LENDING RATES STILL RISING

Average normal lending rates officially rose to 17.68 percent at the close of August, in spite of decision by the Monetary Policy Committee (MPC) to retain both the Monetary Policy Rate (MPR) and Cash Reserve Ratio (CRR) at 10.5 and four percent respectively.The MPR is the rate at which CBN lends money to banks. At the end of the day, if the apex bank increases its lending rate, banks will in turn lend money to their customers at higher rates.The implication is that retaining the rate means that the lending rates were supposed to be stabilized.As for the CRR, it is the amount of money banks keep with the CBN. In effect, since the apex bank retained the former rate, banks would have more money to play with or lend to their customers.But according to the Money Market Association of Nigeria (MMAN), the rise in lending rates connotes high cost of fund, and the apex bank’s drive to achieve a single digit inflation rate.Nonetheless, recent figures released for the month of July indicate that inflation rate rose from a double digit 12 percent in June to 14 percent the following month.On the other hand, savings rate dropped marginally during the month to an average of 3.4635 percent, while prime lending rate shed 0.11 basis points to end on an average of 17.4048 percent.

Source: Businessday Newspaper