Dr Joseph Nnanna, the Deputy Governor (Economic Policy) of the Central Bank of Nigeria (CBN), has said Deposit Money Banks cannot lend at single digit interest rate due to the attractiveness of treasury bills.
Speaking at a roundtable event on factoring financing, Nnana said with the government borrowing from banks at an average rate of 18 per cent, it would be difficult to achieve a single digit lending rate.
He said: “Banks have some challenges at lending at a single digit interest rate not because they don’t want to do so, but because there are compelling needs, and I am saying this without any fear of contradiction.
“If the government itself is willing to borrow at 18 per cent from the banks through treasury bills, then why would any banker want to give out loan to anybody at a single digit interest rate? So, that is the problem.
“If government can stop borrowing and start living within its means, liquidity will be there and banks will be constrained to lend at a single digit.
“Now, see what is happening; the government has decided to finance part of its budget externally, they are offloading treasury bills and treasury bills rate have now dropped from 18 per cent; and as I speak to you now, it is 10 per cent.
“So, banks will be awash with liquidity and they will look out for MSMEs and lend the money to them. So, let us put our fiscal house in order; once we do that, all will be well.”