The Nation Newspaper

Tag: Interest rates

  • CBN Survey: Households optimistic despite concerns over rising interest rates

    CBN Survey: Households optimistic despite concerns over rising interest rates

    Nigerian households maintain a cautiously optimistic outlook for the economy over the next three to six months, despite concerns over rising interest rates on bank loans.

    This was the conclusion of the July Household Expectations Survey of the Central Bank of Nigeria (CBN). The survey gauges the sentiments of households across the country and provides crucial insights into expectations for family income, inflation, and economic conditions.

    According to the survey, respondents expressed optimism about the economic outlook over the next six months, with a confidence index of 2.7 points. This positive sentiment reflects an anticipation of improved economic conditions and an increase in family income, suggesting that many households expect a gradual economic recovery in the coming months.

    The survey results indicate a significant level of awareness and support for price stability among households, with many respondents viewing inflation as a threat to economic growth. This perspective underscores the importance of maintaining inflation at manageable levels to ensure sustainable economic development.

    A concern highlighted by the survey is the perceived increase in interest rates on bank loans over the past three months. According to the findings, 56.5 per cent of respondents reported that interest rates on bank loans had risen, while only 8.3 per cent believed they had decreased. Another 20.2 per cent indicated that rates had remained unchanged, and 15.1 percent had no opinion. These responses suggest that more households are feeling the pinch of higher borrowing costs, which could have implications for consumer spending and investment in the short term.

    Looking ahead, the majority of respondents (51.0 per cent) expect interest rates on bank loans to continue rising over the next three months. Meanwhile, 15.5 per cent of households believe rates will fall, 19.5 per cent expect them to remain unchanged, and 14.0 per cent are uncertain.

    The expectation of further interest rate increases could influence household financial decisions, particularly in terms of borrowing and saving.

    Read Also: NNPCL: We are facing financial issues due to petrol supply cost

    When asked about their preferences regarding interest rates and their impact on the economy, 67.8 percent of respondents indicated that it would be best for the economy if interest rates were to decrease, while 13.4 percent preferred no change, and 9.0 percent opted for higher rates. The remaining 9.8 percent were undecided. These results reflect a strong preference among households for lower interest rates, which they believe would be more beneficial for the economy.

    The survey also explored households’ understanding of the relationship between interest rates and price changes. In the short term (within a month or two), 53.3 percent of respondents agreed that an increase in interest rates would lead to higher prices, while 18.5 percent disagreed, and 8.5 percent were unsure. In the medium term (six to twelve months), 49.8 percent agreed that higher interest rates would result in increased prices, while 20.7 percent disagreed, 21.3 percent were neutral, and 8.2 percent had no opinion. These responses suggest that many households are aware of the potential inflationary impact of rising interest rates, although opinions are somewhat divided.

    The survey asked households to choose between raising interest rates to curb inflation and keeping rates low while allowing inflation to rise. A majority of 50.6 percent favored keeping interest rates low, even if it means higher inflation, while 36.3 percent preferred raising rates to combat inflation. The remaining 13.1 percent were undecided. These findings highlight a preference among households for lower interest rates, reflecting concerns over the cost of borrowing and its impact on household budgets.

    The CBN’s July Household Expectations Survey provides valuable insights into the economic sentiments of Nigerian households. While there is optimism about economic recovery and rising family incomes, concerns over rising interest rates on bank loans and the potential inflationary impact are evident.

    These findings underscore the complex balancing act faced by policymakers in managing interest rates, inflation, and economic growth in Nigeria. As households navigate these economic challenges, their preferences and expectations will play a critical role in shaping the nation’s economic trajectory in the months ahead.

  • GDL plans better interest rates on savings

    The Growth & Development Limited (GDL), a financial services group,  has called for a remodel of the Nigerian financial system togive more benefits to savers, strengthen social infrastructure  and protect the middle class.

    Speaking yesterday at a press briefing in Lagos, GDL Group Managing Director,  Kola Ayeye, said the firm which has both the asset management and finance housing licences, will support expansion of the middle class and societal transformation.

    “A situation where critical social infrastructure has collapsed, the middle class is almost totally emasculated, but banking sector profit is almost approaching N1 trillion is unacceptable,” he said.

    According to him, savers can use their savings pool of almost N4 trillion to remodel the financial system rather than continuing to contribute over N300 billion to banking income annually.

    Ayeye, who spoke during the opening of the Mainland office of the company, he said the financial services group  with interests in asset management, finance and stockbroking.

