If the pronouncement of the new governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, is anything to go by, then the era of high interest rate and bank charges on customer cash deposits are over.
Addressing a maiden world press conference on Thursday, the apex bank chief abolished with immediate effect all charges on customer deposits, but retained charges on withdrawals at 3 per cent for individuals withdrawals exceeding N500, 000 and 5 per cent on corporates exceeding N3million.
He also gave hinted that CBN would soon begin sharing with commercial banks the income arising from charges on withdrawals which currently goes entirely to commercial banks.
Although he did not give a timeline as to when the lower interest rates regime would kick off, he said the objective is a reduction in overall lending rates to make it cheaper to invest.
This will mark a remarkable shift from his predecessor’s policy of combating inflation threat at the expense of the economy, such that although CBN achieved single digit inflation rate, benchmark interest rate remained high and crippled the manufacturing sector.
Benchmark interest rates have been kept on hold at 12 per cent since late 2011, and several measures of tight monetary policy further tightened liquidity, leaving businesses complaining of high lending rates at about 22 to 25 per cent.
“We shall pursue a gradual reduction in interest rates,” he said. “A comparison of selected macro-economic aggregates from some emerging market countries including South Africa, Brazil, India, China, Turkey and Malaysia indicate that Nigeria has one of the highest Treasury Bill rates.
“Such high rates create preserved incentives for commercial banks to simply buy virtually risk-free government bonds rather than lend to real sector,” he said.