CBN RATE CUT MAY LOWER BORROWING COSTS, SAYS COLEMAN CEO

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The recent reduction in the Central Bank of Nigeria’s Monetary Policy Rate could eventually lower borrowing costs for businesses, according to the Managing Director and Chief Executive Officer of Coleman Technical Industries Limited, George Onafowokan.

Onafowokan described the CBN’s decision as a reset aimed at aligning monetary policy with prevailing conditions in the financial market.

The CBN reduced the MPR from 26.5 per cent to 23 per cent at its September Monetary Policy Committee meeting. The decision followed a widening gap between the benchmark rate and actual market lending rates, which had fallen to about 22 to 23 per cent for some commercial borrowers.

Onafowokan said the recapitalisation of Nigerian banks had also increased their lending capacity and liquidity, leading financial institutions to compete more actively for borrowers.

He noted that the impact of the rate adjustment would not be immediate but could begin to show across the economy within two to three months.

According to him, lower interest rates could affect the yields on Treasury bills and influence the decisions of foreign portfolio investors.

The development comes as manufacturers and business groups call for commercial banks to transmit the CBN’s rate cut to their lending rates. The Manufacturers Association of Nigeria and Lagos Chamber of Commerce and Industry have both stressed that the reduction in the policy rate would have limited impact if borrowing costs for businesses remain high.

Onafowokan said the adjustment could support economic activity if the lower cost of funds is reflected in lending rates.