    He said a major strategic intent of GDL’s asset management business is to create unique private sector led frameworks to pool capital from both private and public sector and innovatively deploy same to deliver good financial returns while solving problems that have defied government solutions in education, healthcare and housing.

    He said the high-impact finance agenda, he said, requires bringing the resources of both public and private sector under private sector leadership to achieve both descent financial returns and compelling social dividends.

    Continuing, he said: “GDL finance and leasing, a subsidiary, will focus on transforming medium-scale and eligible small-scale enterprises to trans-generational institutions”.

    Ayene, who voluntarily resigned his last position as Executive Director, at Asset Management Corporation of Nigeria (AMCON) said he felt compelled by the imperatives of middle class expansion and societal transformation which are core to GDL vision.

  • Industrialist makes case for low interest rates

    A Lagos-based industrialist in the paint manufacturing industry, Mr. Raphael Danilola, the Chairman and Chief Executive Officer of Dalux Chemical Industries Ltd,  Badagry, Lagos State, has called on the government to, as a matter of urgency, address the issue of high interest rates on loans from commercial banks which is a big impediment to the survival of the local industries.

    Mr. Danilola made the call in his office in Lagos at an interactive session with the media during which he spoke glowingly of Dalux products meeting international standards and receiving certification from the Standards Organization of Nigeria (SON) on a repeated basis since its incorporation and commencement of production in 1992.

    He also called for the increased patronage of local paint manufacturing companies in the country.

    He said: ” Dalux Chemical industries Ltd has a wide range of products of international quality ranging from Daflex paints which is of premium standard of three variants, emulsion, texture and gloss. This product, when used for painting, has a life span of between 15 and 20 years.

    “There is also Danilux paints of standard quality in three variants of emulsion, texture and gloss whose quality is comparable to international standards.

    “Another product of Dalux Chemical Industries Ltd is the general people’s paint called Villa, which is of the emulsion and gloss variants and can last up to three to four years on any surface. The company is also into the production and sale of high quality wood finishing, auto paints, airless spray paint, Stoven enamel as well as quick dry paint”.

  • Agents seek cut in interest rates

    The Federal Government has been urged to reduce interest rates to enable ship owners upgrade their facilities and compete with foreigners.

    In an interview with The Nation in Lagos, some stakeholders urged the government to build a vibrant investment climate for the sector.

    Association of Nigerian Licensed Customs Agents ( ANLCA) President Prince Olayiwola Shittu said there should be policies to create linkages between the industry and other sectors, such as banking and manufacturing.

    He suggested measures, such as a dedicated institutional financing mechanism for the shipping and maritime sector, and a comprehensive regulatory policy, to delineate the role and responsibilities of the government and private sector in the development of the sector.

    A shipper, Akinderu-Fatai, said the purchase of modern vessels would provide jobs for millions  across the country.

    Shittu said there was a need for sustained partnerships between the private and public sectors for effective funding.

    The country, he said, has not enjoyed benefits of transporting large quantities of cargoes because local ship owners lacked the capital.

    Akinderu-Fatai suggested that the Federal Government should integrate maritime education and training into the national university system so that Nigerians interested in seafarers’training could get the necessary education to promote the sector.

    Lamenting the lack of foreign exposure for better performance, he said many operators were bogged down with no experience, with little or no education.

    “There is a need for more government interventions aside the Cabotage Vessel Financing Fund (CVFF) to actively encourage the banking sector to support local ship owners to acquire modern fleet, which can sail anywhere in the world,” he said.

    An importer, Mr Timoty Adetoye  said 60 per cent of the inward and outward-bound sea trade in the West and Central Africa sub-regions passed through the nation’s waterways. He called on the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, and the Minister of Transport, Rotimi Amaechi, to assist in developing the industry.

    He said the country needed to expand its merchant fleet because of  the high volume of bulk liquid, gas and dry cargoes that passes through its waterways.

    “The fleet to carry the enormous quantity of cargo is estimated at 200 tankers, including combo general cargo vessels and liquefied natural gas vessels, Adetoye said.

     

  • ‘Cut interest rates to assist skilled graduates’

    An All Progressives Congress (APC) member in Lagos and a House of Representatives aspirant has advised governments and banks  to support graduates of skills empowerment institutions by reducing loans’ interest rates for them.

    Martins Owodunni Iwonlanwe, who gave the advice at 120 trainees’ graduation at TREM City, Wilmer, Lagos, said it is the only way beneficiaries of such programmes could be supported since many of them have no money to start off. He scored the empowerment training, which he sponsored, high and praised the graduates for their attendance and comportment during their training.

