By Franklin Alli
The Organised Private Sector (OPS) Nigeria has expressed frustration over the high interest rate regime which persisted in 2017. In their review of the outgoing year, Manufacturers Association of Nigeria, MAN; Nigeria Employers Consultative Association, NECA; Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) noted that their vigorous advocacy for single digit interest rate regime in Nigeria, specifically five percent, went unheeded, and unfulfilled by the monetary policy.
In Nigeria, interest rate is driven by Central Bank of Nigeria’s Monetary Policy Rate, MPR, which was sustained at 14 percent in 2017 by the apex bank’s Policy Committee.
This, according to the various OPS organisations, is contrary to what obtains around the world as follows: Kenya 10 percent; South Africa 7 percent; China 4.35 percent and, U.S.A 0.75 percent. Others are UK 0.25 percent, France 0.00 percent; India 6.25percent and Brazil 13 percent, Mexico 5.75 percent; Indonesia 4.75 percent; Ghana 25.5 percent, and Ethiopia 5 percent. Whereas in Nigeria interest rate hovers between 25-30 percent, excluding other ancillary charges.
According to Iyalode Alaba Lawson, NACCIMA President, “As at June 2017, the prime lending rate was 17.59 percent while the maximum lending rate was 30.94 percent. This shows no improvement and NACCIMA continues to advocate that government earnestly puts in place measures to bring down the interest rates to a single digit.
She noted that more investment-friendly policies, interventions and measures which will reduce the cost of funds are urgently required as this continues to prevent entrepreneurs from fully gaining and exploiting the potentials of their businesses and even hinder new ventures. “With better interest rates, infrastructure and government policies, contributions from the private sector of the economy will improve the country’s GDP and reduce dependence on crude oil and external borrowing,” she said.
Director- General, NACCIMA, Barr. Emmanuel Cobham, added “A situation where there exist various rates for different purposes does not augur well for the polity. It also does not boost investors’ confidence.”
MAN President, Dr Frank Jacobs Udemba, said: “The association has done its best on the advocacy on lowering the monetary policy rate. MAN would continue to ask for five percent interest rate for the manufacturers “as high-interest rate doesn’t favour manufacturing enterprises in the country.
“We urge CBN to take a drastic action about lowering interest rate for manufacturers. MAN members are not happy about it.”
Larry Ettah, NECA President, noted that another dimension of the negative implications of current interest rate policy is the phenomenon of “crowding out” of private sector access to credit by credit to the government.
“Data from the CBN demonstrates that credit expansion to government is outgrowing by large margins credit to the private sector. For example, between February and April 2017, while credit to government grew by 3.10 percent, 27.81 percent and 7.54 percent respectively, private sector credit grew marginally in February by 0.10 percent; declined by 1.89 percent in March, and also declined by 1.48 percent in April on a month-on-both basis. On a year-on-year basis, credit to government expanded by 15.43 percent, 19.76 percent, 37.46 percent and 42.15 percent in January to April 2017, while private sector credit grew only 19.76 percent, 19.17 percent, 17.96 percent and 13.23 percent in the same period,” he said.