By Franklin Ocheneyi
IN the year under review, despite advocacies by the Nigerian private sector organizations to Central Bank of Nigeria, CBN, to bring down the high interest rate to a single digit, 2017 ended without them realizing this expectation.
At the beginning 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) and other players in the sector advocated severally for single digit interest rate in Nigeria. They demanded specifically for five percent.
They based their demand on interest rates obtained in others: 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, Ethiopia 5 percent. In Nigeria it ranges from 25-30 percent, excluding other ancillary charges.
In Nigeria, interest rate is dictated by CBN’s Monetary Policy Rate, MPR, which the authority had sustained year-in-year-out at 14 percent.
Iyalode Alaba Lawson, NACCIMA President, noted: “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.
“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.
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 urged CBN to take a drastic action about lowering interest rate for manufacturers. MAN members are not happy about it.”
“So far, in view of the above-unfulfilled expectation, what does 2018 hold for the actualization of single-digit interest rate in Nigeria? Will CBN bow to the pressures from domestic manufacturers and crash the interest rate? We shall have to wait and see”
Nevertheless, Jacobs said: “Obliviously, 2017 was much better than last year. For us in manufacturing, it is better in terms of access to foreign exchange; it is also better in terms of the numbers of programmes that the Federal Government introduced the Economic Recovery and Growth Plan, ERGP; the inauguration of an Industrial Policy and Competitiveness Advisory Council, IPCAC, of which 65 percent of the members are drawn from the manufacturing sector, notable manufacturers.
“At last, the voice of manufacturers is now heard and built into the government policy. I have the feeling that 2018 will even be better than 2017 because by then, all the policies that are coming out through the IPCAC would have taken root.”
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%, 27.81% and 7.54% respectively, private sector credit grew marginally in February by 0.10%; declined by 1.89% in March, and also declined by 1.48% in April on a month-on-both basis. On a year-on-year basis, credit to government expanded by 15.43%, 19.76%, 37.46% and 42.15% in January to April 2017, while private sector credit grew only 19.76%, 19.17%, 17.96% and 13.23% in the same period,” he said.
So far, in view of the above-unfulfilled expectation, what does 2018 hold for the actualization of single-digit interest rate in Nigeria? Will CBN bow to the pressures from domestic manufacturers and crash the interest rate? We shall have to wait and see.