Posted by By Enitar Ugwu on
BANKS mostly the liquid ones may have silently slashed interest rates on deposits by as much as four per cent.
BANKS mostly the liquid ones may have silently slashed interest rates on deposits by as much as four per cent.
This came to light yesterday when customers who took their funds or had such money in the banks found that the prevailing interest rates of 14 per cent and 15 per cent were no longer obtainable.
They were therefore told that their deposits could only attract between 10 and 12 per cent.
But banks, which are not in the big league still pay as high as 14 per cent on deposits.
The Guardian learnt that the recent rate crash was informed by the perceived intention of the Central Bank (CBN) to slash the Minimum Rediscount Rate (MRR).
The second reason for the drop in rates, according to sources, is the current "flight to safety" by depositors.
With the banks consolidation programme drawing to a close, depositors in banks suspected to be weak and which are perceived not to be doing anything to meet the deadline, have started pulling out their funds and lodging them in banks that have either recapitalised or capable of doing so.
Indication that the CBN may slash the MRR were rife last week when the apex bank reviewed downwards the Repo rate (the rate of interest it pays to discount houses for funds it borrows from them).
The CBN had on Wednesday last week informed the discount houses that henceforth, it would not pay above four per cent interest on one to seven days funds.
Prior to this time, the CBN pays a flat interest of five per cent on the fund.
With the development, a-day-old fund will now attract two per cent interest, two to three day funds (three per cent), while four to seven days funds will attract four per cent interest.
Money market operators are therefore expecting the CBN to slash the MRR, which is the anchor rate that determines the deposit and lending rates in the economy.
Last February, it was reviewed downwards from 15 per cent to 13 per cent.
Sources however say that between now and December 31, 2005 deadline for banks capitalisation, interest on deposit will remain low.
This, they pointed out was because those banks perceived to be weak would continue to lose their funds to the stronger ones. Consequently, the healthy banks, which may have little or no outlets to invest the growing funds at their disposal and earn more have resorted to interest cutting to reduce the burden of holding unutilised money.
The Manufacturers Association of Nigeria (MAN) had recently in Abuja accused banks of charging exorbitant interest rates despite the lowering of the MRR to 13 per cent by the CBN.
Reacting to reports that banks were charging over 30 per cent interest rates, the Acting Director-General of MAN, Mr. Jide Mike, said that manufacturers were not declaring enough dividends because of rise in interest rate.
His words: "Manufacturers are not declaring good dividends these days because of hike in interest rates. What we should have ploughed back or given back as dividends to stakeholders is now given to banks in the form of interest.`