Members of the Organised Private Sector have praised CBN’s 50bps interest rate cut but warn lending conditions remain tight.
Members of Organised Private Sector (OPS) and some analysts, on Wednesday, welcomed the 50-basis-point reduction in Monetary Policy Rate (MPR) by Central Bank of Nigeria (CBN) after a long tightening campaign to rein in inflation.
They described the cut as a “caution” step by CBN amid concerns over the durability of disinflation trends, and urged the government to further de-risk the business environment.
The Monetary Policy Committee (MPC) of the apex bank had voted to reduce MPR, the benchmark interest rate, to 26.5 per cent, from 27 per cent.
Briefing journalists after the two-day meeting of the committee in Abuja, CBN Governor, Mr. Olayemi Cardoso, said the decision to cut interest rate was premised on a balanced evaluation of risks to the inflation outlook, which suggested that the ongoing disinflation trajectory would continue.
However, analysts, who spoke in separate interviews with THISDAY, expressed worry that despite the recent interest rate cut, the prevailing interest rate environment remained restrictive for the real sector, limiting access to affordable credit and dampening expansion plans.
President, Abuja Chamber of Commerce and Industry (ACCI), Chief Emeka Obegolu, described the reduction as “cautiously optimistic step toward easing financial pressures on businesses and supporting economic recovery”. Obegolu said the cut signalledgrowing confidence in Nigeria’s disinflation trajectory and macroeconomic stabilisation.
He said the adjustment of the asymmetric corridor around the MPR was a technical but important reform aimed at improving interbank market efficiency and strengthening policy effectiveness.
Obegolu said the chamber anticipated that the policy mix will reduce financing costs and improve credit availability to the real sector, support private sector expansion and job creation, sustain exchange rate stability and investor confidence, as well as encourage prudent fiscal liquidity management and transparency.
He told THISDAY, “While commending the CBN for its balanced approach, ACCI urges continued coordination between monetary and fiscal authorities to ensure that easing financial conditions translate into real sector growth.
“The chamber also calls for targeted credit interventions, infrastructure improvements, and regulatory reforms that lower the cost of doing business.”
The ACCI president reaffirmed the chamber’s commitment to working with policymakers and stakeholders to ensure that the evolving monetary environment translated into tangible benefits for businesses, investors, and households across the Federal Capital Territory (FCT) and the country, at large.
Director-General, Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Almona, praised the central bank’s deviation from aggressive monetary tightening towards a stabilisation phase anchored on disinflation, exchange rate convergence, and improving supply-side conditions.
Almona stated that the shift was a “cautious, positive step in the right direction”.
The LCCI emphasised the need to continue to focus on addressing impediments in the business environment in order to attract the necessary foreign direct investment into critical sectors, such as renewable energy, transport logistics, agro-processing, and oil and gas.
She stated that while retaining other monetary parameters suggested that liquidity conditions remained restrictive, the rate reduction was a critical confidence signal to the OPS, as it established a pathway towards a gradual reduction in the cost of capital.
Almona added that for domestic and foreign investors, the MPC decision reinforced Nigeria’s transition from reform-induced adjustment to stabilisation-driven expansion.
Almona told THISDAY, “Beyond this action, we expect to see improved policy predictability, strengthened real return expectations, and support for medium-term investment planning, particularly in manufacturing, agro-processing, local drug production, and export-oriented industries.
“We must sustain our efforts to expand local refining capacity and build lasting industrial systems that outlast political administrations.”
The Lagos chamber also stated that it expected increased credit to the private sector for productive activities, and investment in critical infrastructure, including government commitment to continued transparency in the FX market, as well as strong support to building local refining capacity in both the oil and gas and solid minerals sectors.
Almona expressed hope that with firm coordination between the monetary and fiscal authorities, the “Nigerian economy will make good progress towards achieving a GDP growth rate above five per cent in the short term”.
Chief Executive of CFG Advisory, Mr. Tilewa Adebajo, stated that the modest MPR cut pointed to lingering caution within MPC over the durability of disinflation trends.
Adebajo said, “My own thoughts really are that the MPC still doesn’t have confidence in the disinflation situation. The key focus for the economy right now, in our own opinion, is the urgency of now. Reform gains need to now move from reform gains to productivity-led growth.”
He warned that the prevailing interest rate environment remained restrictive for the real sector, limiting access to affordable credit and dampening expansion plans.
According to him, government securities, including Treasury bills and OMO bills, are currently trading between 18 and 22 per cent, keeping borrowing costs elevated across the economy.
He stressed that the current high interest rates regime could not grow the economy, as the real sector still could not lend, adding that this remains a cause for concern.
Adebajo also observed that by the next MPC meeting in May, half of the year would already be gone, narrowing the window for meaningful stimulus.
He stated that as Nigeria approached an election cycle, campaign-related spending could provide short-term economic stimulus without necessarily stoking inflation.
According to him, “Election spending can be a boost to the economy. It can stimulate growth, because this is the sort of spending that will reach the grassroots. People are printing posters. They are being mobilised for campaigns.
“So, basically, these are the sort of spending activities that actually stimulate growth. I don’t think it’s going to be inflationary. The key thing for me now is that we need to start moving this economy into productivity-led growth.
“And it cannot grow at four per cent. We need to start growing this economy at eight to 10 per cent per annum.”
Analysts further urged CBN to accelerate monetary easing to unlock stronger growth momentum.
Senior Market Analyst at FXTM, Lukman Otunuga, said the rate reduction was unlikely to undermine the Naira, adding that it could reinforce recent gains in the foreign exchange market.
Otunuga said, “The CBN’s decision is likely to have a stabilisingand even potentially positive impact on the Naira, which has gained six per cent year-to-date.”
He stated that growing investor confidence in the Nigerian economy, supported by improved foreign exchange liquidity and rising external reserves, which had climbed to a 13-year high, should provide a solid buffer for the local currency.
Otunuga said even with the 50-basis point cut, real interest rates remained elevated when adjusted for inflation, preserving Nigeria’s yield appeal.
He added, “Most importantly, Nigeria’s interest rate is still one of the highest in Africa, which may attract foreign portfolio investors, lending the Naira further support.”
Similarly, Head of Financial Institutions Ratings at Agusto & Co, Ayokunle Olubunmi, described the apex bank’s move as a signal of the monetary authority’s willingness to gradually unwind its tight stance.
Olubunmi said, “The 50bps reduction in the MPR is a signal that the monetary authority is willing to reduce the prevailing rates. The rate cut also reflects the perception that while inflation pressure is easing, the decline does not justify a significant reduction in the prevailing rate.”