    The trainer and Managing Director of Spotless World Skills Acquisition, Agim Immacualate, also praised the graduates saying: “I will score them 100 per cent. The trainees performed more than expected. You can’t train a person to make a cake or a pair of shoes in three days. But with this set of trainees, we did. They did marvelously well. They should keep it up. They should start something, no matter how small, even if it is N1000 they have, they should take off with.”

    Wife of resident pastor TREM City of Joy, Olodi-Apapa, Princess Favour Nkere, advised the graduates on the need to go for further training. She said:“You have acquired knowledge, go for further training. Register a company, do complementary cards to sell yourself to enable people buy your products.’’ Her husband, Rev Chinedu Nkere, prayed for them, urging them to be God-fearing in their businesses.

    A graduate of the training, Mrs Husainat Ibrahim, expressed delight with the sponsor and the trainer, saying she applied for the training and was picked without any hurdles. She promised to deploy her training in her fashion business.

  • ‘Cut interest rates to assist skilled graduates’

    An All Progressives Congress (APC) member in Lagos and a House of Representatives aspirant has advised governments and banks  to support graduates of skills empowerment institutions by reducing loans’ interest rates for them.

    Martins Owodunni Iwonlanwe, who gave the advice at 120 trainees’ graduation at TREM City, Wilmer, Lagos, said it is the only way beneficiaries of such programmes could be supported since many of them have no money to start off. He scored the empowerment training, which he sponsored, high and praised the graduates for their attendance and comportment during their training.

    The trainer and Managing Director of Spotless World Skills Acquisition, Agim Immacualate, also praised the graduates saying: “I will score them 100 per cent. The trainees performed more than expected. You can’t train a person to make a cake or a pair of shoes in three days. But with this set of trainees, we did. They did marvelously well. They should keep it up. They should start something, no matter how small, even if it is N1000 they have, they should take off with.”

    Wife of resident pastor TREM City of Joy, Olodi-Apapa, Princess Favour Nkere, advised the graduates on the need to go for further training. She said:“You have acquired knowledge, go for further training. Register a company, do complementary cards to sell yourself to enable people buy your products.’’ Her husband, Rev Chinedu Nkere, prayed for them, urging them to be God-fearing in their businesses.

    A graduate of the training, Mrs Husainat Ibrahim, expressed delight with the sponsor and the trainer, saying she applied for the training and was picked without any hurdles. She promised to deploy her training in her fashion business.

  • CBN Increases Interest Rate to 12% 

    CBN Increases Interest Rate to 12% 

    Four months after the Monetary Policy Committee (MPC) reduced interest rates, it has reversed its decision and increased Monetary Policy Rate or interest rates bank lend money to 12 percent.

    Addressing journalists at the end of the two days MPC meeting in Abuja Tuesday, the governor of the Central Bank of Nigeria (CBN) Mr Godwin Emefiele said “the Committee, in its assessment of relevant internal and external indices, came to the conclusion that the balance of risks is tilted against price stability. The MPC therefore, voted to tighten the stance of monetary policy.”

    Based on this, the MPC raise MPR by 100 basis points from 11.00 per cent to 12.00 per cent; Raise the Cash Reserve Ratio (CRR) by 250 basis points from 20.00 to 22.50 per cent; retain Liquidity Ratio at 30.00 per cent; and narrow the asymmetric corridor from +200 and -700 basis points to +200 and -500 basis points.

    Before arriving at this decision, Emefiele stated that “the Bank had adopted accommodative monetary policy since July 2015 in the hope of addressing growth concerns in the economy, effectively freeing up more funds for DMBs by lowering both CRR and MPR, with excess liquidity arising from the lower CRR warehoused at the CBN.”

    Emefiele noted that Deposit Money Banks (DMBs) were to access these funds by submitting verifiable investment proposals in the real sector of the economy.

    He however lamented that “the funds have not impacted the market yet because the CBN was still processing some of the proposals submitted by the DMBs. In the first episode of easing which resulted in injecting liquidity into the Banking system, DMBs did not grant credit as envisaged.”

    The CBN governor added that, “the delay in passage of the 2016 Budget has further accentuated the difficult financial condition of economic agents as output continues to decline due to low investment arising from weak demand.”

    “The cautious approach to lending by the banking system underpinned by a strict regulatory regime conditioned by the Basel Committee in the post global financial crisis era has further alienated investors from access to credit as banks prefer to build liquidity profiles in anticipation of government borrowing,” he said.

