Interest Rate Cut Signals Gradual Relief For Manufacturers’

The managing director and chief executive officer of Coleman Technical Industries Limited, Mr. George Onafowokan, stated that the recent decision by the Central Bank of Nigeria (CBN) to reduce the benchmark interest rate by 50 basis points as a positive signal for Nigeria’s manufacturing sector.

Speaking, Onafowokan said the move reflects a shift from the period of aggressive monetary tightening aimed at stabilising the economy to a gradual phase of stimulating growth.
According to him, the decision was widely anticipated by the market, especially as inflationary pressures begin to ease.

He noted that for manufacturers, the rate cut is symbolically significant as it signals the beginning of a gradual transition away from the era of extremely high borrowing costs.

“For the manufacturer’s point of view, the 50 basis points cut is a good sign that we are moving out of the woods of high interest rates and slowly transitioning into a lower interest rate environment,” he explained.

Onafowokan added that although the reduction is modest, the symbolic shift in policy direction is more important than the magnitude of the cut.

“It is not the size that matters most; it is the signal that the CBN has begun reversing the earlier push to raise rates in order to stabilise the macroeconomic environment,” he said.

The Coleman CEO said early signs of the policy shift are already visible, with commercial banks beginning to slightly adjust lending rates.

However, he cautioned that significant reductions in interest rates should not be expected in the short term due to both domestic and global economic uncertainties.

He also warned that global geopolitical tensions, particularly the ongoing Middle East conflict involving the United States, Israel and Iran, could influence inflation and monetary policy decisions.

Onafowokan further noted that manufacturers must adopt dynamic risk management strategies to cope with such uncertainties, especially as rising fuel prices could significantly increase production costs.

“For businesses relying on diesel, operating costs may rise sharply. Diesel prices have already climbed significantly compared to previous levels,” he said.

Despite these challenges, the industrialist expressed optimism about Nigeria’s economic outlook, noting that policy reforms implemented since 2023 have contributed to greater macroeconomic stability.

He cited the removal of fuel subsidies and exchange rate adjustments as difficult but necessary reforms that have helped stabilise the economy and attract investment.

According to him, the manufacturing sector is already seeing increased activity, particularly in construction and infrastructure projects, which drive demand for electrical cables.

“The cable industry is a good indicator of infrastructure development. When construction and industrial expansion increase, we see it immediately through demand for cables,” he explained.

Looking ahead, Onafowokan projected that Nigeria’s economic growth could reach about 4.5 percent by the end of the year if current trends continue.

“I believe achieving 4.5 percent GDP growth this year is realistic, but if Nigeria aims to reach a $1 trillion economy, growth rates will need to move closer to eight or nine percent,” he said.

He emphasised that achieving such growth would require increased foreign direct investment, stronger domestic investment, and sustained infrastructure spending.