Monday, 13 September 2010 00:00 Editor

THE immediate past President, Association of National Accountants of Nigeria (ANAN), Dr Samuel Nzekwe, has urged the Central Bank of Nigeria (CBN), to reduce lending rate to 10 per cent.

 

Nzekwe, in a statement made available to newsmen in Lagos on Saturday, said that the gap between lending rate and interest paid on deposits was high.

 

“The yawning gap between lending rate and interest paid on deposits is unhealthy and I think that the long run effect will not be good for the economy,” he said.

 

According to him, currently, banks’ lending rates stand between 18 per cent and 28 per cent, while rates paid on deposit by banks stand between two per cent and three per cent.

 

“This is abnormal and I continue to wonder why the CBN has allowed this disequilibrium to continue.

 

“If we look at the supply side of funds, the banks are paying interest of between two per cent and three per cent on deposit at the face of rising inflation, currently standing above 11 per cent.

 

“In the circumstance therefore, inflow of funds into the financial system through savings by individuals and institutions would be frustrated,” he said.

 

According to him, the implication of this situation is that the banks would be illiquid because of the scarcity of “loanable” funds.

 

The former ANAN president said that with the lending rate currently, between 18 per cent and 28 per cent, no investor could borrow and make profit.

Source: Guardian