The Senate, yesterday, mandated its Committees on Finance, Banking, Insurance and other Financial Institutions and Legislative Compliance, to investigate the rationale behind the huge differences between deposit and lending interest rates among commercial banks and other financial institutions.
The Senate passed the resolution sequel to a motion, “Urgent need to reduce the gap between lending interest rate and deposit interest rate among commercial banks and other financial institutions.”
The sponsor of the motion, Senator Solomon Adeola (APC, Lagos West), while leading debate on the proposal, lamented that there was a huge divergence between the deposit and lending rates in Nigeria.
He said that, according to data from the Central Bank of Nigeria (CBN), savings deposit rate as at December 2019 was 3.89 per cent while the prime and maximum lending rate were 14.99 per cent and 30.72 per cent in the same period.
The lawmaker stated that Nigeria’s current lending rate was one of the highest in the world, saying that while the prime lending rate, according to the CBN monetary policy rate, MPR, was 14.99 per cent, loans were available in commercial banks and others at an interest rate of between 22 and 27 per cent.
He also pointed out that the country’s inflation rate had risen to 11.98 per cent as at December 2019, saying “this is the highest inflation rate between January and December 2019.”
“Latest data from the National Bureau of Statistics also shows that the inflation rate further rose from 11.98 per cent in December 2019 to 12.13 per cent in January 2020. This development negatively affects the deposit of bank customers in addition to the low interest rate on deposits,” he added.
Adeola further expressed worry that inflation rate in some other African countries were not as wide as that of Nigeria.
“For instance, in Kenya, the deposit rate, savings rate and lending rate as at September 2019 were 6.89 per cent, 4.58 per cent and 12.47 per cent respectively. South Africa’s overnight deposit rate and lending rate as at February 20, 2020 were 6.34 per cent and 9.75 per cent respectively,” Adeola pointed out.
Contributing, Senator Barau Jibrin (APC, Kano North) described the practice as “deliberate attempt to shortchange the citizens”, saying that 24 per cent to 30 per cent rates are not only the highest in Africa, but a rip-off.
“There’s no way economy can grow under such situation. How can investors come into the country with huge lending rate when no investors can do without bank loans?” he asked.
He argued that the CBN, as the country’s apex bank, should be summoned and called to order over bank’s policies that were anti-people.
Also, Senator Sabo Mohammed (APC, Jigawa South West) said: “If the country must be industrialised, investors must have access to bank loans with affordable interest rates. Unfortunately, it is now being made difficult for the people and this is the reason why our industries are not working.”
Senator Bala Ibn Na’Allah (APC Kebbi South) also lamented that Nigeria had one of the most unstable monetary policies in Africa, adding that the National Assembly was the only hope for Nigerians to correct the excesses of government agencies in the country.
According to him, “80 per cent of decisions by people in government are based on personal interest and it is this parliament that has the power to reverse such policies.
“Last week, the CBN came up with a policy that you cannot transfer to a third party from your domiciliary account. Ordinarily, this shouldn’t have happened without coming to the National Assembly,” he said.
In his remarks, the President of the Senate, Dr. Ahmad Lawan, reminded his colleagues that it was the same legislature that gave certain organizations powers of regulations.
Accordingly, he said that the same parliament could also summon the agencies when they were not discharging their roles effectively, and not at the point of policy making.
Lawan, after the resolution was adopted, gave the committees two weeks to conclude the assignment and submit its report to the Chamber for consideration.