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Wednesday, October 20, 2021

Most bank creditors got loans at below 15% interest rate – MPC member

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About 83.04 per cent of banking creditors were able to access credit at below 15 per cent lending rates as of February.

A member of the Monetary Policy Committee, Prof. Adeola Adenikinju, disclosed this in his personal statement at the recent meeting, according to the Central Bank of Nigeria.

“Data on the industry’s credit disbursement shows that 83.04 per cent of banking creditors were able to access credit at below 15 per cent lending rates,” he said.

He said the banking stability report showed that the banking industry remained stable and resilient.

The Capital Adequacy Ratio, non-performing loans ratio and the liquidity ratio remained quite encouraging and not significantly different from where they were at the January meeting of the MPC, he said.

However, he added, there were moderate declines in returns on equity and returns on assets and a significant rise in the share of operating incomes in total interest incomes of Deposit Money Banks.

In his report, he said economic report showed mixed performance of the Nigerian economy.

Adenikinju said although Nigeria took an early exit from economic recession in 2020, Q4, the overall Gross Domestic Product growth for the year was negative and the recovery was tepid.

He said growth forecast for Nigeria for 2021 ranged from 1.1 per cent by the World Bank to 3.0 per cent by the Federal Ministry of Finance, Budget, and National Planning.

The current growth recovery was led by agriculture and services, he said.

He said, “Oil refining and air transport are the major laggard sub-sectors. Data released by the NBS for 2020 show that unemployment and underemployment and invariably poverty rates have worsened in the last one year due to the pandemic.

“Inflation rose to 17.33 per cent in February 2021, fuelled primarily by food inflation. Food inflation rose to 20.57 per cent in February 2021 from 12.29 per cent in February 2020.

“The prices of both locally produced and imported food rose between January and February 2021. Naira exchange rate depreciated across the various windows, the I&E and BDC.

“External reserves also declined from $36.6bn in December 2020 to $34.46bn in February 2021.”

Adenikinju noted that the CBN had spent over $1.3bn to defend the naira between January and February 2021.

He said it was early in the day to know the extent to which the new policy of CBN to boost remittances would impact on pressures in the foreign exchange market.

“Capital imports, though have picked up in recent months is still far below the level it was in January 2020,” he said.

He expressed concerns that the rising inflationary pressure seemed to be unabated.

Bank staff projection, he said, showed that inflation would remain above 17.9 per cent by 2021.

This, he noted, was also fuelling inflation expectation by economic agents.

He noted that Nigeria has one of the highest inflation rates in the world.

According to him, high inflation induced macroeconomic instability.

“It will negatively affect the welfare of households and fixed income earners,” he said.

He said he supported the current policy of the MPC which was to support growth and in the medium to long term, expand aggregate supply curve of the economy and eventually lower aggregate price level.

Empirical studies, he said, showed that the bank’s interventions contributed significantly to the country’s early exit from recession in 2020 and the better-than-expected real GDP growth in 2020.

However, he added, the persistent high inflation figure, which was largely driven by structural factors, including insecurity all over the country, also had elements of monetary phenomenon, as staff estimates showed that broad money and net domestic credits were above their provisional levels in December 2020.

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