Following calls by operators in the real sector, agencies and Nigerian lawmakers for a reduction in interest rates particularly for micro, small and medium enterprises, the banking industry and the Central Bank of Nigeria say they are working on adjusting conditions for lending to MSMEs in the country.
Lending rates in the country currently hover around 28 and 30 per cent making the cost of finance high for companies, especially small businesses.
Rising from the Bankers Committee meeting last week, chief executives of banks as well as the CBN said they planned to de-risk SMEs so as to make it easier to lend to them.
Acting Director, Corporate Communications of the CBN, Isaac Okoroafor, addressing journalists after the meeting in Lagos said there was a consensus to look into ways to bring down interest rate “as a complementary measure to bring about prosperity especially through the SME and agriculture.
According to him, “This would involve finding ways of de-risking SMEs, because people argue that SMEs are too risky to lend to and so the bankers committee is working in collaboration with the CBN to ensure that that segment of business is de-risked by way of risk sharing and trying to tweak some of the conditions even as the CBN works to ensure that the macro-economic impediments to low interest rate are addressed over time.”
The Senate recently met with the CBN on the need to ensure that lending rates is brought down so as to save the country’s economy.
At a round-table between the Senate and interest groups in the country’s financial and business sectors in Abuja, the Senate President, Bukola Saraki, frowned at the decision to keep lending rate unchanged, saying it was stifling businesses.
“The economy will not grow despite the current efforts by the Federal Government to revive it, if the interest rates charged by banks remained high,” the Senate President said.
He noted that despite government’s new initiatives to boost growth in the economy, Nigerians were still concerned about the impossible interest rate regime businesses were facing to survive.
The CBN, the regulatory authority, has continued to insist it could not reduce interest rate in the country, currently at between 25 and 30 per cent, to avoid worsening the inflationary pressure on the economy.
Saraki however noted that “it is inconceivable that businesses anywhere can survive on a 25 to 30 per cent interest rate regime. How can investors anywhere survive on these rates? How can they create jobs and make returns on their investment? But, this is the situation our businesses currently live with.”
During the last Monetary Policy Committee, MPC, meeting, the CBN left the benchmark lending rate, also known as Monetary Policy Rate, MPR, unchanged for the seventh successive time at 14 per cent.
The President of the Nigeria Employers Consultative Association (NECA), Mr Larry Ettah, at the weekend had also joined in the call for a lower interest rate noting that one crucial step towards revitalising the economy was by bringing down interest rate.
Stating that interventions would not be enough to address the financing challenges of the real sector, he said “when textile industry or other sectors have problems, CBN intervenes. When you open many windows, you have to ask yourself why not open a door?”