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Ex ANAN president wants CBN to peg lending rate at 10%

By Uzoma Egwu
The immediate past President, Association of National Accountants of Nigeria (ANAN), Dr. Samuel Nzekwe, has urged the Central Bank of Nigeria (CBN) to reduce lending rate to 10 per cent.

SANUSI

Nzekwe, in a statement made available to newsmen in Lagos, said the gap between lending rate and interest paid on deposits is unnecessarily too high and should be closed to create a healthy monetary environment.

“The yawning gap between lending rate and interest paid on deposits is unhealthy and I think that the long run effect will not be good for the economy.

“Currently, banks’ lending rate stand between 18 and 28 per cent while rates paid on deposit by banks stand between 2 and 3 per cent.

“This is completely abnormal and I continue to wonder why the CBN has allowed this dangerous disequilibrium to continue unabated as the economy will be hurt in the long run.
“If we look at the supply side of funds, the banks are paying interest of between 2 and 3 per cent on deposit at the face of rising inflation which is currently standing above 11 per cent

“In the circumstance, therefore, inflow of funds into the financial system through savings by individuals and institutions would be frustrated because the return on deposits which is lower than the rate of inflation and the real income or earnings received from such investment (deposits) is technically negative.”

The former ANAN president said the implication of this situation is that the banks would be illiquid because of the scarcity of loanable funds and as such, would not be able to play their financial intermediation role of collecting funds from surplus units (depositors) and lending to the deficit unit.


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