    The Committee noted that the sluggish growth in output was partly attributable to “certain fiscal uncertainties, which inadvertently hampered investment spending and flows; intermittent fuel scarcity, increased energy tariffs (without commensurate improvement in power supply), foreign exchange scarcity as well as slow growth in credit to private sector in preference to high credit growth to the public sector.”

    The Committee noted that many of these factors were outside the control of monetary policy and given these limitations, in the absence of complementary fiscal and structural policies, the only option was to continue with the existing measures.

    The MPC Emefiele said “believes that complementary fiscal and structural policies are essential for reinvigorating growth.”

    The Committee reiterated its commitment to maintaining a stable naira exchange rate stressing that it “ took note of the high level of activity in the autonomous foreign exchange market as well as the rising demand in the interbank market but observed that the data on demand for foreign exchange had become ‘very noisy’, being overshadowed by speculative demand.”

    However, the Committee charged the CBN “to speed up reforms of the foreign exchange market to improve certainty and eliminate noise and opportunities for arbitrage.”

    On the monetary front, Emefiele, said, “the wider economy appears starved of the needed liquidity to spur growth and employment. Recent performance of the monetary aggregates lends credence to this fact.  With the exception of credit to government, growth in all the monetary aggregates remained largely below their indicative benchmarks, yet; headline inflation spiked to 11.38 per cent in February 2016, substantially breaching the policy reference band of 6 – 9 per cent.”

    The increase in inflation he said “was driven not so much by liquidity, but by structural factors such as fuel scarcity, increased electricity tariff, persistent insecurity, exchange rate pass through and seasonality of agricultural produce.”

    Emefiele warned that “the conflicting signals from slowing growth and rising inflation present a difficult policy challenge.”

    The CBN governor noted the limitations of monetary policy in influencing the drivers of the current price spiral, which led the Committee to stress the need to urgently address the key sources of the pressures. In this regard, the Committee reaffirmed its commitment to closely monitor the development while working with relevant authorities to address the structural bottlenecks.

    The Committee also enjoined the relevant agencies to speed up passage of the 2016 Budget in order to halt the depressing effect of the uncertainty that engulfs the waiting period, hoping that the implementation of the budget would go a long way in boosting business confidence, and reinvigorating the financial markets. In the circumstance, the Committee urged the Bank to continue to upscale its surveillance of the financial system with the aim of promptly detecting and managing vulnerabilities to ensure sustained stability.

    When asked what will happen to the $20 billion in some individuals’ domiciliary accounts, Emefiele said the money was not sitting idle in the banks but were being used by the banks to fund assets on the other side of the balance shot and constitute a liability in the banks’ balance sheets.

  • Reps to CBN: reduce interest rates on lending

    Reps to CBN: reduce interest rates on lending

    The House of Representatives yesterday urged the Central Bank of Nigeria (CBN) to reduce interest rates on lending to small and Medium enterprises within the nation.

    The Green Chamber also mandated its Hon. Jones Onyereri-headed Committee on Banking and Currency, to liaise with the CBN, so as to arrive “at measures that will reduce lending interest rate to a single digit and report back to the House within four weeks.”

    The resolution was sequel to the passage of a motion sponsored by Hon. Bode Ayorinde and titled: ‘Call for regulatory lending rate charged by commercial banks.”

    Ayorinde, in his argument noted that the 21 licensed banks in Nigeria to serve as financial intermediaries between those who have surplus funds and those who require borrowings for various purposes.

    He said the banks charge astronomical high interest rates ranging from 23 per cent and 28 per cent on lending, against 2 per cent to 3 per cent interest on savings.

    Ayorinde expressed displeasure over the five per cent to 10 per cent monthly interest rate charged by microfinance banks, which he said  translates to 60 per cent and 100 per cent per annum on loans and overdrafts.

    His words: “Commercial banks use the benchmark interest rate otherwise known as the Minimum Rediscount  Rate, as the basis for fixing the lending rates to their customers, while the CBN is accountable to Nigerians for the 13 per cent benchmark interest rate, the licensed banks achieve their super profits by whatever percentage they add to the 13 per cent.”

    He said businesses that are largely dependent on credit, such as SMEs, are adversely affected due to rising production costs which significantly constrain output and growth, adding that consumers have had to pay to higher prices as businesses have lost the capacity to generate employment opportunities and facilitate economic growth.

