also make it legally possible to admit evidence of electronic transactions between parties in court during proceedings.
Sponsor of the bill, Senator Ibikunle Amosun, lamented that Nigeria’s extant laws provide inadequate protection for e-commerce businesses and consumers.