There are indications that Nigerian Banks are raising their interest rates to soften the impact of inflation on operational cost and profit.
Nigerian banks are loaning to customers at a higher interest rate while reducing interest rates on deposits to the bank. The Central Bank of Nigeria’s recent report shows a 3.15% increase in the average lending rate from 27.58% in December 2021 to 30.73% in February 2022. While average deposit rates fell by 0.47% from 5.07% in December 2021 to 4.6% in February 2022.
Why this is happening
As inflation of commodities in Nigeria increases, the operational cost for businesses such as the banking sector are also increasing. Banks are cutting work hours as a result of the 163% rise in the price of diesel to enable them to maintain a profit margin.
What they are saying
At the last Monetary Policy Committee meeting, bankers complained of the impact of inflation and the increase in AMCON’s (Asset Management Corporation of Nigeria) charge on revenue. CBN held that its 11.5% lending rate to commercial banks remains unchanged.