Nigerian firms cry out over new conditions set by Access, Zenith others to give loan …C0NTINUE READING HERE >>>
The Manufacturers have voiced concerns about the 35% total loan rates that commercial banks imposeIt stated that this will make inflationary pressures worse and discourage investment in the industrial sectorMAN criticised the CBN’s monetary policy committee (MPC) for its “erroneous disposition” in addressing inflation
Henzodaily.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.
Concerns have been expressed by the Manufacturers Association of Nigeria (MAN) regarding the 35% aggregate lending rates that commercial banks charge. It opined that this will exacerbate inflationary pressures and deter industrial sector investment.
In each of the six geopolitical zones, the MCCI gathers the perspectives of four hundred CEOs of manufacturing firms. Photo Credit: RuslanDashinsky
Source: UGC
It stated that after rising from a 28.6% interest rate in the first three months of 2024 to a 6.4% rate in the second quarter, loan rates increased.
The association made this known in its second quarter Q2 “24 MAN CEO’s Confidence Index (MCCI)” entitled “MAN Position on the Incessant Increase in Interest Rate”.
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“The continuous hikes in MPR have tightened financial conditions for the productive sector, with the average maximum lending rate charged by commercial banks on manufacturers’ finances rising to 35 percent in Q2 2024 from 28.6 percent in Q1 2024,” MAN said.
“This has not only increased the cost of goods but has also further compounded the inflationary problem and threatened employment in the sector,” it added.
What the report says
The MCCI compiles the opinions of 400 CEOs of manufacturing companies from each of the six geopolitical zones regarding macroeconomic shifts in the nation, such as employment and business environments, output levels, and working conditions.
The research said that the index dropped from 53.5 points in Q1 to 51.9 points in Q2 as a result of macroeconomic difficulties.
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According to the research, Zenith Bank’s average loan rate to manufacturers in the second quarter was 30%, whereas Access Bank and the United Bank for Africa had rates of 32%.
MAN further said that First Bank of Nigeria and Ecobank maintained their interest rates at 35 percent during the reviewed period.
The monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) was criticized by MAN for its “erroneous disposition” to combat inflation by continuously raising the monetary policy rate (MPR), which serves as the benchmark interest rate for banks.
MPC increases interest rate
In a traditional move to control inflation and stabilise the naira, the monetary authorities raised the benchmark interest rate by an additional 50 basis points to 26.75% at the most recent MPC meeting in July.
After the strong monetary boost in May 2022, the nation’s interest rate was hiked by 1,525 basis points; nonetheless, inflation is still high and is almost at a three-decade high.
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“Unfortunately, inflation has continued to defy the antidote of increased interest rates, as the inflationary problem in the country is largely driven by supply-side deficiencies and other structural bottlenecks,” the report noted.
According to the manufacturers, prior to the latest hike in the MPR, all five of the leading banks had maximum lending rates that were below 30%.
Furthermore, MAN issued a warning, stating that the MPC’s decision will increase borrowing costs, restrict credit availability, and deter investment in the manufacturing sector.
However, it expressed concern that the manufacturing sector’s capacity to play its strategic role of stimulating economic growth has been further constrained by the increase in interest rates.
“The new rate will further limit the growth of the manufacturing sector, as the purchasing power of consumers, production levels, competitiveness, and sales will further decline beyond measure,” it said.
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Henzodaily.ng reported that the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) has increased the benchmark interest rate to 26.25% from 24.75%.
The new rate is a 150 basis point increase from the previous rate and the third consecutive hike implemented in 2024 by the CBN to fight inflation.
Olayemi Cardoso, the CBN Governor and MPC Chairman, disclosed the new interest rate at the end of the 295th MPC meeting held in Abuja on Tuesday, May 21, 2024, Punch reports.
Source: Henzodaily.ng
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