Mr Onakoya, however, said existing contractual agreements could delay the transmission of the lower policy rate to borrowers.
Economists and financial analysts have offered mixed views on the immediate impact of the Central Bank of Nigeria’s (CBN) decision to cut the Monetary Policy Rate (MPR) by 350 basis points.
CBN on Tuesday cut the benchmark interest rate to 23 per cent from 26.5 per cent and recalibrated the policy corridor as part of what it described as an operational realignment aimed at strengthening monetary policy transmission.
The rate cut is the lowest since February 2024, when it was pegged at 22.75 per cent.
The apex bank said its previous reforms improved Nigeria’s macroeconomic conditions and that the latest policy reset was intended to strengthen the operation of monetary policy without abandoning its focus on inflation.
This decision followed two consecutive retention of the Monetary Policy Rate (MPR) at 26.5 per cent, holding it at that level in May and July, following a 50-basis-point reduction in February from 27 per cent.
Meanwhile, CBN cut the interest rate amid its continued efforts to moderate Nigeria’s headline inflation. The regulator said the effort was to reset the monetary policy.
Since CBN maintained the rate in May, inflationary pressure has generally eased, with headline inflation standing at 15.39 per cent in August, down from 15.43 per cent in July, 15.91 per cent in June and 15.93 per cent in May, according to the National Bureau of Statistics (NBS).
Speaking on the implications of the decision, Shakirudeen Taiwo, chief macroeconomist at Cordros Securities Limited, said the policy rate cut was likely to have different effects across various segments of the economy.
“The bottom line is that the policy rate recalibration is likely to produce differentiated effects across the economy. Banks and leveraged real-sector corporates are likely to capture most of the direct benefits, while the main adverse effects should fall on savers and holders of short-duration financial assets,” Mr Taiwo said.
According to the economist, the immediate effect on banks as lenders would be the repricing of loans, as many Nigerian corporate facilities are priced using the MPR plus a spread.
He said the 350-basis-point reduction should eventually lower borrowers’ interest expenses, although the initial impact could favour banks because deposit rates are likely to adjust faster than loan rates.
“With the SDF floor dropping to 20%, banks can reduce deposit rates on savings, terms and wholesale deposits, while the loan book reprices only on a lag as facilities reach their reset dates.
“This should support net interest margins (NIMs) over the first one or two quarters, before asset yields increasingly offset the benefits of cheaper CASA,” Mr Taiwo said.
The macroeconomist, however, said the impact would not be uniform across banks. According to him, Tier-1 banks, whose cost of funds is already low, could also gain from securities revaluation and stronger loan growth.
“Tier-1 banks with a high proportion of low-cost CASA deposits are relatively better positioned – their cost of funds is already low, limiting the scope for further cost savings as deposit rates decline. These banks (the FUGAZ – First Bank, UBA, GT, Access and Zenith) could also gain from securities revaluation and stronger loan growth,” he said.
Mr Taiwo added that banks with higher funding costs could face greater earnings pressure as income from the Standing Deposit Facility (SDF) declines while lending rates also reprice lower.
He said lower debt-service burdens for existing floating-rate borrowers could reduce repayment pressure and, at the margin, support asset quality, particularly in sectors such as power, manufacturing and real estate.
However, he noted that the 45 per cent cash reserve requirement (CRR) would remain a major constraint on the ability of banks to expand lending rapidly.
Mr Taiwo said the unchanged CRR could limit the extent to which the reduction in the policy rate translates into increased credit to the real sector.
“The binding constraint CRR at 45%. This is the crux and the reason to temper the ‘credit boom’ story. A 45% CRR materially limits the share of deposit funding that banks can allocate to earning assets, constraining the quantity-side transmission of lower policy rates to new lending.
“With the CBN leaving the CRR unchanged, the capacity for rapid loan-book expansion remains constrained. It is therefore expected that the initial benefit to bank profitability will be more immediate than the expansion in real-sector credit, which is likely to remain gradual and selective while the CRR remains unchanged,” he added.
The economist, Mr Taiwo, said the reduction in the policy rate would also compress banks’ low-risk investment income, potentially encouraging them to redirect liquidity towards lending or longer-duration securities.
He noted that banks with significant fair-value exposure to Federal Government bonds could record valuation gains as market yields decline, depending on the duration and accounting classification of their portfolios.
On the real sector, Mr Taiwo said the benefits of the rate cut would be greatest for businesses that are highly leveraged, predominantly naira-funded, long-duration and sensitive to financing costs.
He said manufacturers could experience some relief because the sector is heavily dependent on working capital, but warned that other factors, particularly foreign exchange availability and energy costs, remain more important drivers of profitability for many manufacturers.
“For the manufacturing and industrial sector, there is an anticipated modest positive impact. The sector is working-capital-heavy, so downward repricing of loans or credit facilities helps cash flow.
“However, most manufacturers in Nigeria are import-dependent for their intermediate goods and raw materials, making FX availability and energy costs more important drivers of profitability than the domestic cost of naira funding,” he said.
As a result, he said the 350bps reduction should therefore provide some relief, but is likely to remain a secondary driver of sector performance.
Mr Taiwo also said the direct impact on households could be limited because consumer credit remains shallow in Nigeria.
