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  • Business - Companies
  • Updated: February 06, 2023

Interest Rate Hike Will Negatively Affect Consumers, SMEs — Firm

Interest Rate Hike Will Negatively Affect Consumers, SMEs �

Comercio Partners Limited, an investment banking firm, has projected that a further increase in the Monetary Policy Rate of the Central Bank of Nigeria (CBN) will likely translate to higher funding costs for Small and Medium Enterprises (SMEs) and increased cost of living for consumers.

According to a statement, the Co-Managing Partner and Head of  Advisory and Investment Banking, Comercio Partners Limited, Steve Osho, while speaking on the rate hike, said that while the jerk of the MPR by 100 basis points was understandable, banks and lenders would respond by adjusting their interest rates to reflect the hike.

“From the banking and consumer lending point of view, banks/lenders typically would adjust their rates to reflect the hike.

“Although the recent upward trajectory on inflation has anchored majorly on the exchange rate volatility/naira depreciation, the astronomical cost of energy and food insecurity amidst many other factors.

“So, it is yet to be seen how this will impact the real sector but the likely impact will be felt by SMEs and other consumers on the cost of borrowing to finance business and likely increase in the cost of living for an average Nigerian,” he said.

Osho added that the hike would make yields on fixed-income securities continue to trend upward and encourage more investors’ shift from the equity market to the fixed-income market.

“The common reaction to rate hikes in the market would see bearish sentiments dominate the equities market as investors would be looking to switch to higher yielding fixed income instruments. I expect a similar trend this time."

CBN Governor Godwin Emefiele on January 24, 2023, raised the Monetary Policy Rate (MPR), which measures interest rates from 16.5% to 17.5 per cent to tame inflation.

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