The high interest rate regime in Nigeria may still linger except certain fundamentals in the country are fixed adequately, the Group Chief Executive Officer of Ecobank Transnational Inc., Ade Ayeyemi, has said.
At the moment, the Monetary Policy Rate (MPR), which benchmarks interests charged by deposit money banks in the country has been fixed at 14 per cent for more than year against agitation by operators in the real sector that the rate was inimical to their operations and was stifling activities in the sector.
Though the MPR is fixed at 14 per cent, the banks on the other hand lends to customers at rates ranging between 22 per cent and 28 per cent, which makes it difficult for entrepreneurs to borrow because of their inability to meet the terms, especially with its short term tenor.
Ayeyemi explained that the unfortunate situation may persist unless certain fundamentals like ensuring that all citizens pay their taxes, infrastructure get fixed by government, as well as government living up to her expectations like meeting contractual obligations timely.
The Ecobank chief was speaking in Abuja at the just concluded 23rd edition of the Nigerian Economic Summit Group where he also featured as one of the panelists on one of the sessions focusing on access to Finance by budding entrepreneurs.
“Interest rate is not the problem of the banks. it is the problem of the society. I lend to bank, small scale and medium scale enterprises in Benin Republic at 8 per cent, we need to understand our problem so that we can put appropriate solutions.
“If you have the opportunity to put your savings in the bank today and the bank tells you we would pay you five per cent and you can put it in treasury bills at 17 per cent, which one will you choose?” Ayeyemi rhetorically asked.
He advised that no one should try to force a solution that is not sustainable, as what we need is to solve the fundamental problem.
“Secondly, it is not a good past time for us not to pay taxes, if we don’t pay taxes then the government have to borrow to be able to discharge their obligations, when they borrow interest rate goes high, so we have to choose whether to pay the tax or pay a high interest rate.”
“So it’s something that we have to speak truth to ourselves, I can’t tell you that all the banks would bring down the interest rate, is not going to happen. Why is it not going to happen is because the government is borrowing at 17 per cent and we are not going to pay taxes.”