Lagos, Nigeria (VOICE OF NAIJA)- A member of the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC), Murtala Sabo Sagagi, has urged the apex bank to take additional steps to ensure that the benefits of the recently concluded banking sector recapitalisation translate into lower lending rates for households and businesses.
Sagagi made the recommendation in his personal statement following the 305th meeting of the Monetary Policy Committee, arguing that stronger bank capital should improve access to affordable credit and stimulate economic activity.
He noted that although the recapitalisation exercise has strengthened the resilience of the banking sector, structural challenges continue to weaken the transmission of monetary policy to lending rates.
According to him, the CBN should intensify oversight to ensure that improvements in banks’ capital positions are reflected in more favourable borrowing conditions for businesses and consumers.
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“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.
“Structural impediments in the credit transmission mechanism, including high risk premiums and limited credit bureau penetration, require targeted macroprudential intervention.
“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 said.
Sagagi stressed that preserving financial stability should remain a priority as banks adjust to their expanded capital base and increased lending capacity.
He also called for stronger coordination between monetary and fiscal authorities to consolidate recent gains in inflation moderation, warning that increased government spending associated with election cycles could trigger demand-driven inflation and reverse recent progress on price stability.
To mitigate this risk, he recommended sustained collaboration between the CBN and fiscal authorities in pursuing a responsible, counter-cyclical fiscal spending framework.
On food inflation, the MPC member observed that many of its underlying drivers—including insecurity in farming communities, poor rural infrastructure and high transportation costs—cannot be addressed through monetary tightening alone.
He advocated policies that expand farmers’ access to affordable inputs such as fertiliser, improved seeds and pesticides, alongside greater investment in rural roads and security, saying such measures would help curb structural food inflation and reinforce the ongoing disinflation trend.
Sagagi also advised the apex bank to maintain prudent exchange rate management by leveraging Nigeria’s stronger external reserves to cushion any short-term volatility arising from global energy market disruptions, while sustaining policies that boost export earnings and diaspora remittances.
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At the end of its 305th meeting, the MPC retained the Monetary Policy Rate (MPR) at 26.5 percent.
The committee also left the Cash Reserve Ratio (CRR) unchanged at 45 percent for commercial banks and 16 percent for merchant banks. The asymmetric corridor around the MPR was maintained at +500/-100 basis points, while the CRR on non-Treasury Single Account (TSA) public sector deposits remained at 75 percent.
The CBN recently concluded its banking sector recapitalisation programme, an initiative aimed at strengthening the financial system, enhancing banks’ capacity to finance the real economy and supporting long-term economic growth.
