The gap between the savings and lending rates in the banking sector widened by 25.33% in March- CBN.
CBN money market indicators revealed that savings deposit rate was 1.28% in March while the maximum lending rate was 26.61%. It showed that in February, the savings rate was 1.28 per cent while lending rate was 26.61 per cent. According to the figures, the savings rate stood at 1.25% in January while lending rate was 30.73%.
Experts have, however, said that the rates introduced in the market by the banking regulator would discourage people from saving and encourage those with the funds to look for other investments that would yield better returns. But some experts have expressed concerns that the lending rate is too high for entrepreneurs. This could hinder them from making profits, asides other hostile economic challenges.
A professor of Capital Market and Chairman of the Chartered Institute of Bankers of Nigeria Uwaleke, said the huge gap between savings and lending rates in Nigeria would inhibit financial intermediation.
“The huge cost of funds is discouraging a lot of SMEs from accessing working capital. The result is low-capacity utilisation, which is partly responsible for the high rate of unemployment. “Equally, very low savings rates discourage deposit mobilisation and promote a lot of cash circulating outside the banking system. So, it is neither in the interest of a cash-light society nor financial inclusion.”
He added that, “On the flip side though, it has encouraged investments in other asset classes such as stocks and bonds. “Be that as it may, the CBN should ensure that this huge gap be narrowed”
However, the Monetary Policy Committee of the CBN raised the benchmark interest rate from 11.5 per cent to 13 per cent during its last recent meeting in May.
-Punch.
