MAN decries 14% lending rate, others call for caution

Chairman, Manufacturers Association of Nigeria (MAN)  Ogun Chapter, Mr Wale Adegbite has expressed disappointment over the Monetary Policy Committee (MPR) ‘s decision to retain all the monetary policy rates. Adegbite expressed his view in an interview  in Ota, Ogun. But Mazi Okechukwu Unegbu, former President, Chartered Institute of Bankers of Nigeria (CIBN), said that the MPC would tinker with the rate when the budget would have been approved. Unegbu said that the members had no choice but to retain the rates the way they were at the moment because the budget was still pending as well as other economic factors.

He said that the capital market had been experiencing a mixed performance, while the interest rate for manufacturing companies had skyrocketed. “When the budget is passed and implementation commences, things will start working. We will now know if they will do a downward review, retain or take it up. “They are right to retain the rates the way they are at the moment, if they tamper with it, it will create more problems for them,’’ Unegbu said. He said that apart from the budget, the Federal Government needed to embark on human capital development to achieve the desired growth, noting that money was not the major thing.

Malam Garba Kurfi, the Managing Director, APT Securities and Funds Ltd. expressed dissatisfaction with the MPC decision to keep Nigerians in suspense as to when the rates would be reviewed. Kurfi said that the members would have done better by setting a limit to when Nigerians should expect a change in the benchmark interest rate. He said that the committee would have set an inflation rate target when the interest rate review would be expected rather than allow people to guess. According to him, banks keep their money in Treasury Bills (TBs) and Federal Government Bonds rather than lend to the real sector to accelerate economic growth. “As of today, most banks lend to companies between 22 per cent and 30 per cent which is higher than the apex bank approved limit,’’ Kurfi said. He said that the development if not addressed would affect economic growth and the three per cent Gross Domestic Product (GDP) projected by government for 2018.

Mr Ambrose Omordion, the Chief Operating Officer, InvestData Ltd., said that the outcome was in line with expectations. Omordion observed that the present socio-political environment did not give room for a rate cut due to uncertainties surrounding the coming general elections despite the positive economic data. He said that rates remaining unchanged for nine sessions of MPC would favour foreign investors. This may keep the inflow of capital to the economy and market, knowing that their funds are for different investment purpose and limit exposure to different markets. Fund managers have the choice of where to put their funds for profit with less associated risk,’’ Omordion said.

He said that the outcome of MPC meeting would likely slow down the panic in the market ahead of first quarter companies earnings and first quarter economic data. Mr Bayo Adeleke, immediate past Secretary, the Independent Shareholders Association of Nigeria, said that the committee was trying to be careful in terms of adjusting the key variables since they have not met for some time. “This is good for our market (capital market). The stability will continue because the returns on TBs is low (10-11%) largely due to increase in price of crude oil,’’ Adeleke said. MPC members of the apex bank have voted at the end of the two-day meeting in Abuja to retain MPR at 14 per cent, alongside all other policy parameters.

Mr Godwin Emefiele, Central Bank of Nigeria (CBN) Governor, said at the end of meeting that the committee was keeping monetary policy rates because of the fear that loosening the rates may lead to a rise in consumer prices. Adegbite however said MPC could have reduced the monetary policy rate so as to jump-start the economy after the long  seizure for close to two years. “We hope that the rate would have started coming down now because we need a lower interest rate so as to increase activities in the manufacturing sector, “the chairman said.

Adegbite said that with lower interest rate, the manufacturer would be able to produce at the optimal level as well as adding value to the nation’s Gross Domestic Product (GDP). MPC had on Wednesday, concluded its two-day meeting and retained all the monetary  policy rates. The benchmark interest rate is at 14 per cent with the asymmetric corridor between 200bps and 500bps around. The Cash Reserve Ratio (CRR) is at 22.5 per cent and the Liquidity Ratio at 30 per cent.