Tier-One Lender United Bank for Africa (UBA) saw its average interest rate charged on loans to customers rise to 28.5% per annum in the third quarter (Q3), of 2022, according to data from its financial statement analysed by MoneyCentral.
UBA earned N217.78 billion as interest income from outstanding loans of N3.049 trillion in Q3, equivalent to an average of 7.1% for the quarter or 28.5% per annum.
This included term loans and overdrafts, the data showed.
That was up 16.4% from the N187.05 billion it earned from interest it charged on loans in Q3, 2021.
While customers were charged high interest rates by UBA of 28.5% on loans, the bank paid as little as 5.6% on average for its N7.028 trillion worth of deposits from customers, used to create the loans in the first place.
That made savers with the bank to earn way below the inflation rate of 21.09%.
With high inflation and high cost of borrowing Nigerian firms are largely unable to expand and grow job openings, leading to sluggish growth and high unemployment for what is still Africa’s largest economy.
“I had my goods stuck at the ports for more than 6-months earlier this year accumulating demurrage. My bank charged me close to 30% for the loans I used to partly finance the business. Once I cleared them I was unable to recoup my investment after paying the high interest on the loan plus customs,” a Lagos based dealer in heavy industrial machinery told MoneyCentral.
The major candidates running to be Nigeria’s President in 2023, have all fingered high interest rates as an economic challenge.
According to Atiku Abubakar of the People’s Democratic Party (PDP):
“Within the first 100 days in office, I will create an Economic Stimulus Fund with an initial investment capacity of approximately US$10 billion to prioritize support to MSMEs across all the economic sectors, as they offer the greatest opportunities for achieving inclusive growth.”
Asiwaju Bola Ahmed Tinubu the Presidential candidate of the APC in his manifesto promised to help manufacturers to:
“Create, and invent more of the goods and services we require. Nigeria shall be known as a nation of creators, not just of consumers.”
Peter Obi of the Labor Party (LP) in his manifesto released over the weekend says:
“We will prioritize the development of MSMEs through a boutique of incentives which include new structures, new capital access, new legislation to support small business growth and strategic centres of excellence for small businesses such as Enterprise Hubs, Business Incubators and MSME Industrial clusters across all the geopolitical zones.”
It remains to be seen if their policies can bring down high bank interest rates for the benefit of SME’s and industry.