Follow Us on Google
The recent adjustment in the monetary policy rate of the Central Bank of Nigeria (CBN) represents a “reset” of monetary policy to prevailing market realities, the managing director/chief executive officer of Coleman Technical Industries Limited, George Onafowokan, has said.
Onafowokan said the market had already moved ahead of the previous 26.5 percent policy rate, with commercial banks offering loans at about 22 to 23 percent, making the latest adjustment a reflection of conditions already prevailing in the financial market.
Speaking on the development, the Coleman chief executive said the gap between the CBN’s benchmark rate and actual lending rates had become increasingly misaligned, describing the adjustment as a necessary realignment between monetary policy and market realities.
According to him, one of the major factors behind the shift was the recapitalisation of Nigerian banks, which significantly strengthened their equity positions and expanded their capacity to lend to businesses and other economic actors.
Onafowokan explained that banks with capital bases of about N50 billion were required to increase them to N200 billion, while institutions with about N200 billion were required to scale up their capital to N500 billion.
He said the additional capital injected into the banking system had increased liquidity and intensified competition among financial institutions for viable lending opportunities, ultimately pushing lending rates below the CBN’s previous policy rate.
“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,” Onafowokan said.
The industrialist, however, cautioned that the full impact of the monetary policy adjustment would not be felt immediately, projecting that its effects would begin to filter through the wider economy within the next two to three months.
He said lower interest rates could have implications beyond bank lending, including possible effects on Treasury bill yields and the investment decisions of foreign portfolio investors, as changes in domestic returns could influence the attractiveness of Nigerian financial assets.
Onafowokan nevertheless maintained that Nigeria remained attractive to international investors because of the returns available in the country, adding that the evolving monetary environment could further shape investment decisions as the rate adjustment works through the financial system.
The Coleman CEO also called for a review of the lending rate of the Bank of Industry (BOI), arguing that its current rate was becoming increasingly close to those offered by commercial banks.
He urged the CBN, Ministry of Finance and the Federal Government to support the BOI in returning to a lower lending rate, saying this would better align the development finance institution with its mandate of providing affordable financing to businesses and productive sectors of the economy.
Onafowokan further pointed to what he described as positive signals in the Nigerian economy, including economic growth of more than four per cent, declining inflation and relative stability in the naira.
He urged Nigerians to maintain confidence in the local currency, arguing that the naira had demonstrated resilience in recent times and that those who retained their naira holdings had benefited from its performance.
“The economy is in the right direction,” Onafowokan said, while urging policymakers to ensure that the emerging improvement in monetary conditions translates into cheaper credit, stronger business activity and increased investment across the productive sectors.
