The Centre for the Promotion of Private Enterprise has called on Nigerian banks to lower lending rates following the Central Bank of Nigeria’s 350-basis-point cut in the Monetary Policy Rate, saying the reduction should translate into cheaper credit for businesses.
In a statement signed by its Chief Executive Officer, Dr Muda Yusuf, on Tuesday, the CPPE said the rate cut was particularly beneficial to the real sector, where high borrowing costs have continued to constrain investment, production, working capital and job creation.
The organisation said lower interest rates could reduce the cost of capital, strengthen business cash flows and encourage investment in manufacturing, agriculture, construction, logistics and other sectors characterised by long investment cycles and tight profit margins.
However, the CPPE stressed that the impact of the rate cut would depend on how quickly banks adjust their lending rates to reflect the new monetary policy environment.
The organisation said the MPR cut could improve business cash flows and boost productive activity, particularly in sectors grappling with high financing costs.
It added that banks were expected to reduce their lending rates in response to the CBN’s decision to cut the policy rate.
“The CPPE expects banks to reflect the new monetary policy environment in the pricing of credit. Lending rates on both new and existing facilities should progressively adjust downwards,” the statement said.
“Without meaningful transmission to borrowers, the impact of the policy adjustment on investment and economic growth would be limited.”
It was earlier reported that the CBN reduced the Monetary Policy Rate by 350 basis points to 23 per cent following the 307th meeting of the Monetary Policy Committee in Abuja.
The committee also adjusted the MPR corridor to +50 and -300 basis points, while retaining the Cash Reserve Requirement for commercial banks at 45 per cent.
The CRR for merchant banks remained at 16 per cent, while the 75 per cent requirement for non-TSA public sector deposits was also maintained.
