Why Nigerian banks can’t lend at single digit – CBN
Joseph Nnanna, on Thursday said Deposit Money Banks cannot lend at
single digit interest rate due to the attractiveness of treasury
bills.
He spoke at a roundtable event on factoring financing held in Abuja on
the sidelines of the African Export-Import Bank's annual conference.
Nnana noted that with the government borrowing from banks at an
average rate of 18 per cent, it would be difficult to achieve a single
digit lending rate.
He said, "Banks have some challenges at lending at a single digit
interest rate not because they don't want to do so, but because there
are compelling needs, and I am saying this without any fear of
contradiction.
"If the government in its self is willing to borrow at 18 per cent
from the banks through treasury bills, why should any banker lend from
anybody at a single digit? So, that is the problem.
"If government can stop borrowing and start living within its means,
liquidity will be there and banks will be constrained to lend at a
single digit.
"Now, see what is happening; the government has decided to finance
part of its budget externally, they are offloading treasury bills and
treasury bills rate have now dropped from 18 per cent; and as I speak
to you now, it is 10 per cent.
"So, banks will be awash with liquidity and they will look out for
MSMEs and lend the money to them. So, let us put our fiscal house in
order; once we do that, all will be well."
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