Last week, a Nairametrics reader sent us a letter from their bank informing them that their effective interest rates will now be increased from 24%pa to 26%. The bank claimed this was in response to CBN’s decision to increase the Monetary Policy Rate from 12% for 14%. In case you missed the tweet here is it below;
In case you are wondering what the effect of the recent CBN MPR decisions means for business. Well here it is… pic.twitter.com/O0WvVkMcZ9
— Ugo Obi-Chukwu (@ugodre) August 11, 2016
Incidentally, it wasn’t only First Bank that sent this letter out to their borrowers. Most of our readers also confirmed that their banks (other than First Bank) sent similar letters so this is not about singling out one bank.
Incidentally, a few days before we got hold of this letter we put up an article demonstrating how over the past few month Nigerians have been on the other side of the high interest rates regime. In case you missed the article, you can find it here. The chart below (which was also in that article) explains the kind of broad day light “stealing” currently taking place in the Financial Sector.
On one hand, banks are wittingly hiking lending rates in line with the rate of inflation while Nigerians who are being inundated daily to deposit money in banks at ridiculously low deposit rates. It’s a classical robbing Peter to pay Paul and the CBN clearly has chosen what side it belongs to. It’s on the side of hawkish commercial banks as well as foreign portfolio investors which they need to keep our everlasting enslavement to the dollar going.
The advise to most people who reach out to us is to avoid taking on loans they just don’t need. At interest rates of 26% and above it obvious that you no longer own your business. Commercial Banks now own it except of course you decide to default which we do not encourage.