Harrison EDEH
THERE is hope for improved lending to small and medium enterprises (SMEs) as the apex bank has lowered rate to incentivise attractive lending for the real and productive sector.
Accordingly, analysts believe that risks for those who borrowed money from the banks are eased with the rate cuts which would lessen their burden on loan repayment.
This follows the monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) reset the monetary policy rate (MPR) to 23 percent.
The CBN governor, Olayemi Carson announced the development at a news conference on Tuesday, following the committee’s 307th meeting in Abuja.
The reset marks the first reduction this year and the lowest since February 2024, when the interest rate was at 22.75 percent.
The CBN committee also cut the asymmetric corridor around the MPR at+50/-300 basis points.
Cardoso also said the committee retained the cash reserve ratio (CRR) at 45 percent for deposit money banks and 16 percent for merchant banks, while the CRR on non-treasury single account (TSA) public sector deposits was also retained at 75 percent.
According to Cardoso, the decision to reset the MPR and adjust the corridor was aimed at strengthening monetary policy transmission and reinforcing the MPR as the main signal of monetary policy.
“The MPC emphasized that the recalibration of the corridor does not constitute a change in the current monetary policy stance, but rather an operational reset to enhance the effectiveness of monetary policy and support the transition to an inflation targeting framework,” he said.
The governor said the MPC members considered the current macroeconomic environment supportive of the adjustment without undermining the disinflation process.
He added that the divergence between the MPR and prevailing market rates had weakened the effectiveness of monetary policy transmission.
Cardoso said the CBN’s ongoing repair of its monetary policy implementation framework, including the adoption of the Nigerian overnight funding average (NOFA) as a transaction-based operational benchmark, had improved the transparency of money market operations.
“The committee therefore considered a reset of the MPR and recalibration of the corridor appropriate to better align the monetary policy implementation framework with market realities,” he said.
The CBN governor said the adjustment would strengthen policy transmission and restore the MPR as the principal signal of monetary policy.
Cardoso also said that the recalibration of the policy framework should not be interpreted as a change in the underlying monetary policy stance.
Economic watchers expressed optimism over possible expansion of banks loan books would be pushing to increase their loan income.
“Banks are expected to grow their loan volume with the rate cuts to grow the interest income level of their business,”said Harrison Osagiede,a Financial research analyst.
