Following the 150bps rate hike in May which brought the MPR to 13 per cent from 11.5 per cent, banks had readjusted their lending rates. Lending rates before the rate hike in May this year hovered between 12 and 40 per cents but as at July 15, lending rates was between 12 and 44 per cents in the banking industry.
“The more you increase the , the likelihood that the asset quality of banks will even deteriorate. In the last MPC communique, we were told that the non performing loans of banks have dropped to below the CBN threshold of five per cent. “So, if the interest rate is 15 per cent, banks of course cannot lend at below 15 per cent, it has to be higher, with the cost of doing business that is also rising. That is why you also find that banks are shifting all these things to their customers and those who are borrowing.
Uwaleke also noted that the higher MPR would mean the cost of government servicing its domestic debt obligations will also increase.