Experts divided over CBN’s 3% interest rate slash

***CBN cuts rate to 23%, says stability achieved

***Rate cut still too high to boost businesses — NCMDLCA

By Emma Ujah, Abuja Bureau Chief, Babajide Komolafe, Peter Egwuatu, Yinka Kolawole, & Efe Onodjae

Mixed reactions yesterday trailed the Central Bank of Nigeria, CBN’s cut on interest rate by three per cent, as the Monetary Policy Rate, MPR, was reduced from 26.5 per cent to 23 per cent.

The governor of the apex bank, Mr. Olayemi Cardoso, who announced the new rate at the end of the 307th Monetary Policy Committee, MPC, meeting, in Abuja, described the decision as resetting it to meet the current financial market realities.

Meanwhile, the National President of the National Council of Managing Directors of Licensed Customs Agents, NCMDLCA, Mr. Lucky Amiwero, described the CBN’s rate cut as insufficient to stimulate businesses and economic activities.

Also, Dr Muda Yusuf, Chief Executive Officer, Centre for the Promotion of Private Enterprise, CPPE, stated that the reduction of the MPR by 350 basis points from 26.5% to 23% ia a timely reset and a major relief for the real sector.

Reacting as well, Fiona Ahimie, President of Chartered Institute of Stockbrokers, CIS, said the reset in the rate to 23% is a significant development for the capital market and could mark the beginning of a new phase of asset repricing.

Reacting, President of the Capital Market Academics of Nigeria, Professor Uche Uwaleke said: “ The MPC decision to cut the MPR by 350 basis points is justified by moderating inflation, exchange rate stability, improvement in FX market liquidity, and accretion to external reserves.

“It is a welcome development, against the backdrop of the recently signed MoU between the Minister of Finance and the CBN governor on fiscal and monetary policies collaboration.”.

The CBN governor in his speech at the MPC meeting said the committee decided to “recalibrate the standing facilities’ corridor to +50/-300 basis points around the MPR; retain the Cash Reserves Requirement, CRR, for Deposit Money Banks at 45 per cent, Merchant Banks at 16 per cent and Non-TSA public sector deposits at 75 percent.”

He said the decision to reset the MPR and recalibrate the policy corridor should be seen as “an important operational realignment aimed at strengthening monetary policy transmission and forcing the primacy of the monetary rate.”

No change stance

Cardoso emphasised that the new corridor does not constitute a change in the current monetary policy stance but rather an operational reset to enhance the effectiveness of operational monetary policy and support the transition to an inflation targeting framework.

His words: “Members (of MPC) are of the view that the current macroeconomic environment remains supportive of such a recalibration without undermining the disinflation process.

“In arriving at this decision, the committee noted that the observed divergence between the MPR and the prevailing market rates had weakened the effectiveness of monetary policy transmission.

“Members noted that the bank’s ongoing repair of the monetary policy implementation framework, including the adoption of NOFA as a transaction-based operational benchmark, has improved the transparency of money market operations.

“The committee, therefore, considered a reset of the MPR and recalibration of the corridor appropriate to better align the monetary policy implementation framework with market realities.

“This would strengthen policy transmission and restore the MPR as a principal signal of monetary policy. Members emphasized that the recalibration represents an operational realignment of the framework and should not in itself be construed as a change in the underlying policy stance.”

The governor added that with the current stability in the market, there was no better time to adjust the rate than now.

“We are in a position of stability. The tightening we have done in the past has worked. FX pressure has receded. Capital market growth is because of the FX market stability. Investor confidence has come back. We have nothing to fear. This is a reset and a recalibration. No better time to do it than now when things are stable,’’ he added.

He added that the past tightening actions had achieved increased resilience demonstrated by the Nigerian economy, reflected by the moderating inflation, robust external reserve buffers, improved external sector fundamentals, and strengthening investor confidence.

The CBN boss said: “Members observed that the moderation in inflation indicated the effectiveness of previous policy tightening measures, sustained exchange rate stability and improved inflation expectations.”

$55bn external reserves

Cardoso put the nation’s Gross External Reserves at $55.25 billion as of September 18, 2026, the highest in the last 18 years, and sufficient to finance approximately 11.3 months of import of goods and services.”

The governor, who clocked three years in office yesterday, said his team at the CBN had recorded great achievements, particularly by stabilising the exchange rate through the unification policy.

According to him, before his assumption of office, while the nation was subsiding fuel up to 2 per cent of the Gross Domestic Product, GDP, the exchange subsidy was as high as 3 per cent of GDP.

