Gap Between Lending, Deposit Rates Widen Further As Nigerian Banks Short-Changed Customers

Nigerian banks continue to short change their customers as the disparity between their lending rate and interest paid on deposit widen further in February, a Central Bank of Nigeria (CBN) report has shown.

As at February this year, the maximum lending rate by the country’s commercial lenders was as high as 30.56 percent whereas the gap between the lending rate and consolidated deposit rate is as wide as 26.23 percent, the report showed.
The average interest rate paid on savings remain as low as 4.33 percent in some banks, while term deposit attracts around 5-6 percent depending on the commercial lender depositors are dealing with.
This development, according to economists is not growth-friendly and could further erode confidence in the banking industry.
“The huge gap between average lending and deposit rates is too wide and symptomatic of lack of real competition among the banks,” Adeola Adenikinju said in his statement at the last Monetary Policy Committee (MPC) meeting in March
Many Nigerian banks have attributed the high cost of operations as a result of poor infrastructure like power supply, security and inflation as the reason for the huge disparity in the cost of fund in the financial system.
The regulatory bank’s report also showed that deposits level of many banks dropped in the month of February this year.
Though the CBN did not provide the value of the decline in commercial lenders’ total deposits by February 2019 compared to the January 2019 levels, it expressed concern about the development, which might not be unconnected with the decision of many customers to adjust their deposit portfolio to reflect the development in the financial market. 

Investigations showed that some customers are gradually shifting their fund into fixed-income assets to benefit from the better and attractive interest rate paid compared with deposit with commercial lenders.
However, banks Non-Performing Loans (NPLs) improved from 11.68 percent in December 2018 to 11.28 percent in February 2019.
“The downward trend is a good indicator of the effectiveness of the recovery efforts of the banks and the regulatory support of the CBN towards achieving lower NPLs, even though the ratio remains above the prudential requirement of 5 percent for the industry.