Keystone Bank more than doubles rate on CBN intervention funds

By Bashir Olanrewaju

Keystone Bank unilaterally imposed higher interest rates on some recipients of Central Bank of Nigeria (CBN) intervention funds in violation of the terms governing the credit lines, the affected borrowers allege.

Among the intervention loans for critical sectors introduced under former CBN Governor Godwin Emefiele is one based on the Differentiated Cash Reserve Requirement. Under this, banks were to lend funds that would’ve been idle as statutory reserves to businesses at not more than 9 percent interest for a maximum of 10 years. It was designed as a win-win both for the banks and the loan beneficiaries.

Keystone Bank informed partipating customers in September that it was unilaterally hiking the interest rate to 24 percent .

 “These facilities were disbursed to your company on 5th November 2020 at the interest rate of 9 percent per annum,” Keystone Bank wrote to one of its customers recently. “Having conducted a detailed review of our loan book in line with market realities, please be advised that a reasonable and concessionary interest rate of 24 percent per annum will apply to your facilities effective October 9, 2023.”

Some of the affected loan beneficiaries have taken their case to the central bank, querying the arbitrary changing of the rules in the middle of the game. So far, the new CBN leadership under Olayemi Cardoso has yet to make any policy pronouncements on these moves by some banks, which has left many of the intervention fund borrowers feeling abandoned.

Customers concerned over raised rates.

Efforts to get an interview with Keystone Bank’s Managing Director Olaniran Olayinka were unsuccessful. In response to  enquiries, Olayinka left a message affirming that banks can’t change rates already set by the CBN on intervention funds.  “It is, therefore, not correct to say we are charging 24 percent on such intervention loans for as long as the funds have been provided by the Central Bank of Nigeria for onlending to beneficiaries,” he said. “For all loans funded from the Bank’s position, we charge commercial rates which are determined by the money market situations.”

He didn’t respond specifically to questions on intervention funds disbursed under CBN’s Differentiated Cash Reserve Requirement programme. 

Central bank officials didn’t immediately respond to requests for comment. However, sources at the CBN hinted that the intervention fund beneficiaries may be victims of an anti-Emefiele purge sweeping through the monetary policy regulator. 

“Everything done by Emefiele is being rolled back, whether good or bad,” one official said on condition of anonymity for fear of victimization.

Companies that received loans under the intervention programmes are still awaiting a CBN position on the matter. A number of them say they’re already being charged the arbitrarily imposed interest rates by the participating banks. Some are also weighing their legal options.

“We were surprised to receive the attached letter from our bank, notifying us of the upward interest-rate review from 9% to 24%,” one of the affected companies wrote in an October 24, 2023 protest letter to the CBN. “We note that the bank has unjustly debited the account, applying a 24% rate as against 9%.”