High interest rates stifling businesses, economy, Senate tells CBN

Amid growing concerns about the impact on businesses of the high interest rates charged by financial institutions, the Senate on Tuesday asked the Central Bank of Nigeria, CBN, to intervene to save the economy.

The CBN, the regulatory authority, has continued to insist it cannot reduce interest rate in the country, currently at between 25 and 30 per cent, to avoid worsening the inflationary pressure on the economy.

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.

But, at the round-table between the Senate and interest groups in the country’s financial and business sectors in Abuja on Tuesday, 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.

In attendance at the meeting held behind closed doors after the opening session, were representatives of the CBN; Deposit Money Banks; development finance institutions; Chartered Institute of Bankers of Nigeria; Nigeria Deposit Insurance Corporation, NDIC; Manufacturers Association of Nigeria, MAN; Nigerian Association of Small and Medium Enterprises; Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, NACCIMA, and others.

During the opening of the Forum, Mr. Saraki said 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.

“It is inconceivable that businesses anywhere can survive on a 25 to 30 per cent interest rate regime,” he noted. “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.”

He said the Senate fully understood the economic complexities in determining interest rate regimes, particularly during the high inflation periods, which call for interest rate hikes.

However, he pointed out that unless businesses were able to survive, inflation and all other market conditions alone would not any difference.

To boost productivity in the economy, the CBN has continued to assure of increase its intervention by way of support to the manufacturing and agriculture sectors to make more funds available for their businesses.

During the meeting, a senior manager in one of the banks who attended, said the CBN governor, Godwin Emefiele, had told the committee although he was sympathetic to the sentiments expressed by Nigerians about high interest rates, it would be difficult to do anything about it, considering the current economic climate under which the banks were operating.

The official, who requested that his name should not be revealed as he was authorized to speak on the issue, said Mr. Emefiele explained this was why the CBN decided to set aside special intervention funds at nine per cent for key sectors of the economy.