Nigeria: LCCI urges banks to lower lending rates after CBN cut

The Lagos Chamber of Commerce and Industry (LCCI) has urged commercial banks to reduce lending rates and expand credit to businesses following the Central Bank of Nigeria’s (CBN) 350-basis-point reduction in the Monetary Policy Rate (MPR).

The CBN’s Monetary Policy Committee (MPC) cut the benchmark rate from 26.5% to 23% at its 307th meeting, creating expectations that lower policy rates will translate into more affordable and accessible financing for businesses.

However, the LCCI warned that the impact of the decision could remain limited if banks do not transmit the reduction to the cost and availability of credit.

LCCI calls for stronger monetary policy transmission

The chamber said the rate cut creates an opportunity to reduce the financing burden on businesses, but cheaper policy funding would not automatically result in lower commercial lending rates.

“The transmission from the policy rate to lending rates and actual credit allocation remains critical,” LCCI Director-General Chinyere Almona said in a statement.

For businesses, particularly small and medium-sized enterprises (SMEs), the immediate test of the policy adjustment will be whether financial institutions respond with more affordable and accessible credit.

The chamber noted that banks continue to assess loans based on factors such as borrowers’ cash flows, collateral, credit history, sector-specific risks and repayment capacity. These considerations could keep lending rates elevated even after the reduction in the benchmark rate.

High operating costs constrain access to credit

The LCCI also pointed to high operating costs as a factor increasing lending risks and making it more difficult for businesses to generate sufficient cash flows to service loans.

Energy costs, transportation and logistics expenses, exchange-rate volatility, input costs, infrastructure deficiencies and insecurity were identified among the major constraints affecting businesses.

The chamber therefore called on the CBN to closely monitor how banks respond to the rate cut, particularly movements in lending rates and the flow of credit to productive sectors.

LCCI seeks stronger SME credit support

The LCCI also urged the government and financial institutions to strengthen credit guarantees, partial-risk guarantees and other de-risking mechanisms that could encourage lending to viable small businesses.

It called on banks to expand cash-flow-based lending, credit scoring, movable-asset financing and other alternative forms of security to enable businesses without conventional collateral to access formal credit.

According to the chamber, reducing the risks associated with lending will be critical to ensuring that the benefits of monetary policy adjustments reach the real economy.

The LCCI further called for measures to reduce structural costs facing businesses, including unreliable electricity, high logistics expenses, infrastructure gaps and multiple regulatory charges.

Rate cut expected to support productive sectors

The chamber said increased liquidity should be channelled towards sectors capable of raising production and employment, including manufacturing, agriculture, agro-processing, trade, logistics, technology, healthcare and construction.

While acknowledging the CBN’s need to balance economic growth with price and financial stability, the LCCI said improving inflation conditions had created room for the reduction in the policy rate.

The chamber described the MPR cut as an opportunity to strengthen monetary policy transmission and improve financing conditions for businesses.

“The reduction in the MPR should not be interpreted as an automatic reduction in the cost or availability of credit to businesses,” the LCCI said.

It said the priority should now be to ensure that the policy adjustment translates into lower borrowing costs, increased credit supply, stronger investment and appropriately structured financing for SMEs.

“The priority now should be to ensure that this window translates into credit for businesses, investment in productive capacity, jobs, and sustainable economic growth,” it said.