Organised private sector groups have welcomed the Central Bank of Nigeria’s (CBN) 350-basis-point cut in the Monetary Policy Rate (MPR), from 26.5 per cent to 23 per cent, but insisted that the benefits would remain theoretical unless banks pass them on through lower lending rates.

The Lagos Chamber of Commerce and Industry (LCCI) described the cut as a significant easing of monetary conditions and a welcome development for businesses, particularly micro, small and medium enterprises (MSMEs), which have long been constrained by the high cost of credit.

Its Director-General, Dr Chinyere Almona, said a lower policy rate could reduce the cost of funds, improve credit conditions and support investment, but cautioned that it should not be interpreted as an automatic reduction in the cost or availability of credit.

She pointed to high energy costs, elevated logistics and transportation expenses, exchange-rate risks, rising input costs, infrastructure deficiencies and insecurity as factors shaping lenders’ risk assessments, particularly for MSMEs.

Almona noted that commercial banks do not assess the affordability of credit solely on the CBN’s policy rate, but also consider borrowers’ cash-flow capacity, collateral, credit history, sectoral risk and repayment capacity.

She urged the CBN to closely monitor how commercial banks respond in terms of lending rates and credit allocation to productive sectors, and called for stronger credit guarantees and other de-risking instruments for viable SMEs without compromising prudent banking standards.

The Nigeria Employers’ Consultative Association (NECA) also welcomed the decision but warned that it would have limited impact unless it translates into cheaper loans.

Its Director-General, Adewale-Smatt Oyerinde, said retaining the Cash Reserve Ratio (CRR) at 45 per cent for Deposit Money Banks showed that monetary conditions remained relatively tight despite the rate cut.

With inflation at 15.39 per cent in August, he noted that the new 23 per cent MPR still sits above the inflation rate, describing the move as a measured easing rather than a broad shift towards accommodative monetary policy.

He said the revised corridor, with the Standing Lending Facility at 23.5 per cent and the Standing Deposit Facility at 20 per cent, could support liquidity management, but urged authorities to complement the rate cut with more pragmatic support for manufacturers.

The Manufacturers Association of Nigeria (MAN) struck a similar note, welcoming the cut while insisting that the real test lies in whether banks pass the relief on to borrowers.

The Director-General of MAN, Segun Ajayi-Kadir, described the decision as a welcome relief, but not yet a stimulus, noting that even at an MPR of 23 per cent, prime lending rates would still range between 27 and 30 per cent, a level he said no manufacturer anywhere could competitively borrow at.

“However, the extent of manufacturers’ benefit will depend on the speed and strength of monetary policy transmission to actual lending rates and complementary fiscal and structural interventions, including reliable electricity supply, reduced logistics costs, smooth road infrastructure and favourable ease of doing business.

“Broadly, MAN sees the MPR reduction as a good opportunity to create a more supportive financing environment for manufacturing. Yet, more cuts are needed to achieve meaningful impact. Nevertheless, lower interest rates alone cannot resolve the structural constraints that continue to raise production costs.

“Therefore, MAN advocates for stronger coordination between monetary and fiscal authorities to ensure that monetary policy easing is complemented by targeted fiscal and structural interventions. Such coordination is necessary to translate the reduction in the policy rate into lower lending costs, improved access to credit, increased productive investment, an improved operating environment, and stronger industrial growth.”