CEM REPORT, FINANCE | Amidst multiple rate hikes by the Central Bank of Nigeria (CBN) in 2022, the maximum lending rate for Nigerian banks rose to 29.13% in December 2022.
The lending rate rose from 28.14% recorded in November 2022 and 27.58% in the corresponding period of 2021.
According to the CBN data on money and credit statistics, the maximum lending rate averaged 28.09% in 2022 compared to 28.06% recorded in the previous year.
Meanwhile, the prime lending rate stood at 13.85% from 13.17% recorded in the previous month.
The CBN in its efforts to curb inflation and mop-up excess liquidity, especially in the second half of 2022 increased the benchmark interest rate by a collective 500 basis points to 16.5%, representing its highest rate in 21 years.
This seems to have had no effect as data reveals that Nigeria’s private sector’s credit rose by N6.61 trillion in 2022 to close the year at N41.8 trillion, the highest on record.
Compared to the previous year, net loans increased by 23.65% compared to N5.04 trillion recorded in 2021, and a 47.7% increase from 2020.
In the same vein, credit to the government increased significantly, with N11.33 trillion in new credit being acquired in the period under review, representing a 92% surge from 2021’s loan figure.
With the increase in the interest rate, the ability of businesses to repay the loans could be hampered. A possible solution will be to pass the cost to the consumers.
Banks however will be on the gaining side of the increase since they generate income from interest from the loan, although this has a downturn.
Financial statements of top publicly quoted banks on the Nigerian Exchange showed that interest income increased by 30% year-on-year in Q3 2022, earning a whopping sum of N1.15 trillion compared to N888.36 billion recorded in the corresponding period of 2021.
For the nine months, interest income rose by 24.6% to N3.14 trillion from N2.52 trillion earned in the same period of the same year. These numbers seem set to increase further when the banks begin to release their full-year results.
Meanwhile, the deposit rate for December 2022 increased to 8.15% in December 2022 from 7.38% recorded in November.
3-month deposit rate stood at 8.79% in the review period, an increase from 8.45% recorded in the previous month.
The 6-month and 12-month deposit rates stood at 8.68% and 8.22% respectively in December 2022.
The savings deposit rate climbed to 4.13% in December, the highest since April 2017.