The Centre for the Promotion of Private Enterprise (CPPE) has welcomed the decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to reduce the Monetary Policy Rate (MPR) by 50 basis points to 26.5 percent. The announcement by the CBN Governor, Olayemi Cardoso, signals a continuation of the gradual transition from aggressive monetary tightening to measured easing.
According to the statement signed by the Chief Executive Officer of CPPE, Dr Muda Yusuf, the policy adjustment is appropriate and supportive of economic growth. It reflects improving macroeconomic fundamentals and reinforces confidence in Nigeria’s stabilisation trajectory.
The Centre noted that the easing decision is underpinned by significant macroeconomic progress, including sustained disinflation, with headline inflation declining consistently for eleven consecutive months; improved external reserves supported by stronger export earnings and remittance inflows; relative exchange-rate stability, which has helped anchor inflation expectations; and an improving balance of trade reflecting stronger external sector performance.
“These indicators collectively signal strengthening macroeconomic resilience,” the CPPE stated, commending the monetary authorities for consolidating stability gains while cautiously pivoting toward growth.
The rate cut sends a positive signal to investors and the business community. A moderation in the policy rate, even if incremental, is expected to improve investor sentiment, gradually ease financing conditions, strengthen private-sector confidence, and support prospects for credit expansion. Given the significant cost pressures businesses have faced over the past two years — including high energy costs, logistics challenges, exchange-rate volatility, and elevated interest rates — even modest monetary accommodation provides both psychological and financial relief.
However, the CPPE cautioned that the real impact of the rate cut will depend heavily on the effectiveness of monetary transmission. A major concern remains the weak linkage between monetary policy adjustments and actual lending rates in the real economy.
Despite reductions in the MPR, lending rates remain elevated due to structural constraints such as the high Cash Reserve Ratio (CRR), elevated cost of deposits, risk premiums reflecting macroeconomic uncertainty, crowding-out effects from government borrowing, and high operating costs within the banking system. Unless these rigidities are addressed, the benefits of monetary easing may not fully translate into lower borrowing costs for manufacturers, SMEs, agriculture, and other productive sectors.
The CPPE emphasised that strengthening policy transmission should therefore be a priority. This may require complementary measures to ease liquidity constraints, improve credit-risk frameworks, and reduce distortions arising from domestic government borrowing. Monetary easing must effectively reach the real sector to deliver meaningful growth outcomes.
While commending the monetary policy direction, the Centre also highlighted fiscal vulnerabilities as a critical concern. Elevated public debt levels, persistent fiscal deficits, and ongoing budget financing challenges pose macroeconomic risks. Debt-service obligations continue to absorb a substantial share of government revenues, limiting fiscal flexibility.
The CPPE stressed that sustainable macroeconomic stability requires stronger non-oil revenue mobilisation, expenditure rationalisation, improved fiscal transparency, a credible deficit-reduction strategy, and reduced dependence on high-cost domestic borrowing. Without fiscal consolidation, monetary easing could be undermined by continued fiscal pressures and crowding-out effects within the financial system. Effective coordination between fiscal and monetary authorities is therefore essential.
The Centre further noted that the gradual easing cycle presents strategic opportunities for investors. In the fixed-income market, moderating rates could support capital appreciation, making active duration management important. Lower rate expectations may also support equity valuations, particularly in banking, consumer goods, manufacturing, industrials, and construction, as exchange-rate stability moderates input costs. Improved macro stability enhances prospects in agro-processing, manufacturing, export-oriented businesses, logistics, infrastructure, and SME-focused private equity investments. Sustained exchange-rate stability and reserve growth could also continue to attract foreign portfolio inflows.
In conclusion, the CPPE commended the CBN for its measured and data-driven policy adjustment. The easing reflects strengthening macroeconomic performance marked by declining inflation, growing reserves, improving trade balance, and enhanced foreign-exchange stability.
However, the Centre emphasised that for the benefits of monetary easing to be fully realised, two critical priorities must be addressed: strengthening monetary transmission to ensure lower lending rates for the real sector, and advancing credible fiscal consolidation to safeguard macroeconomic stability.
If supported by structural reforms and disciplined fiscal management, the current policy direction could unlock a stronger investment cycle and deliver more durable economic growth.
