The Central Bank of Nigeria (CBN) has revealed that the average prime lending rate in the banking sector increased to 14.07 per cent in May 2023, becoming a record high in 27-month amid hike in Monetary Policy Rate (MPR).
The CBN in its money market indicators stated that January 2020 was the last time average prime lending rate was above 14.07 per cent when it was 14.97 per cent.
Prime lending is the interest rate that Deposit Money Banks (DMBs) charged on loans and products held by customers with the highest credit rating.
The average prime lending rate in January 2023 was at 13.67per cent and increased to 13.62per cent in February when MPR was at 17.5 per cent. It increased to 13.97 per cent in March amid 18 per cent MPR as the CBN tackled rising inflation rate.
The lending rate further increased to 14.05 per cent in April and subsequently closed at 14.07 per cent in May 2023.
Prime lending rate had closed 2022 at 13.85per cent from 11.68 per cent in January 2022.
Prime lending closed 2022 at an average 13.85per cent from average 11.68 per cent in 2021 with averaging 16.57 per cent from January 2006 to average 13.67per cent in January 2023.
The data reached an all-time high of average 19.66 per cent in November 2009 and a record low of average 11.13 per cent in March 2021.
The money market indicators also disclosed that maximum lending rate dropped from 28.59 per cent in April to 28.31 per cent in May 2023, while interest on savings deposits closed May 2023 at an average of 5.13 per cent, the highest in over 17 years.
Maximum lending rate refers to the rate charged by banks for lending to customers with low credit rating.
Consequently, the interest rate on treasury bills (T-Bills) dropped to 2.98 per cent in May 2023 from 5.73 per cent reported by CBN in April 2023.
Analysts said that the gap between the CBN’s lending rate and the prime lending calls for concern, stressing that the spread between the rates should not be more than 10 per cent.
