‘Interest rate cut is relief for manufacturers’

The recent decision by the Central Bank of Nigeria (CBN) to reduce the benchmark interest rate by 50 basis points is a positive signal for Nigeria’s manufacturing sector, Managing Director and Chief Executive Officer of Coleman Technical Industries Limited, Mr. George Onafowokan, has said.

A statement released by the company’s media office quoted Onafowokan as saying that 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.

“From my own viewpoint, the market expected it because inflation is coming down and the economy is stabilising. Now we need to start stimulating growth in the economy, which means stimulating spending and borrowing,” he said.

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.

“From 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.

“I do not foresee a massive reduction. Between now and the end of the year, a gradual cut of about two to three per cent from the current position would probably be the highest possible reduction,” he stated, adding that single-digit interest rates may not be achievable until between 2027 and 2028.

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.

According to him, rising global oil and fuel prices could drive inflation upward, forcing the CBN to adjust policy measures again.

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“The price of crude oil and petrol has already increased due to the conflict, and inflation may rise again. If that happens, the CBN may need to respond either through interest rates or other policy tools,” he said.

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.

“The stability of the naira and reforms undertaken since 2023 have begun to restore investor confidence and stimulate expansion within existing businesses,” he said.

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.

Onafowokan disclosed that in the first quarter of 2026, Coleman has observed a noticeable rise in demand linked to factory expansions and construction projects across the country.

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

“I believe achieving 4.5 per cent 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 per cent,” he said.

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

Onafowokan concluded that while challenges remain, Nigeria’s manufacturing sector is entering a period of cautious optimism.

“Manufacturers are beginning to see opportunities for expansion again because there is growing confidence that the economy is stabilising and that investments will yield returns,” he said.

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