Burdened by difficult operating environment, typified by foreign exchange scarcity, stiff competition for funds to meet up with the new capital requirements by the Central Bank of Nigeria (CBN), Nigerian banks have one major issue of customers resistance over repricing of credits ocassioned by the hikes in the anchor interest rates.
With CBN’s anchor rate at 26.75 percent following the last 50 basis points hike in the Monetary Policy Rate (MPR) on Tuesday, banks have, as expected, commenced repricing of both the existing amd potential facilities, a development that is expected to strain the existing frosty relationship between banks and their customers.
It is also expected that the level of financial intermediation as individual and corporate entities are exploring other sources of financing, like cooperative societies and wealthy family members.
According to Metrobusinessmews.com (MBN) interactions with industry operatives, the high energy costs as well as the need to improve the welfare of their staff have brought about higher recurrent expenditures that will have to be passed down to the customers.
They are also saying that, combining this with other levies being proposed by the federal government could lead to shrink in their profit margins and possibly affect their continued existence.
As a way out, banks have written to some of their affected customers for discussions on the need for upward review of rates.
But, some of the customers have not taken this lightly as they are insisting that the status quo remains.
Consequently, the retail customers, disenchanted by banks’ perceived excessive charges are opting for the instrument believed to be more in investment friendly for the season, possibly after the maturity of the facilities.
In response to the Apex Bank’s interest rate review, Guaranty Trust Bank (GTBank) has announced an upward revision of interest rates on its MaxPlus loan facilities, effective August 6, 2024.
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According to the bank, the prevailing conditions in the money market, which have seen a general rise in interest rates have necessitated their action.
In a recent statement, GTBank highlighted that the new interest rate on MaxPlus loan facilities will be adjusted from the existing 28.5 percent to 29 percent.
Another tier one bank has moved the rates on its prime facilities from 31 to 33 percent, while others are even discussing beyond that range with their customers.
Lagos based analyst, Friday Ameh said the current situation calls for caution as the real sector of the economy is negatively being impacted by the rising hike.
“With the all-round rise in the prices of goods and services as well as high energy costs, what kind of business can be profitable to pay over 30 percent interest rate?” he asked.
But other analysts say the hike in the asymmetric corridor is the most problematic as it will put banks into tighter liquidity positions as getting facilities from CBN has become more expensive.
Bismarck Rewane, chief executive of the Financial Derivatives Company (FDC) had earlier explained that the CBN’s recent decision to adjust the asymmetric corridor around the Monetary Policy Rate (MPR) to +500/-100 basis points would deter banks from borrowing from CBN to purchase foreign exchange from the apex bank thereby reducing the pressure on FX.