CBN rate cut could lower borrowing costs, Coleman CEO says

By Chibuzor Alli

The Central Bank of Nigeria’s recent reduction in its monetary policy rate could gradually bring down borrowing costs and improve access to credit, according to the Managing Director and Chief Executive Officer of Coleman Technical Industries Limited, George Onafowokan.

Onafowokan described the policy adjustment as a “reset” that brings the CBN’s monetary stance closer to conditions already prevailing in the financial market.

He said commercial banks had already begun lending below the previous policy rate of 26.5 per cent, with some loans priced at between 22 and 23 per cent.

According to him, the disparity between the CBN’s policy rate and actual lending rates had widened as liquidity increased across the banking system, making the latest adjustment a reflection of market realities.

“The market found its own level based on the amount of liquidity and the new money in equity in the market. And so it repositioned itself and started lending lower than the CBN was,” he said.

Onafowokan linked the increased liquidity partly to the recapitalisation of Nigerian banks, which he said had strengthened their capacity to lend and intensified competition for borrowers.

Under the recapitalisation exercise, banks with capital bases of about N50 billion were required to raise them to N200 billion, while institutions with N200 billion were required to increase their capital to N500 billion.

He said the additional equity injected into the banking system ultimately increased the funds available for lending, allowing financial institutions to compete more aggressively for lending opportunities.

Rate cut impact may take months

The Coleman chief executive said the effect of the monetary policy adjustment would not be felt immediately, projecting that its impact could become more evident across the economy within two to three months.

Beyond bank lending rates, he said the lower-rate environment could affect yields on treasury bills and shape the decisions of foreign portfolio investors.

Nigeria, he added, remained attractive to international investors because of the returns available in the domestic market.

Onafowokan also called for a reduction in the lending rate of the Bank of Industry, arguing that its current pricing was becoming increasingly close to rates charged by commercial banks.

He urged the CBN, Ministry of Finance and Federal Government to support the development finance institution in returning to a lower lending rate that would be more consistent with its mandate.

Coleman CEO backs economic outlook

Onafowokan also pointed to what he described as improving conditions in the Nigerian economy, citing economic growth of more than four per cent, declining inflation and relative stability in the naira.

He said the currency had remained resilient and urged Nigerians to maintain confidence in the naira, arguing that those who had retained their naira holdings had benefited from its recent performance.

“The economy is in the right direction,” he said.

The comments come as businesses and investors continue to assess the implications of lower monetary policy rates for credit costs, investment returns and broader economic activity.