Commercial lenders have adjusted interest charged on existing contracts by 200 basis points or 2 percent to about 30 percent or higher depending on the bank.
Inside Business authoritatively gathered from sources close to some of the banks that notifications have been sent to customers who have existing loans contract informing them about an upward review of the interest rate.
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“Last Friday, November 25, a friend of mine got a notification from his banker that the interest rate on his existing transaction has been adjusted upwards by 200 basis points or 2 percent. You can see how a rise in monetary policy rate can adversely affect companies.
“Almost immediately after CBN announced the increase in interest rate by 100 basis points to 16.5 percent, every other rate in the market was adjusted upwards,” said Teslim Shitta-Bey.
The financial markets expert explained that such adjustment is not possible with commercial papers (fixed income instruments) because the rate was fixed, adding that even though there are adjustable commercial PAPERS, they however cannot prevail at the Nigerian capital market currently.
According to him, the new amount of interest is North of 22 percent, meaning that with inflation at 21.09 percent, real lending rates are now positive implying that the lender is ahead of the borrower even after adjusting for inflation.
The consequence is higher pressure on manufacturers as margins get squeezed and profits get pummeled.
Tuesday last week, November 22, the Central Bank Nigeria (CBN) raised the interest rate to 16.5 percent from 15.5 percent sustaining its aggressive stance towards fighting inflation which rose to 21.09 percent in October.
