Publishing Banks’ Interest Rates

THE Monetary Policy Committee of the Central Bank of Nigeria (CBN) recently announced its decision, which mandated the nation’s banks to publish their interest rates on loans and deposits to ensure fairness and transparency in the market. Many Nigerians have complained about the huge interests banks charge on loans. In spite of the parlous state of the real sector of the economy, these banks continue to declare huge profits, making people to link their astronomical profits to the high interest rates they charge on the loans to their hapless customers.

Unlike what obtains in other countries, where there is a strong correlation between the development in the two segments of the economy — the real and the financial sectors— the Nigerian situation defies all known logic. The local firms, which are supposed to power the nation’s development engine, are struggling to survive under the yoke of high cost of energy and moribund infrastructure, as well as unfair competition with cheap imports.

BANKS’ facilities, especially loan, are very hard to access by these firms. The banking system in Nigeria is rarely a lender of first resort as is the case in countries with well developed financial systems. A survey of the Nigerian Manufacturing Enterprise Survey (NMES) jointly, carried out by UNIDO, DFID and the Centre for the Study of African Economies (CSAE) between 2001 and 2005, revealed that only about 35 per cent of respondents regarded borrowing from the banks as the principal means of overcoming cash flow problems. This has not changed much, as Nigerian banks are only interested in financing government and traders. The situation is such that, today, most Nigerian banks are promoting all kinds of consumer credit facilities to finance the purchase of imported vehicles, while the productive sector, the driver of long term economic growth, remains a “no go area” to them.

IN spite of the recent effort of the CBN to give the nation’s banking sector a solid financial base, the sector has remained unfriendly to the economy. Bank spread — the difference between lending and deposit rates, which is one of the measures of efficiencies of the financial sector — is among the highest in the world. The implication of this is that, depositors get low interests on their money, while the banks give out the same savings as loans at very high interest rates to their customers.

WORSE still is the fact that unsuspecting borrowers are often made to pay some hidden charges that are hardly spelt out clearly at the time the loans were granted by the banks. Many bank customers have complained about hidden charges on the loans they collected. The charges are so much that by the time they finish paying the loans, what they paid back to the banks often exceeds the amounts they borrowed.

THIS kind of shady practice is unhealthy for the economy. It discourages potential customers from patronising the banks. The high interest rates on loans are also enough disincentives for the investors. The huge difference between the saving and lending rates constitutes the unmerited profits that the banks flaunt openly.

WE hope the new policy will put an end to the excessive interests on loans most Nigerian banks charge their customers. This new policy will help customers to have a knowledge of all the charges that they are expected to pay on their loan commitments. They will know the banks that charge the most favourable rates and those whose charges are prohibitive. But, more importantly, it will give the customers more options and promote greater competitions among the banks. It will introduce greater transparency to the money market and help in the development of the financial sector.

HOWEVER, given the well-known ability of Nigerians to always beat the system and hide under various guises to flout policies they do not agree with, we hope that the CBN will be ready to effectively monitor the banks and punish, severely, any of them that contravenes the new policy. The CBN must also set up a surveillance unit, as well as a public information unit, where reports can be easily lodged. The banks must demonstrate that they have a stake in the efforts to make the real sector of the Nigerian economy grow. Their actions must show that they are willing and ready to contribute, significantly, towards reducing the harshness of the environment under which businesses operate in the country.

Give Nigeria a break

THE Food and Agriculture Organisation (FAO), an agency of the United Nations, gave Nigeria the bird last week. It said a savage strain of bird flu had flown to Nigeria and that the country threatened the poultry population of sub-Saharan Africa.

THE FAO is based in Rome, Italy. The vicious virus made visits to Italy, Afghanistan and Iran before making a stop in Nigeria. Yet it is Nigeria that is threatening the good health of birds in many countries of the world!

THE world loves to sling mud at Nigeria. The country is the world’s whipping boy; it is blamed for almost every ill of humankind.

Nigeria is supposed to have created corruption and conceived the confidence trick. Soon, it may be said that the first AIDS case was reported in Nigeria.

OK, some Nigerians gloat about their stolen wealth and nothing happens to them. Their homes are happening places, salons of sybaritic living.

IT is also true that the country’s rulers are good at giving jobs to their boys and nothing else. The roads are rough and repulsive and elctricity cannot be found in the cities.

Nigeria’s problems are not few, so why add that of bind flu?

Give Nigeria a break, folks.