Banks may have begun the renegotiation of interests on the loans they gave to their major customers, it was learnt on Tuesday.
Some of the banks have hinted borrowers of the need to review existing facilities (cost on loans) to reflect the prevailing interest rate realities.
The higher lending rates already being implemented by banks on the top borrowers followed steep increase in yields on government securities, especially Nigeria Treasury Bills (NT-Bills).
Yields for one-year NT-Bills was 7.8 per cent at the weekend, higher than about 1.5 per cent paid a year ago.
The Nation’s check showed that the rise in borrowing rates by government has pushed depositors to demand higher interest for their funds, leading to higher rates for loans.
Term-deposit rates in banks have also risen to around 9.5 per cent from below five per cent a year ago during the low-yield government securities era.
With the development, many commercial banks that gave long-term loans to their customers when they got cheaper deposits have written such customers to demand that the loans be repriced as deposit rates have risen.
Managing Director, BaoBab Microfinance Bank, Kazeem Olanrewaju, who confirmed the development, said commercial banks that previously gave out cheap loans to their customers when the NT-Bills rate was low are demanding loan prices renegotiation to suit new market rates.
He said: “Banking is like every other thing; you cannot be buying money at high cost and selling it cheap. Our own bank, a commercial bank, has written to us, asking us to come and renegotiate price for the loans we took from them. Nobody is asking for interest rates on deposits, everybody is asking for something extra on loans already extended.
“For more than one year, we have been with the commercial bank, and suddenly the bank is now changing the whole parameter asking that the loan price be renegotiated. For us, when we sign a contract with a customer, that contract stands till the end of the tenor of the loan”
He, however, said his bank will not increase interest rate on extended loans in line with its corporate philosophy on fidelity.
Olanrewaju said: “If we agree with you that the interest rate is three per cent, no matter what happens, unlike the commercial banks, we will not write you to say the interest rate has gone up, please come and pay 3.2 per cent. We will not do that, because if you look at the contract, it is very simple.”
He explained that irrespective of the movement of the interest rate, his bank always insists on keeping to the loan agreement rate.
He said: “Right now that everybody is renegotiating, we have kept to the rates at which loans to our customers were approved, unless for new ones.
“For the ones we have committed ourselves since last year, there is nothing we can do about it. We are not even thinking of communicating to the customers, until time of renewal.”
In emailed notes to investors, Managing Director, Afrinvest West Africa Limited, Ike Chioke, said yields in the NT-Bills market have sustained an upward trajectory over the past few weeks.
According to a Central Bank of Nigeria (CBN) data, prime and maximum lending rates sometimes, averaged between 15.01 per cent and 30.70 per cent.
Some borrowers pay higher interest on loans up to 40 per cent depending on perceived risk assigned to such loans.
However, Monetary Policy Rate (MPR), which is the benchmark interest rate at which the CBN lends to the commercial banks, is currently at 11.5 per cent.