By Kayode Tokede
The interest income on loans and advances of 10 commercial banks to customers rose by nearly 19 per cent to N1.27 trillion in 2016.
The banks are Zenith Bank Plc, Fidelity Bank Plc, Sterling Bank, United Bank for Africa Plc, Guaranty Trust Bank Plc, Union Bank Of Nigeria Plc, Unity Bank Plc, Wema Bank Plc, Access Bank Plc and First City Monument Bank Group Plc (FCMB) Plc.
This followed the increase in interest rate from 12 per cent to 14 per cent by the Central Bank of Nigeria (CBN).
In 2015, the 10 banks recorded N1.06 trillion interest on loans and advances to customers as they intensified approach to growing interest income from loans granted to customers despite tough operating environment.
LEADERSHIP can authoritatively reveal that commercial banks in 2016 increased loans to their customers in oil and gas sector, manufacturing, general commerce and the government.
A breakdown of the N1.27 trillion interest income earned by Bank gained 15.5 per cent from N52.25 billion in 2015 to N60 billion in 2016.
Union Bank of Nigeria’s interest income went up by 14.9 per cent from N60.8 billion to N69.9 billion in 2016.
United Bank for Africa Plc gained about 13 per cent increase on interest income from N146 billion in 2015 to N165 billion in 2016, while Fidelity Bank gained N88 billion interest income from loans and advances to customers against N80 billion recorded in 2015.
The CBN had increased interest rate to 14 per cent to complement the adoption of the flexible foreign exchange policy framework in a bid to moderate inflation and provide for positive real returns on investment to attract investors.
Experts had said the tight monetary policy stance of the CBN brought about commercial banks’ increase average maximum lending rates to about 30 per cent.
CBN disclosed that 6-month average prime and maximum lending rates rose in the second half of 2016 by 0.48 percentage point to 17.11 per cent and by 0.93 percentage point to 27.75 per cent, compared with their levels in the first half of 2016.
The apex bank said real maximum lending rate recorded positive trend, given the prevailing headline inflation rate of 18.55 per cent at the end of 2016.
An Associate Professor of Finance and Deputy Director of Research at Nasarawa State University, Uche Uwaleke said that tightening of monetary policy by CBN did not make any economic sense alongside the nation’s economy that was battling with high interest rates.
He said, “Tighter monetary policy implies, in part, jerking up the benchmark rate from the present level of 14 per cent which is most likely to put additional pressure on banks’ asset quality, with commercial banks being compelled to reprise their assets, resulting in a further increase in the rate of non-performing loans and undermining financial stability.
“The real sectors of the economy will suffer, as banks show preference for placing their funds in high yielding government securities. Many small businesses will suffocate under a harsh environment occasioned by the high interest rate regime, leading to loss of jobs.
“The increase in interest rate will also spike the cost of servicing the country’s public debt as bond yields go up, especially in view of the fact that domestic debt constitutes a significant proportion of the country’s public debt stock