Quality Investment Windows Few, Lending Rates High – Experts
Experts have said the new interest rate policy of the Central Bank of Nigeria on savings accounts will discourage people from saving and encourage investment.
Some of the experts, who spoke on the policy, said quality investment windows were few while the lending rates still remained high.
The CBN on Monday ordered all Deposit Money Banks to review interest rates paid on savings accounts to a minimum of 10 per cent of the Monetary Policy Rate effective from September 1, 2020.
This would amount to 1.25 per cent of the current MPR.
The Director-General, LCCI, Dr Muda Yusuf, said, “Already real interest rates on savings are negative.
“The incentive to save will therefore further diminish, but it may stimulate investment because the alternative to savings is investment.
“But the challenge is that quality investment windows and asset classes are few.
“An improvement in the quality of investment climate could translate the low interest regime into good investment opportunities.
“But this is not a good time to put money in savings deposits in the bank; the values of such savings are diminishing very fast.”
The acting Director-General, Manufacturers Association of Nigeria, Mr Ambrose Oruche, said it would boost investment, spending and consumption because people would rather buy assets or keep the money with a company that would give a better return than 1.25 per cent.
He said, “It is a way of discouraging savings and encouraging investment. Instead of people tucking their money in savings while the economy is contracting, why not release it so that manufacturing and others will see money coming back into the economy?”
A former President, Association of National Accountants of Nigeria, Dr Sam Nzekwe, who said the policy was to discourage people from saving and encourage investment, observed that the gap between the savings and lending rates was too high.
He said, “My concern is that interest rate is still very high; they should bring it down to single digit.
“Since you have brought savings interest rate down, bring down lending rate too to single digit as it will also help in taming inflation, because by the time you add interest rate, it brings about inflation.”
According to him, banks may not be willing to bring down the lending rates so low because they need to cover for the cost of running their businesses due to infrastructure deficiency, and insecurity, among other challenges.
