Nigeria’s 18% MPR is highest among BRICS, N-11 countries

Key Highlights

• 18% interest rate is the highest among BRICS and N-11
• High-interest rate makes the cost of borrowing high for Nigerian firms to compete favorably with peers
• N-11 countries are characterized by high population growth and rising consumer appetite
• High population growth and rising consumer spending creates business opportunities for both local and international firms

With the pronouncement of an 18% primary lending rate on Tuesday by the governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, Nigeria has now assumed the position of the country with the highest interest rate among the BRICS (Brazil, Russia, India, China, and South Africa), as well as the Next 11 (N-11), which includes Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, Turkey, South Korea, and Vietnam.

As of February 2023, among the BRICS, Brazil’s primary lending rate is 7.37%; Russia’s is 7.50%; India’s is 6.75%; China’s is 4.39%, while South Africa’s interest rate is 7.25%.

Among the N-11 countries, Bangladesh’s primary lending rate as of February 2023 is 4%; that of Egypt is 16.46%; Indonesia’s is 5.75%; Iran’s is 18%; Mexico’s is 11%, while that of Nigeria is 18%.

Others include Pakistan, which is 17%; The Philippines at 6.25%; Turkey at 9%; South Africa at 10.75% and Vietnam at 3.5%.

The implication of a high rate

This high rate implies that Nigeria may be less competitive than her development peers as her cost of borrowing further inches up. As the cost of borrowing among Nigeria’s business entities rises, goods and services become more expensive, while those from her development peers become cheaper.

By the reckoning of Goldman Sachs, there are development similarities that group the BRICS countries, and by extension, the N-11, which category Nigeria falls in.

The BRICS countries were named in 2003 as the most rapidly developing countries with the greatest economic potential. With these countries continuing to develop fast, albeit at different rates, it was useful to look at the next tier of emerging economies. Those countries following the BRIC path typically experience high rates of population growth, creating a growing pool of potential consumers, at the same time as rising disposable incomes.

Rapidly growing populations

Hence, in 2005 Goldman Sachs mooted the BRIC successors, otherwise known as the Next-11 (N11). The N11 countries share the characteristics of rapidly growing populations combined with significant industrial capacity or potential.

Together, these factors indicate a growing consumer market with increased earning potential, creating business opportunities for both local and international firms.

Although varied both geographically and economically, these 11 countries have features in common that are believed to single out their high economic potential.

The attraction

All 11 countries demonstrate population growth rates above those of Western developed economies, indicating greater consumer market potential over the medium term. Large populations represent a wide potential pool of consumers for businesses to target; while high growth rates mean that this market will expand rapidly, providing proportionally more potential customers.