By Chinwendu Obienyi
With significant excess liquidity in the banking sector, its lending rate dropped to about 27.61 per cent in the first half (H1) of 2022, the lowest in five years.
This was even as 7 banks generated about N570 billion from interest income in loans in the period under review.
Data from the Central Bank of Nigeria (CBN) on banks’ deposit and lending interest rates in the first quarter (Q1) of 2022 showed a 1.04 per cent point drop in average lending rate to 26.61 per cent in March 2022 from 27.65 per cent in January.
The banks’ prime lending rate in the during the period rose by 12.29 per cent in June, the highest in 17-month, while the maximum lending rate dropped to 27.61 percent in June 2022 from 27.65 percent reported in January 2022.
Prime lending rate is the interest rate charged by banks to largest, secure and creditworthy customers on short-term loans while maximum lending rate refers to the aggregate percentage of prime lending rate.
The development saw seven of the top tier banks generate N570.43 billion in interest income from loans granted to customers in the period under review amidst hike in the Monetary Policy Rate (MPR).
This was in contrast to N457.95 billion granted to customers in H1 2021. With the exclusion of Sterling Bank Plc, other banks including Ecobank Transnational Incorporated (ETI), FBN Holdings Plc, FCMB Group Plc, Union Bank, Unity Bank Plc and Wema Bank Plc generated double-digit increase in interest income on loans granted to customers in the period under review.
Specifically, Sterling Bank Plc reported N47.04 billion interest income from loans to customers in H1 2022, representing an increase of 7.88 per cent from N43.61 billion in H1 2021.
For ETI, interest income from loans to customers rose by 16.3 per cent to N168.7 billion in H1 2022 from N145.08 billion in H1 2021, while FBN Holdings announced 36 per cent rise to N166.32 billion as interest income generated from loans to customers in H1 2022 from N122.03 billion in H1 2021.
FCMB Group reported N78.75 billion in interest income from loans to customers in H1 2022, representing an increase of 25 per cent from N63.08 billion in H1 2021, while Union Bank closed H1 2022 with N50.46 billion interest income from loans to customers as against N40.7 billion in H1 2021.
Unity Bank reported N19.17billion interest income from loans to customers in H1 2022, representing an increase of 26 per cent from N15.15 billion in H1 2021, while Wema Bank generated a whopping sum of N39.97 billion from interest income from loans to customers in H1 2022 from N28.33 billion in H1 2021.
Commenting on the development, the Vice President, Highcap Securities Limited, David Adnori, said most customers were only able to obtain loans at rates higher than the prime lending rate mostly because they are more likely to default on a loan.
“An increase in the MPR by the MPC will result in an increase in the price (interest rate) you pay for borrowing and vice versa. Banks responded to this hike by jacking up their lending rate as well. The consequence of this is that borrowers would have to pay more when they borrow from the bank.”