Stakeholders seek moderation in policy rates as MPC meets

Centre for the Promotion of Private Enterprise (CPPE) has raised concerns over the aggressive monetary tightening measures implemented by the Central Bank of Nigeria (CBN) under Yemi Cardoso.
  
Meanwhile, as the Monetary Policy Committee (MPC) of the CBN holds its 302nd meeting today, some stakeholders in Abuja, yesterday, urged the loosening of policy rates.
   
Reviewing Cardoso’s two years as the CBN governor, the Chief Executive Officer (CEO), Dr Muda Yusuf, noted that while the measures were necessary to combat inflation, “the present stance is highly restrictive,” with the Monetary Policy Rate (MPR) at 27.5 per cent and Cash Reserve Ratio (CRR) at 50 per cent, considerably pushing up the cost of funds.
   
This, he said, has led to credit constraints, as elevated lending rates have suppressed private sector borrowing, particularly in key sectors such as manufacturing, agriculture, Micro, Small and Medium Enterprises (MSMEs) growth, real estate and others. He added that there was also a growing risk that private investment could be displaced by high-yield government instruments.
  
Acknowledging that the CBN has undertaken some reforms aimed at restoring confidence and repositioning the financial system to support inclusive and sustainable economic growth, he said Nigeria’s financial system historically faced challenges, including foreign exchange market distortions, weak corporate governance, excessive monetary financing and limited access to affordable credit.
  
The above-mentioned issues, he said, contributed to macroeconomic instability, inflationary pressures and suboptimal economic performance. Yusuf noted that a fully market-based approach, while improving efficiency, had not addressed structural financing gaps.
  
According to him, Small and Medium Enterprises (SMEs) continue to face limited access to affordable credit and infrastructure, and industrial, agricultural, construction and real estate projects lack patient capital and affordable long-term funding mechanisms.
   
Despite these concerns, he said the CBN made progress under Cardoso. “FX reform has been one of the most notable achievements, with the elimination of multiple FX windows reducing opportunities for arbitrage and corruption. CBN has also improved governance and autonomy, strengthened oversight mechanisms and internal controls and curtailed unrestrained monetary financing.
   
“The CBN has maintained confidence in the financial system, introducing recapitalisation measures to enhance the soundness of banks and strengthening regulatory frameworks to safeguard stability in the face of global and domestic shocks. Through a mix of monetary policy tools, the CBN has contributed to the recent deceleration in inflation and restoration of macroeconomic stability,” he said.
   
To address the emerging concerns and build on the gains made, Yusuf called for a balanced policy stance that supports growth while preserving macroeconomic stability. This, he said, could be achieved by gradually easing the CRR and MPR downward as inflation moderates, creating a more enabling credit environment.
  
He urged Cardoso to complement monetary tightening with supply-side measures to address structural inflation drivers as well as develop credit guarantee schemes and concessionary financing programmes for MSMEs and critical sectors of the economy, promoting development finance instruments, and deepening the domestic bond market to mobilise resources for infrastructure.
   
The MPC had retained the baseline interest rate, known as the MPR, at 27.50 per cent for the third consecutive time in its 301st meeting in July.
This marked a departure from the aggressive tightening stance adopted by the committee under Cardoso. The Cardoso-led MPC had raised the MPR from 18.75 per cent to 27.50 per cent between February 2024 and July 2025.
   
Some stakeholders are calling for a rate cut due to moderation in headline inflation for many consecutive months, a positive sign that prior monetary tightening measures are working.
   
A development economist, Ken Ife, stated that there had been persistent calls and expectations for the MPC to lower the MPR. Ife, who is the lead consultant on private sector development to the ECOWAS Commission, however, said he was not persuaded that the time was right to ease the rates.
 
 “It is true that the rebasing of inflation has pushed the real interest rate to positive territory, MPR being higher than inflation. The seeming moderation of year-on-year inflation is contradicted by month-on-month inflation. Notwithstanding the general moderation, the food sub-index is rising.
  
“The meltdown of foreign direct investments (FDIs) and the volatility of the crude sales component mean that we are dependent on foreign portfolio inflows, which are very sensitive to the MPR and yields on securities,” he said.
  
A financial expert, Uche Uwaleke, stated that the MPC would likely retain the existing rates due to the prevailing falling inflation rate and exchange rate stability.
  
The Director-General of the Nigeria Employers Consultative Association (NECA), Adewale-Smatt Oyerinde, said the decline in inflation was commendable.  Oyerinde, however, said full benefits would remain muted unless the MPC strategically began to reduce the benchmark interest rate.