CPPE tells banks to cut lending rates after CBN's biggest rate cut since 2006
By Aboki Forex —
The Centre for the Promotion of Private Enterprise (CPPE) has called on Nigerian commercial banks to reduce lending rates after the Central Bank of Nigeria (CBN) cut the Monetary Policy Rate (MPR) by 350 basis points to 23%.
The call came in a statement signed by CPPE chief executive Dr Muda Yusuf on Tuesday, September 22. The organisation described the CBN decision as a positive development for the economy and said the lower benchmark rate should flow through to businesses weighed down by high financing costs.
What the CBN did
The 350-basis-point cut was announced at the 307th meeting of the Monetary Policy Committee (MPC) held in Abuja, bringing the MPR down to 23%. The committee also adjusted the corridor around the MPR to +50 basis points and -300 basis points.
The CBN retained the Cash Reserve Requirement for commercial banks at 45%, with merchant banks staying at 16%. The 75% CRR on non-Treasury Single Account public sector deposits was also left unchanged.
The reduction is the largest single cut to the benchmark rate since December 2006, when the CBN lowered the MPR by 400 basis points from 14% to 10%. That was followed by a further 200-basis-point cut in June 2007.
CPPE's message to banks
The CPPE said cheaper credit could ease pressure on business cash flows, encourage investment and support working capital, especially in manufacturing, agriculture, construction and logistics.
The organisation warned that the policy cut would deliver little if commercial banks failed to pass on lower borrowing costs to businesses.
"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.
It added that keeping commercial lending rates high despite the MPR cut would neutralise the intended benefits.
"Without meaningful transmission to borrowers, the impact of the policy adjustment on investment and economic growth would be limited," the CPPE said.
The organisation said the real measure of the policy's success would depend on how quickly banks pass the reduction to borrowers, with businesses operating on tight margins and long investment cycles standing to benefit most from more affordable credit.
What it means for Nigerian businesses
The CPPE's position puts the focus on the gap between the CBN's benchmark rate and what banks actually charge customers. For manufacturers, farmers, builders and logistics operators, the cost of servicing both new and existing facilities is the number that matters. If banks hold lending rates steady while the MPR falls, the projected gains in investment, production and job creation will not show up on the ground.