George Onafowokan, Chairman of Coleman Wires and Cables, predicts the Central Bank of Nigeria (CBN) will begin reducing the Monetary Policy Rate (MPR) within the next two policy meetings.
The current benchmark interest rate stands at 26.5%, a restrictive level maintained by the apex bank to combat persistent inflation and stabilise the naira.
Onafowokan indicated that while the restrictive stance was necessary to anchor inflation expectations, the window for easing is approaching as the economy seeks a balance between price stability and industrial growth.
High borrowing costs have placed significant pressure on Nigerian manufacturers, who rely on credit for working capital and capacity expansion. For companies in the cable and plastics industry, the cost of financing raw materials and equipment has risen sharply in tandem with the MPR.
The cable tycoon noted that the current interest rate environment makes it increasingly difficult for local producers to compete with imports and maintain sustainable growth trajectories.
Energy Self-Sufficiency to Offset Operational Costs
To mitigate the combined impact of high interest rates and an unreliable national power grid, Coleman Wires and Cables has invested $20 million in independent power generation.
The investment allows the company to generate its own electricity, reducing its dependence on the Nigerian Electricity Regulatory Commission overseen grid and cutting the operational volatility associated with diesel and gas price fluctuations.
By securing its own energy source, the company aims to protect its margins from the inflationary pressures that the CBN is currently fighting with high interest rates.
This move reflects a broader trend among large-scale Nigerian manufacturers who are increasingly forced to internalise infrastructure costs. The shift toward self-generation is often a strategic necessity to avoid the productivity losses associated with frequent power outages.
The decision to spend $20 million on power reflects a long-term capital expenditure strategy intended to decouple the company’s production capacity from external energy shocks.
The CBN’s current strategy, as detailed in its monetary policy communiqués, focuses on aggressive tightening to bring inflation down to a single-digit target. However, the resulting “crowding out” effect has made commercial bank loans prohibitively expensive for many Small and Medium Enterprises (SMEs) and large industrialists alike.
Data from the National Bureau of Statistics shows that inflation remains a primary driver of the CBN’s hawkish stance, but the real sector has repeatedly warned that prolonged high rates could lead to business closures and job losses.
Onafowokan’s projection of a rate cut within two meetings suggests an expectation that the current tightening cycle has reached its peak and that the CBN will soon pivot to support economic recovery.
If the MPR is lowered, it would likely reduce the cost of funds for commercial banks, theoretically leading to lower lending rates for manufacturers and a surge in domestic investment.
The market now awaits the next Monetary Policy Committee (MPC) meeting to see if the apex bank maintains its current rate or begins the easing process predicted by the industrialist.
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