Cost of borrowing from banks will remain high for the rest of the year and could spill over into next year as the Central Bank of Nigeria (CBN) yesterday retained the prime interest rate at 12 percent.
The rate has remained unchanged since the middle of last year, as the central bank tightened its monetary policy to curb inflation which has continued to be in double digit since the beginning of the year.
Figures recently released from the National Bureau of Statistics put the current inflation to 11.7 percent from the previous 11.3 percent.
Manufacturers and operators of small and medium scale enterprises are finding it difficult to obtain loans from banks because of high interest rates.
Bank charges on loans range from 18 percent to 24 percent and sometimes up to 30 percent.
Speaking at a press briefing in Abuja after the Monetary Policy Committee meeting, Central Bank Governor Sanusi Lamido Sanusi urged the banks to reduce the high spread between the deposit and lending rates.
Sanusi said: "The committee was concerned that the moderation in money market rates was only beneficial to prime customers, who enjoyed a fair degree of reduction in rates on their loan facilities.
"The average prime lending rate declined from 16.96 percent in July to 16.48 percent in October.
Average maximum lending rate, however, which is the rate at which SMEs borrow, increased from 23.5 to 24.65 percent during the period.
"The committee therefore enjoins the banks to fast track the financial inclusion strategy to ensure the effectiveness of transformation mechanism of monetary policy, with the view to improving the financial intermediation process and reducing the high spread between the deposit and lending rates in the Nigeria's banking industry."
At the meeting yesterday, the central bank also retained banks Cash Reserve Ratio at 12 percent and their Liquidity ratio at 30 percent.
President of Lagos Chamber of Commerce and Industry Mr. Goodie Ibru had implored the central bank to ease the monetary policy to liberalise credit conditions and boost economic activities.
He had expected the central bank to change the monetary policy rate in the face of visible improvement in the global economy since the beginning of the fourth quarter of the year.
Ibru had said: "While we recognise the inflationary risk and the threat to exchange rate stability, we also believe that stimulating the economy at this time is crucial. The impact of structural factors in the Nigerian inflation phenomenon should also be acknowledged and addressed through appropriate fiscal policy channels.
"The effects of these factors on the supply side of the economy are profound. We submit that the monetary policy tools - MPR, Liquidity Ratio and the Cash reserve Requirements - should be appropriately adjusted to create the conditions that would stimulate growth, boost economic activities and create jobs."