The Managing Director of Coleman Technical Industries Limited, George Onafowokan, has described the Central Bank of Nigeria’s recent Monetary Policy Rate adjustment as a reset to reflect prevailing conditions in the financial market.
Onafowokan said commercial banks had already moved away from the previous 26.5 per cent policy rate, with some lenders offering loans at between 22 and 23 per cent. He said the difference showed that actual market rates had become disconnected from the CBN’s policy rate.
He linked the change partly to the recapitalisation of Nigerian banks, which increased their equity and lending capacity. Banks with capital bases of about N50bn were required to raise them to N200bn, while those with N200bn were required to reach N500bn.
According to him, the additional capital increased liquidity in the financial system and encouraged banks to compete for lending opportunities. This competition pushed market lending rates below the CBN’s previous policy rate as lenders responded to the increased availability of funds.
Onafowokan said the effects of the rate adjustment would not be immediate but could begin to filter through the economy within two to three months. He added that lower rates could influence treasury bill yields and the decisions of foreign portfolio investors.
The Coleman CEO also called for the Bank of Industry to reduce its lending rate, arguing that its current rate was becoming too close to commercial banking rates. He urged the CBN, Ministry of Finance and Federal Government to support the bank in offering cheaper financing in line with its development-finance mandate.
Onafowokan said Nigeria’s economy was showing positive signs, citing growth of more than four per cent, declining inflation and relative stability in the naira. He urged Nigerians to maintain confidence in the currency, saying recent performance had benefited those who retained naira holdings.
