Shortly after the Central Bank of Nigeria (CBN) hike in its Monetary Policy Rate (MPR) to 13 per cent, commercial banks operating in the country have responded with prime lending increasing to 11.96 per cent in May from 11.83 per cent reported in April 2022.
The prime rate is the interest rate that banks charge their most creditworthy customers, generally large corporations.
The CBN had increase MPR or interest rate to 13 per cent in response to global inflationary pressures, which had continued to hurt economies around the world.
The CBN in its “Money Market Indicators” data revealed that prime lending as of May 2022 reached highest level this year and 16-month high when the MPR was 13.5 per cent in January 2020.
With the prime lending rate, reaching its highest level in 2022, the data by CBN revealed that maximum lending rate hits lowest rate in 2022, as banks move to attract more lending to customers.
Maximum lending rate dropped to 27.37 per cent, a 0.42 basis points decline from 27.79 per cent reported by CBN in April 2022, while interest on saving deposit closed May 2022 at 1.37 per cent, highest so far this year.
The interest rate on treasury bill (T-bill) increased to 2.12 per cent in May from 1.74 per cent in April 2022.
The CBN had announced a TBills for 1-year tenor worth N143.88 billion, which was auctioned on Wednesday, 25th of May 2022, accumulated a total subscription of N210.82 billion, representing 147per cent of the intended capital raise.
According to the result of the auction, the stop rate for the 364-day Tbills was 6.49per cent, which is higher than the 4.7per cent marginal rate recorded in the previous auction.
The apex bank recorded a total subscription of N236.97 billion for the three tranches of Tbills auctioned as against the N153.03 billion intended offer. This represents a 155per cent subscription rate, while the final aggregate allotment was N173.48 billion.
According to analysts, the decline in maximum lending rate and saving deposit rate is targeted at attracting more customers borrowing and savings in the banking sector.
The vice president, Highcap Securities Limited, Mr. David Adnori lamented over the increase in prime lending rate to MPR, stressing that gap between the CBN’s lending rate and the prime lending calls for concern in the banking industry.
According to him “The gap is almost like double-digit and it indicates a serious rant-seeking within the banking industry.
“The spread between the prime lending rate and MPR should not be more than 10 per cent but when you have something more than 100 per cent, it means there is a serious rent-seeking activity in the banking sector that is eroding the nation’s economy of resources.”