A quarterly survey report titled Inflation Attitudes Survey Report for Q3 2019 released by the Central Bank of Nigeria (CBN) has shown that Nigerians would rather have a lower interest rates than lower inflation.
The Survey report which was released on Tuesday, measured Households’ perception/expectations of price changes in the past one year/next one year, Households’ perception/expectations of interest rate changes in the past one year/next one year, Households’ opinions on the impact of interest rate changes in households and on the Nigerian economy, Households’ perception of the impact of interest rate changes on prices in the short and medium-term, and Households’ assessment of CBN’s role in controlling inflation.
The survey was conducted in 2,070 households that were randomly selected across Nigeria, with a response rate of 98.3%.
When respondents were asked what would happen to the Nigerian economy if prices started to rise faster than they are now, 52.9% believed that economy will grow weaker, 6.4% said it will grow stronger, while 19.5% thinks there will be little difference. 21.2% did not respond.
This suggests that Nigerians prefer stability in prices. This supported the notion that inflation constrains economic growth.
On price changes over the next one, majority of the respondents think inflation will rise by 2.7%.
The survey showed that 47.6% of the surveyed households knew nothing about interest rates.
Out of the remaining 52.4%, 28.2% believed interest had risen in the last 12 months.
On expected change on interest rates for bank loans and savings, 21.4% think rates will rise, while 14.7% believed that rates will fall. However, 63.9% of the respondents were indifferent or had no idea.
On whether if it would be best for the economy if interest rates fall or rise, 37.9% indicated that a fall in interest rates will favour the economy. 6.5% opted for a rise in rates, 14.6% were indifferent. However, a large percentage (40.6%) had no idea.
This indicates that while some Nigerians would prefer a fall in interest rate, the majority have no idea on interest rates.
Interest rates vs inflation
When asked whether they will prefer a high-interest rate or high inflation, 33.7% preferred a rise in prices (high inflation), 22.5% preferred higher interest rates, while 43.4% had no idea.
This suggests, when given a trade-off, Nigerians will prefer higher interest rates to higher inflation. This is also suggestive of support for bank’s price stability objective.
Going by its Q3 2019 unaudited consolidated financial statements for the 9 months period ended September 30, 2019, tier 1 bank group, FBN Holdings Plc has recorded a 2.99% drop in interest income.
Interest income recorded was N327.5 billion as against N337.6 billion in the same period of 2018.
The bank, however, recorded a 16.92% increase in profit before tax from N51.3 billion in 2018 to N60 billion in 2019.
Profit after tax stood at 51.8 billion in 2019, marking a 15.33% increase from N44.9 billion in Q3 2018.
The bank made N76.8 billion from fees and commissions; N5.6 billion trading forex; and N15.5 billion from insurance premium. These represent 22.58% and 25.90% increase in fees and commissions, and insurance premium from N62.7 billion and N12.4 billion in 2018 respectively.
Revenue from forex trading, however, dipped by 76.58% from N23.9 billion in 2018.
Earnings per share increased to N1.38 in 2019 from N1.22 in 2018.
FBN Holdings is currently trading at N5.30 on the floor of the Nigerian Stock Exchange (NSE). The stock is down by 33.75%.