The recent reduction in the Central Bank of Nigeria’s (CBN) benchmark interest rate could help ease borrowing costs for businesses, according to George Onafowokan, Managing Director and Chief Executive Officer of Coleman Technical Industries Limited.
The CBN’s Monetary Policy Committee reduced the Monetary Policy Rate (MPR) from 26.5 per cent to 23 per cent, representing a 350-basis-point reduction. The decision was announced after the committee’s September 21–22 meeting.
According to Onafowokan, the rate adjustment is a “reset” that brings the CBN’s policy rate closer to prevailing conditions in the financial market.
Onafowokan said the market had already moved away from the previous 26.5 per cent policy rate, with some commercial lenders offering loans at around 22 to 23 per cent.
He linked part of the change to the recapitalisation of Nigerian banks, which increased the capital and lending capacity of financial institutions.
As banks gained additional capital and liquidity, Onafowokan said they began competing more for lending opportunities, contributing to lower market lending rates.
The lower policy rate could eventually translate into reduced financing costs for businesses, particularly companies that depend on bank loans for working capital, expansion and investment.
However, the effect is not expected to happen immediately. Onafowokan said the impact could begin to reflect more broadly across the economy within the next two to three months.
The Lagos Chamber of Commerce and Industry has similarly called on commercial banks to lower their lending rates following the CBN’s decision, stressing that the policy reduction would have limited impact if banks did not pass the benefit on to borrowers.
Coleman CEO calls for lower BOI lending rate
Onafowokan also called for a reduction in the lending rate of the Bank of Industry (BOI).
He argued that the development-finance institution’s lending rate should better reflect its role in supporting businesses and industrial development.
He also said the recent economic environment could influence Treasury bill yields and the decisions of foreign portfolio investors.
The CBN’s latest rate cut marks a significant shift in monetary policy, but businesses will be watching how quickly the reduction translates into cheaper credit and improved access to financing.
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