February 10, 2012/ By Ademola Alawiye
Contrary to the Bankers’ Committee’s aspiration of reducing Deposit Money Banks’ lending rates by 30 per cent from January this year, there has been a continual increase in the rates in the last six months in some strategic sectors of the economy.
A publication obtained from the Central Bank of Nigeria on Thursday revealed that the lending rates to borrowers from the major five sectors, namely agricultural, oil and gas, manufacturing, mining and quarrying and real estate sectors, jumped up by three to five per cent in some banks.
The publication showed, for instance, that in the oil and gas sector, prime lending rate for borrowers in Access Bank Plc stood at 17.56 per cent in February 2012, compared to 12 per cent in July 2011, representing an increase of over five per cent in six months.
Also, the prime lending rate in Sterling Bank Plc rose by four per cent in the six months under review, from 18 per cent to 22 per cent.
The prime lending rate originally indicates the rate of interest at which banks lend to favoured customers with high credibility. The banks do not usually go below the rate. Maximum lending rate, on the other hand, is the rate at which banks extend credit to perceived risky customers.
In the manufacturing sector, lending rates also rose across different banks.
For instance, the prime lending rate in Enterprise Bank Limited rose to 22 per cent in February 2012, from 19 per cent mid last year, indicating a three per cent increase, while it increased to 22 per cent this year, from 18 per cent mid last year, showing a four per cent increase. Skye Bank’s lending rate to manufacturers also rose to 22 per cent from 17 per cent last year.
For borrowers in the agricultural sector, First City Monument Bank Plc increased its maximum lending rate to 21 per cent, from 18 per cent in the period under review; while Citi Bank Nigeria’s prime lending rate in the same sector stood at 16 per cent in February 2011, as against 13 per cent in July last year.
The publication also revealed that lending rates in the real estate and construction sector increased in some banks by more than four per cent.
Guaranty Trust Bank Plc increased its prime lending rates to 15 per cent in February 2011, from 10 per cent last year July, while Equitorial Trust Bank Limited also increased by same margin in the same period.
The Bankers’ Committee had said that the banks would work together in 2012 to drastically reduce lending rate.
The committee had said late last year that the 24 banks had unanimously endorsed the initiative taken by the CBN to reduce lending rates through a drastic cost-trimming strategy in line with a new payment regime.
A statement by the committee had said, “The bankers at their meeting recently agreed to cut down operating expenses by as much as 30 per cent to make funds accessible to borrowers at a lower cost. The e-payment initiative involves a transformation of the payment system and the idea is to permit banks to cut cost through moving the country from its present ‘cash-and-carry’ status to one where people will make payments through electronic channels.”