Following the Central Bank of Nigeria’s (CBN) decision to raise the Monetary Policy Rate (MPR) to 22.75 percent in February 2024, fintech companies operating in the digital savings space have raised their interest rates, News About Nigeria reports.
This will have an impact on both savers and borrowers.
Platforms like Cowrywise have informed customers about the new interest rates through email notifications.
Cowrywise announced an increase in their interest rate on saving plans to up to 14 percent per annum, up from around 8 percent previously.
“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 stated in its notification.
However, it also cautioned customers that fluctuations in market rates could affect interest rates in the future.
Similarly, digital lenders are in the process of finalising plans to raise their lending rates in response to the MPR hike.
These lenders have cited a rise in their cost of capital and difficulties in securing new funding as reasons for the impending rate hikes.
When implemented, these new rates will lead to higher borrowing costs for many Nigerians who rely on these lenders for access to quick cash.
Digital lending has experienced significant growth in Nigeria, especially as consumers battle with a rising cost of living crisis.
The surge in digital lending is evident from the rise in consumer credit, which increased by N740 billion to N3.05 trillion between January and September 2023, according to CBN’s quarterly economic reports.
A recent report by Piggyvest revealed that a lot of Nigerians are in debt, with 26 percent owing money to loan apps.
Olayemi Cardoso, governor of the CBN, expects digital lending offerings to expand further in 2024.
However, the increase in the MPR has posed challenges for digital lenders, who now face higher interest rates themselves.
Many of these lenders have expressed their intent to raise rates to align with their increased cost of capital.
“We will be increasing our rates because our cost of capital has also increased,” said Babatunde Akin-Moses, co-founder of Sycamore.
Bello Rukayat, co-founder of Regxta, noted the difficulties in securing bank loans at the new rates and expressed concern over the impact on her company’s lending operations.
Meanwhile, Gbemi Adelekan, president of the Money Lenders Association, stated that lenders are closely monitoring developments in the banking industry and hinted at an imminent rate hike among digital lenders.
