Interest rates may come under fresh pressure as Central Bank of Nigeria, CBN, continued its contractionary monetary policy measures last week, squeezing out about N441.2 billion from the financial system, thereby pushing rates up to 25.6 per cent for interbank overnight funds according to reports from Vanguard.

The rate had opened last week at 24.8 per cent. Last week, the first tranche of the CBN operation came at previous week’s rate of 18 percent for N205 billion worth of treasury instrument on Tuesday, but money market dealers said the apex bank spiked the rate two days later to 18.5 per cent for N236.1 billion worth of instrument, a development which did not only push up the overall market rates but also signalled further rise in lending rates to banks’ credit customers in the days ahead, if the spike rate continues. Banks had raised their lending rates last month, following the jerk up in Monetary Policy Rate, MPR, to 14 per cent by the CBN, which was followed by steady rise in rates at the fixed income market and government securities.


Prime lending rates had since spiked beyond 20 per cent with most banks at over 25 per cent, while other categories of borrowers were slammed over 30 percent interest rates. Treasury executives in banks explained that with the increasing rates in fixed income securities and government securities which are near-zero risk, banks would rather channel their funds to those areas rather than private businesses, though they still lend to secured and profitable businesses at new interest rates. They also explained that the financial system does not have the luxury of liquidity to go round all the prospective borrowers given the current monetary policy regime which has been tightening liquidity in recent weeks.

By floramichaels

Hi, I am Flora Ngo-Martins. I love writing and I am passionate about fashion, stories, news and food. Sometimes I get a little bit serious but that's alright, I can also be mischievous. I also like to analyse stuffs people do and sometimes judge.*wink* Most of all, I love to influence the lives of people positively and tell people's stories from a totally different perspective. Feel free to contact me if you have any suggestions or....

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