NAIRAMETRICS
The Central Bank of Nigeria (CBN), under Yemi Cardoso, has increased the monetary policy rate (MPR) four times to combat inflation and foster economic stability.
The first hike increased the rate from 18.75% to 22.75%, the second to 24.75%, the third to 26.25%, and most recently, in July 2024, the Monetary Policy Committee (MPC) raised the rate by 50 basis points to 26.75%.
These increases, totalling 800 basis points since Cardoso’s appointment, have been driven by efforts to tackle the country’s persistent inflation challenges, which include high core and food inflation.
The MPC is expected to meet on September 23 and 24, 2024 to decide on decreasing, retaining or increasing the MPR.
Each bank offers different lending rates that reflect their respective approaches to lending to the manufacturing industry.
The prime rate indicates the best possible rate offered to the most creditworthy customers, while the maximum rate suggests the upper limit of interest rates for loans provided to the sector, which might apply to higher-risk scenarios or different loan structures.
In a time when interest rates are a critical factor for business sustainability, Nigerian manufacturing firms can find solace in some financial institutions that are offering lower prime lending rates.
Below are the top 10 banks that are standing out by providing the most competitive and lowest rates to the manufacturing sector as of August 30, 2024:
10. SunTrust Bank
- Prime Rate: 22.00%
- Maximum Rate: 36.00%
SunTrust Bank ranks 10th on this list, offering a relatively high prime rate of 22.00% and a maximum rate of 36.00%.
The gap between the prime and maximum rates is significant, which means that manufacturers with lower creditworthiness may face substantially higher borrowing costs.
For manufacturers, the higher prime rate alone may make SunTrust less attractive for seeking loans unless they can secure better terms.
9. Union Bank
- Prime Rate: 19.65%
- Maximum Rate: 35.00%
Union Bank offers a prime rate of 19.65%, which is moderately high but still below SunTrust.
The maximum rate reaches 35.00%, leaving a significant gap between the best and worst rates the bank offers.
Manufacturers with strong credit profiles could access loans at the prime rate, but those with higher risk profiles may experience the financial burden of the much higher maximum rate, which could affect their profitability.
8. Greenwich Merchant Bank
- Prime Rate: 19.00%
- Maximum Rate: 26.00%
Greenwich Merchant Bank has a prime rate of 19.00%, which is still on the higher side compared to other banks in the list. However, the relatively small gap between the prime and maximum rates (26.00%) makes it attractive for manufacturers with varying levels of creditworthiness. The smaller spread between the two rates suggests that even riskier borrowers won’t be penalized as severely with higher rates.
7. Guaranty Trust Bank (GTBank)
- Prime Rate: 12.71%
- Maximum Rate: 29.00%
GTBank offers a prime rate of 12.71%, which is lower than Greenwich and Union Bank, making it more favourable for manufacturers seeking to minimize their borrowing costs.
However, the gap to the maximum rate of 29.00% is significant.
This suggests that while creditworthy manufacturers will enjoy relatively low costs, those with less favourable credit may face a substantial increase.
6. Nova Bank
- Prime Rate: 12.00%
- Maximum Rate: 19.14%
Nova Bank offers a prime rate of 12.00%, which places it slightly ahead of GTBank.
The gap between the prime and maximum rates is relatively narrow, with the maximum rate set at 19.14%.
This smaller spread makes Nova Bank attractive for manufacturers across various credit profiles.
Even those not qualifying for the prime rate will not face extreme penalties in terms of higher borrowing costs, making Nova a stable choice for loans.
5. FSDH Merchant Bank
- Prime Rate: 9.00%
- Maximum Rate: 31.50%
FSDH Merchant Bank offers a highly competitive prime rate of 9.00%, which positions it well for manufacturers seeking low borrowing costs.
However, the maximum rate jumps to 31.50%, representing a large gap.
This indicates that while manufacturers with good credit can benefit from favourable terms, those with weaker credit profiles may face significantly higher borrowing costs.
4. Coronation Merchant Bank
- Prime Rate: 9.00%
- Maximum Rate: 34.00%
Coronation Merchant Bank also offers a low prime rate of 9.00%, but its maximum rate reaches 34.00%.
This gap demonstrates a similar risk-based pricing model to FSDH, where manufacturers with strong credit profiles can borrow at attractive rates, but those with weaker credit will face substantially higher rates.
For manufacturers, accessing the prime rate at Coronation Merchant Bank can be a strategic advantage, but less creditworthy businesses may struggle with the elevated costs.
3. Stanbic IBTC
- Prime Rate: 8.00%
- Maximum Rate: 48.00%
Stanbic IBTC offers one of the lowest prime rates at 8.00%, making it a highly competitive option for manufacturers with strong credit profiles.
However, the gap to the maximum rate is enormous, with the maximum rate reaching 48.00%, the highest on this list.
For manufacturers with lower credit scores, this represents a significant cost increase, which could hinder business growth or lead to financial strain.
However, for top-tier borrowers, Stanbic IBTC remains a very attractive option due to the low prime rate.
2. Polaris Bank
- Prime Rate: 8.00%
- Maximum Rate: 36.00%
Polaris Bank also offers a low prime rate of 8.00%, tying with Stanbic IBTC.
However, Polaris has a lower maximum rate of 36.00%, which makes it a more favourable option for manufacturers with moderate credit risk. The gap is wide, but less severe than that of Stanbic IBTC.
This makes Polaris an attractive option for a broader range of manufacturers, particularly those who may not qualify for the absolute best rates but still want to avoid exorbitant borrowing costs.
1. FBN Quest Merchant Bank
- Prime Rate: 7.00%
- Maximum Rate: 31.00%
FBN Quest Merchant Bank offers the lowest prime lending rate on the list, at 7.00%.
This makes it the most attractive option for manufacturers with strong credit profiles who are looking to minimize borrowing costs.
The maximum rate of 31.00% presents a moderate gap, indicating that riskier manufacturers will still face higher rates, but not as drastically as they might with other banks.
For top-tier borrowers, FBN Quest represents the best opportunity for securing affordable financing.
THIS STORY FIRST APPEARED IN NAIRAMETRICS
