UBA raises loan costs to protect profit margins

Bloomberg

United Bank for Africa (UBA), a Nigerian lender with operations in 20 African countries, plans to increase lending rates by as much as 400 basis points to protect its profit margins.
The repricing of loans will affect all corporate, commercial and personal banking credits, Chief Executive Officer Oliver Alawuba said on an investor call in Lagos, the nation’s commercial capital. “That will continue as long as the economic headwinds are still strong and the cost of funds is increasing.”
UBA plans to increase its loan book by 10% this year, while keeping non-performing loans at not more than 4% of total credits.
The new rates will put further pressure on Nigerian companies, which already face some of the highest lending costs on the continent. While UBA doesn’t publish its interest rates, the average rate for Nigerian bank loans was 12.1% for top-rated corporate borrowers in July, while riskier borrowers paid 27.6%, according to latest data on the Central Bank of Nigeria’s website.
Annual inflation in Africa’s biggest economy quickened to 19.6% in July, the highest rate in about 17 years, and more than twice the 9% target set by the Nigerian central bank. That compelled the monetary policy committee to raise its benchmark interest rate by 100 basis points to 14% in July, following a 150 basis-point hike in May.