Reps urge CBN to review its monetary policy rate

The House of Representatives on Wednesday urged the Central Bank of Nigeria to review its Monetary Policy Rates (MPR) by putting into consideration the cost of doing business by banks.

Monetary policy rate controls interest rates and money supply and targets inflation.

At 13.5 per cent , Nigeria’s policy rate, which is at par with Malawi, is the sixth highest in Africa. It is lower than only Zimbabwe’s rate of 35 per cent, Sierra Leone’s 16.5 per cent, Ghana’s 16 per cent, Angola’s 15.5 per cent and Sudan’s 15.4 per cent.

Concerned about this, the House noted that there is a need to control the interest rates of banks lending particularly to Small and Medium Enterprises (SMEs), manufacturers and Industrialists.

Fatoba Olusola (APC–Ado Ekiti/Irepodun-Ifelodun Federal Constituency), in his motion titled “Need to Investigate Banks’ Lending Practices, Protect Borrowers from Exploitative Interest Rates and Promote Economic Development”, led this debate.

He said high lending rates impede economic growth as they make access to bank loans difficult, and when it is made to be high by the Central Bank of Nigeria (CBN), commercial banks would make theirs higher.

“When lending is at a high interest rate, profits in the manufacturing process are eroded which makes it difficult or unattractive for manufacturers to continue in business,” he said.

“High interest rates cannot both contain inflation and stimulate economic growth at the same time, while in reality citizens, Small and Medium Enterprises, manufacturers and investors are bearing the brunt of the “cut throat” lending rates where the banks and their directors remain the major beneficiaries of the high lending rates,” he noted.

“When interest rates are high, investors and banks are often willing to invest in government securities which pay high returns, a phenomenon known as crowding out, as high interest rates on government securities draw investments away from other areas of the economy.”

The House, therefore, urged the National Economic Council to consider how to reduce the cost of doing business in Nigeria in a manner that the common man will feel the impact.

It also mandated its Committee on Banking and Currency to interface between commercial banks to ascertain the justification for the big gap between the MPR and the lending rates.

The House Committees on Banking and Currency, Finance, and Industry were also tasked to organise a round-table session with the Central Bank of Nigeria (CBN), Banks, the Nigerian Deposit Insurance Corporation (NDIC), Small and Medium Enterprises (SMEs), the Manufacturers Association of Nigeria, Industrialists and industry experts to find solutions.