Fintech companies in the digital savings space have started raising interest rates following the Central Bank of Nigeria (CBN) hike in the Monetary Policy Rate (MPR) to 22.75 percent in February 2024.
Platforms like Cowrywise have informed customers about new interest rates through email notifications.
“We are thrilled to inform you that we have increased our interest rate on saving plans! Earn up to 14 percent per annum on your rolled-over or new savings plan,” Cowrywise said. Previously, their interest rates were around 8 percent.
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“Please keep in mind that we do not control market rates, when we experience a decrease, this will also reflect in our interest rates,” it added.
Meanwhile, digital lenders are finalising plans to raise their lending rates in response to the MPR hike.
Many lenders interviewed by BusinessDay confirmed a rise in their cost of capital and the difficulty of securing new funding. When these new rates kick in, they will lead to higher borrowing costs for many Nigerians who rely on these lenders for survival cash.
Digital lending has grown significantly as Nigerians grapple with a rising cost of living crisis. Between January and September 2023, consumer credit rose by N740 billion to N3.05 trillion, according to the quarterly economic reports of the Central Bank of Nigeria.
A recent report by Piggyvest revealed that four out of 10 Nigerians are in debt, with 26 percent owing money to loan apps. Olayemi Cardoso, governor of the CBN, expects digital lending offerings to expand in 2024, suggesting an increasing dependence on these lenders.
“The services sector is expected to maintain its dominance, driven by mobile money adoption, increased government partnerships, and expanded digital lending offerings,” he said at the launch of the Nigerian Economic Summit Group 2024 Macroeconomic Outlook Report in 2023.
There were 263 licenced digital lenders in the country as of January 2024. However, following the apex bank’s February 2024 move to raise the MPR to control excess naira liquidity and curb inflation, many of these lenders now face higher interest rates themselves.
“We will be increasing our rates because our cost of capital has also increased,” Babatunde Akin-Moses, co-founder of Sycamore, said.
Bello Rukayat, co-founder of Regxta, a company serving businesses in rural and semi-urban areas, lamented the challenges of securing bank loans at the new rates.
“Banks are saying the minimum they can do is 22 percent, this loan used to be about 15-18 percent before now,” she explained.
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She noted that her company, which charges a 5 percent monthly raise, won’t raise rates yet because of the quick turnaround time of the loans.
Adeshina Adewumi, chief executive officer and founder of Trade Lenda, also complained about higher borrowing costs. “Everyone you go to is giving you ridiculous rates,” he said.
While he avoided specifying a timeline for a rate hike, he added, “See why all of us need to increase our rates.”
Gbemi Adelekan, president of the Money Lenders Association, the umbrella body of registered digital money lenders in Nigeria, stated that lenders are monitoring banks and expect to raise rates soon.
“We are looking at what is happening in the banking industry… we are still monitoring what is happening, we have not increased our rate for now, the next couple of days, we might actually do the same.”
“It will be coming sooner rather than later, and because of our cost of capital…,” he affirmed.
Adelekan and Akin-Moses of Sycamore suggested that digital lending rates could be raised to match the increased MPR.
Nigerian banks like Zenith Bank, GTB, and Stanbic IBTC have increased their lending rates following the MPR hike.
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