CBN decides to keep lending rate for manufacturing and critical sectors like power at 5%

CENTRAL Bank of Nigeria (CBN) directors have agreed to keep the interest rate for lending for critical sectors and manufacturing industries at 5% until March 2023 as part of an ongoing plan to help stimulate the economy.

Nigeria has a population of over 200m people but has a gross domestic product (GDP) of just about $400bn, with an annual budget of a mere $30bn. To kickstart the economy, the country needs to start manufacturing and needs to invest in critical infrastructure like power plants, to end the dependence on imports and external borrowing.

Earlier this week, the CBN's Monetary Policy Committee (MPC) decided to increase its benchmark interest rate to 13% from 11.5%. Rate increases of this nature often lead to increases in lending rates across the various sectors of the economy but the CBN opted to keep the rate for manufacturing at 5%.

A CBN spokesman CBN said: “The MPC is of the view that rates on the development finance initiatives of the bank should remain at 5% till March 2023. This 5% per annum interest rate is a form of subsidy for industry players who originally ought to pay an interest rate of 9% and such rates may even rise as high as 20% per annum at commercial banks."

According to the CBN, the decision to leave interest rates for intervention funds at 5% was a measure to stimulate economic growth in critical sectors of the economy. According to the apex bank, it had continued to fund activities across several sectors of the economy as part of its development finance activities in the form of loans through commercial and developmental banks.