The Nigeria Employers’ Consultative Association (NECA) welcomes the CBN Monetary Policy Committee’s decision to reduce the Monetary Policy Rate (MPR) from 26.5 per cent to 23 per cent, marking a significant adjustment after a prolonged period of tight monetary conditions.
For businesses that have faced elevated borrowing costs, the reduction is a step in the right direction. However, it is a cautious welcome, as a lower policy rate does not automatically translate into cheaper credit for businesses.
According to the DG of NECA, Mr. Adewale-Smatt Oyerinde, the retention of the Cash Reserve Requirement (CRR) at 45 per cent for Deposit Money Banks also indicates that monetary conditions remain relatively tight.
Analysing the likely economic implications, the DG noted as follows:
Borrowing costs: The reduction could, over time, support lower lending rates and improve access to working capital and investment financing, particularly for manufacturers and SMEs. However, the speed and extent of this transmission will depend on how banks adjust their lending rates.
Inflation context: With August 2026 headline inflation at 15.39 per cent, the new 23 per cent MPR remains above the prevailing inflation rate. The reduction therefore represents a measured easing rather than a shift to broadly accommodative monetary policy.
Standing facilities: The revised corridor of +50/-300 basis points places the Standing Lending Facility at 23.5 per cent and the Standing Deposit Facility at 20 per cent. The adjustment could support improved liquidity management and monetary policy transmission.
For businesses: The rate cut provides an opportunity for improved access to credit, but the broader cost of doing business remains a concern. Manufacturers and other businesses continue to contend with high input, energy, logistics and foreign exchange-related costs. NECA will therefore continue to monitor the transmission of the policy rate reduction to actual lending rates and advocate for a sustained and predictable path towards lower financing costs.
Investor sentiment: The reduction may improve confidence around the gradual normalisation of monetary conditions, while the retention of relatively high CRR levels indicates that the CBN remains attentive to liquidity and inflation considerations.
Concluding his remarks, the DG stated that while this is a good development, more pragmatic efforts should be made to ease the burden of manufacturers by further strategic support to enhance access to finance.
