Monetary Policy Rate
Criticisms as Banks set to raise lending rates following CBN's new directive on MPR

The move by the Central Bank of Nigeria (CBN) to increase Monetary Policy Rate which is prompting banks in the country to increase lending rates from 14% to 15.5%, as well as, savings interest rates from 10% to 30% has been greeted with criticisms.

According to the Director Banking Supervision Department, CBN, Mr. Haruna Mustapha, who spoke to newsmen at a post-Monetary Policy Committee meeting on Zoom, said, “In terms of the impact on bank loans and incomes, clearly, it will have an impact but it is going to be a bitter-sweet experience. “Also interest on government securities and so on will also go up which will also add to banks non- interest income which is also another income line.”

“Yes we increased interest on savings from 10 percent to 30 percent of MPR and it stands to reason that with the hike in MPR to 15.5 percent that will also change. “The effective date of that directive is September. “So we expect to see banks fully complying and our examiners, as part of our routine examinations on banks will check to ensure that all banks comply’’. 

However, a social Commentator and lecturer with Lecturer, Captain Elechi Amadi Polytechnic, Dr. Nweke, Emmanuel Onyeka, who appeared on ATN Society watch on Tuesday faulted the move by CBN to increase the MPR especially on lending rates from 14% to 15.5%. He argued that the citizens are grabbling with the current inflation rate and the bank is adding to the sufferings of the people. He argued that inflation should be tackled by encouraging local production instead of increasing lending rates.

Dr Nweke said, " I do not think that CBN took the best decision by increasing the lending rates. The reason is that, the inflation rate in the country is not caused by banking operations and so the panacea is not by looking at banking operations. We know that Nigeria is running a dolarized economy. It would have been better if CBN officials had encouraged the government to make sure that more person's participate in the economy by growing entrepreneurship, SMEs, that way, the economy can bounce back.

Increasing the lending rates will cause more harm than good to the economy. CBN should have overtime advised the federal government on the need to revive the economy. We have very idle sectors of the economy that government has not intervened in. We have the case of modular refineries that were expected to have taken off in the Niger Delta, it will not cost government so much, yet the government would benefit from that . In agriculture, we have not seen real manufacturing and the effort of the government to help them out. We have not seen increase in power supply where we will now have steady power supply to boost the economy. So, all that they have to do is to look at the convenient point of causing more pain to the suffering of the Nigerian populace. It is very bad of them.

If as a business man, you acquire a loan and the interest is very high, it is the customers that will bare it, because, you'll have to increase the cost of the products to meet up with the loan.

The increment will deter local production, because, you must pay your debt, so, the money that would have accrued to your profit, that you would have put into savings or to diversify or improve your business will now be put into repaying the money borrowed from the bank."

On the increment of savings interest rates, Nweke said, "that is banking politics, that is politics. Just watch and see if you'll have an additional 30% paid on your savings. Nigerian banks have not shown integrity in their operations before now, is it now that they will start by paying 30% interest rate on savings?

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