    Ayorinde noted that the benchmark interest rate in some countries of the world as at July 2015 according to the Trading Economic website is as follows :

    Italy 1.56 per cent, Candidate 0.05 per cent, Japan 0.00 per cent, South Korea 1.50 per cent, Switzerland 0.75 per cent, UK 0.50 per cent, USA 2.5 per cent, Australia 2 per cent, China 4.85 per cent,  Turkey 7.5 per cent, Indonesia 7.5 per cent, India 7.25 per cent and South Africa 6 per cent and wondered why Nigeria’s case should be different..

    The motion was supported by members when the Speaker, Hon. Yakubu Dogara called for a voice vote, and subsequently refered to the House Committee in Banking and Currency for further legislative imput.

  • Exporters seek single digit interest rates

    Exporters seek single digit interest rates

    Exporters in Nigeria have said that for the country to successfully diverse its economy, the federal government need to initiate policies aimed at promoting single digit interest rates for them.

    The exporters listed access to funding, high interest rates and lack of development of Warri and Portharcourt ports as major challenges facing export.

    They spoke Thursday at a forum for bankers and exporters organised by the Nigerian Export Promotion Council (NEPC) in Benin, the Edo State capital.

    An exporter, Mrs. Rona Peters, said Nigerian banks preferred providing finances for businesses that ‎bring quick financial returns.

    Mrs. Peters explained that the development of Warri and Portharcourt ports would make trucking cheaper for exporters as well as decongest Lagos Ports.

    “Loans for agricultural processing should be single-digit. CBN gives nine per cent. They (banks) should make borrowing single-digit, if they want to promote exports. It is not for banks to get at single digit and give to the citizens at double digit.

    “They should bring it down; the banks should encourage us. NEPC has done well by bringing us together.‎ If you are into agricultural processing, it take time for you to stabilise. So, the banks need to be patient, grant the exporters low interest rates to promote export in Nigeria.”

    ‎Another participant, Abraham Momoh, decried the dearth of accessible port terminals in the South-South to cater for exporters in the region.

    Momoh, who said that functional ports would promote the movement of goods from the area of origin to their respective destination outside the country, called for programmes on capacity building for farmers, as primary producers in the agricultural sector.

    Chief Executive Officer of NEPC, Mr. Olusegun Awolowo, ‎attributed the challenge of funding to what he described at poor business understanding between the banks and exporters.

    Awolowo, who was represented by the Director of the Duties of the council, Olajide Mohammed, however, noted that the federal government was willing to bridge the gap, through relevant interventions, as non-oil export was key to economic growth.”

    Head of Nigeria Export and Import Bank in Lagos, Kalu Ugenyi, said literacy level on export ‘is low because a lot of people don’t want to go through the rigorous process of exporting products and you need a bit of exposure to get a partner outside the country.”

  • Inflation, interest rates batter small businesses

    Inflation, interest rates batter small businesses

    As Nigeria fights to beat back raging inflation, many of its small and medium-sized enterprises (SMEs)—disadvantaged even in good times — are struggling to survive the battle, the President, Association of Micro Entrepreneurs of Nigeria (AMEN), Prince  Saviour Iche, has said.

    The net effect of inflation, he said, is high on businesses, creating a kind of worst case scenario for companies struggling to cope with high inflation and high interest rates.

    According to him, small businesses  are  facing  a tough situation, adding  that  the  pain they  endure runs deeper, with roots in policy shortcomings that need to be addressed by  the  new  regime   if the country is to shift to a more balanced and dynamic economic model.

    While  other factors  are impacting  negatively  on the economy, Iche  said  plunging revenue as  a result of the  state of the  economy   was   making  it difficult  for  small  businesses to  make a profit  not  to talk  of  recruiting  new hands.

    Interestingly, according to him, a number of Nigerians are interested  in starting  new  businesses, but  the greatest challenge is the dearth of financing, adding many banks are reluctant to lend to the sector for a variety of reasons.

    To  encourage  more  Nigerians  to be self -employed, he  urged  the   government   to address the challenge of creating a dynamic SME sector, adding  that  the  current  national   macroeconomic woes, reflected  in  Naira  depreciation  ito make matters worse.

    He  said private companies and SMEs  have remained small in scale because of low competitiveness and an unfair business environment. It was for this reason that the companies should receive support from the Government to access loans, he added.

    Government, he said, should be supportive by providing markets, land, preferential loans and technology, as well as training and management, adding that SMEs constituted the majority in the business community and that they have played a vital role in the economy by providing jobs, increasing income and mobilising resources for investment in development and poverty reduction.