He said there was no way the economy could accommodate a combined subsidy of 5 per cent of the DGP and that the steps his administration took through various reforms saved the economy from disaster.

A timely reset, major relief for real sector — CPPE

Reacting to the reduction, the CPPE boss, yesterday, Yusuf said : “The adjustment is timely, given the improving inflation trajectory and the growing costs of an excessively restrictive monetary environment.

“There had also been a widening misalignment between the MPR of 26.5%, inflation of about 15.4%, and prevailing money-market rates of around 20%. This weakened the signalling function of the policy rate and raised concerns about the effectiveness of monetary policy transmission.

“The reduction of the MPR to 23% should, therefore, be viewed not merely as monetary easing, but as an important realignment of the policy rate with prevailing macroeconomic and financial-market conditions.”

He also noted that the decision was particularly positive for the real sector, where high financing costs had become a major constraint on investment, production, working capital and job creation.

“For many businesses, commercial lending rates have remained at levels that are difficult to reconcile with productive investment, particularly in manufacturing, agriculture, construction, logistics and other sectors with relatively long investment cycles and tight margins.

“The policy adjustment, therefore, offers an opportunity to reduce the cost of capital, improve business cash flows, stimulate investment and strengthen the productive capacity of the economy,” he stated.

However, he warned that the ultimate economic value of the decision will depend on transmission.

CBN rate cut still too high to boost businesses — NCMDLCA

Also, the CIS boss, Amiwero, who spoke in reaction to the latest decision of the CBN’s MPC, said the new rate remained too high for businesses, particularly operators who depend on bank credit to finance their activities.

He said the reduction could not be regarded as a major relief to businesses, given the prevailing economic conditions.

He said: “It is still high. When you look at the economy, they have removed subsidies and they have removed the floating currency. What is the bargaining power of anybody today? We go to the Central Bank; we go to any bank to borrow money. You cannot survive.”

According to him, the cost of borrowing remains a major challenge to businesses, and a 23 per cent policy rate will continue to make access to credit difficult for operators.

Amiwero also cited infrastructure challenges, including electricity and roads, as factors increasing the cost of doing business in the country.

“How do you run your business when there is no light and no good roads?” he queried.

The NCMDLCA president said the government and the CBN should do more to create an environment that would enable businesses access affordable credit and remain competitive.

He also raised concerns over the impact of exchange-rate policies on businesses involved in international trade, particularly operators whose transactions and cost structures were linked to foreign exchange.

**Reset of MPR to 23% significant for capital market – CIS President **

Reacting to the cut in interest rate, the CIS President said: “ The immediate impact is likely to be felt in the fixed income market as investors begin to price a lower interest rate environment, yields on government securities could moderate, particularly at the shorter end of the curve.

The more interesting implication, however, is the potential shift in investor allocation. With returns on Treasury bills and other short-term instruments gradually reducing, investors may begin to look further along the risk spectrum for returns. This could support demand for longer dated bonds and equities, particularly companies with strong earnings visibility and the capacity to benefit from lower financing costs.”

She said : “For the equities market, lower interest rates can provide support through several channels. A lower discount rate improves the valuation of future corporate cash flows, while potentially reducing financing costs for businesses and supporting credit growth.

‘’However, the impact will not be uniform across sectors. The banking sector, for instance, could face a mixed outcome. Lower lending rates could stimulate loan growth and economic activity, but faster repricing of loans than deposits could put pressure on banks’ net interest margins.

‘’The eventual effect on earnings will depend heavily on the pace of balance-sheet repricing and the response of credit demand.”

She noted that the foreign portfolio investor angle was also important, stressing that as domestic yields declined, the relative attractiveness of naira fixed income assets could moderate.

“However, the impact on foreign flows will depend not only on interest rates but also on exchange-rate stability, inflation, external reserves and investors’ assessment of Nigeria’s broader macroeconomic outlook which has been great so far.”

**CBN rate cut, aggressive attack on economic misery — Jeremiah **

The Chief Investment Officer of VNL Capital Asset Management, Dr Ubah Jeremiah, described the 350 basis points reduction in the MPR as an indication of aggressive attack on economic misery by the CBN.

He said: “This is a genuine surprise. Consensus was positioned for a cautious 50–100bps cut, so a 350bps reduction to 23.00% is a strong signal that the CBN is reading the domestic macro picture inflation trajectory, naira stability, and reserve accretion with more confidence than the market priced in. This can be seen as the CBN’s aggressive attack on Nigeria’s economic misery

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