Drive down lending rates after bank recapitalisation, MPC memb....

A member of the Monetary Policy Committee (MPC), Professor Murtala Sabo Sagagi, has urged the Central Bank of Nigeria (CBN) to take additional measures to lower lending rates for households and businesses following the successful completion of the banking sector recapitalisation exercise.

Sagagi, in his personal statement after the 305th MPC meeting, said stronger bank capital should translate into cheaper credit for the real sector, warning that structural weaknesses continue to hinder the effective transmission of monetary policy to lending rates.

He called on the apex bank to closely monitor whether improvements in the banking sector are resulting in more affordable loans for businesses and consumers.

“The CBN should closely monitor the extent to which banking sector improvements and the current policy stance are being transmitted into affordable lending rates for households and businesses,” he said.

According to him, structural impediments, including high risk premiums and limited credit bureau penetration, continue to weaken the credit transmission mechanism and require targeted macroprudential interventions.

Sagagi also advised the CBN to closely supervise banks following the recapitalisation exercise to address potential risks associated with increased capital.

“Given the successful completion of the banking sector recapitalisation exercise, the CBN should proactively identify and address emerging post-recapitalisation risks, including potential shifts in risk appetite, credit concentration and governance challenges in newly merged or enlarged institutions, to preserve financial system stability,” he added.

The MPC member further stressed the need for stronger coordination between monetary and fiscal authorities to sustain recent gains in inflation moderation.

He warned that increased government spending associated with election cycles could fuel demand-driven inflation and reverse recent progress in stabilising prices.

Sagagi called for a responsible and counter-cyclical fiscal spending framework, supported by close collaboration between the CBN and fiscal authorities.

He also noted that the key drivers of food inflation, including insecurity in farming communities, high transportation costs and poor rural infrastructure, require broader policy interventions beyond monetary tightening.

According to him, expanding farmers’ access to affordable inputs such as fertilisers, improved seedlings and pesticides, alongside investments in rural roads and improved security, would help ease structural food inflation.

The economist further urged the apex bank to maintain prudent exchange rate management by leveraging Nigeria’s stronger external reserves to cushion short-term volatility arising from global energy market disruptions while sustaining policies that promote export earnings and diaspora remittances.

At its 305th meeting, the MPC retained the Monetary Policy Rate at 26.5 per cent, while leaving the Cash Reserve Ratio unchanged at 45 per cent for commercial banks and 16 per cent for merchant banks.

The committee also retained the asymmetric corridor around the MPR at +50/-450 basis points and maintained the Cash Reserve Ratio on non-Treasury Single Account public sector deposits at 75 per cent.

The CBN recently concluded the banking sector recapitalisation programme, which was designed to strengthen banks’ capital base and enhance their capacity to support economic growth through increased lending.