CPPE: CBN rate cut could revive private investment, unlock cheap credit for firms

THE Centre for the Promotion of Private Enterprise (CPPE) says the Central Bank of Nigeria (CBN)’s 350-basis-point cut in its benchmark interest rate could ease financing pressures on businesses and revive private investment.

The Monetary Policy Committee (MPC) of the CBN reduced the Monetary Policy Rate from 26.5 percent to 23 percent at its 307th meeting on September 22, 2026.

The committee also narrowed the asymmetric corridor around the MPR from +50/-450 basis points to +50/-300 basis points.

In a policy brief issued on Tuesday, the CPPE said the size of the rate reduction marked a significant shift from the restrictive monetary policy stance that had prevailed for an extended period.

The group said the decision was timely, given the decline in inflation and the increasing cost of maintaining tight monetary conditions.

According to the CPPE, the previous 26.5 percent MPR had become increasingly disconnected from other key market indicators, with inflation at about 15.4 percent and money market rates around 20 percent.

It said the reduction to 23 percent should therefore be seen as a realignment of the policy rate with prevailing economic and financial-market conditions.

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Businesses seek lower lending rates

The CPPE said the real sector impact of the rate cut would depend on how quickly commercial banks transmit the lower policy rate to borrowers.

It said high borrowing costs had constrained investment, production and working capital across manufacturing, agriculture, construction, logistics and other sectors with long investment cycles.

“The ultimate economic value of the decision will depend on transmission,” the group said.

It expects lending rates on new and existing facilities to progressively decline as banks adjust to the new monetary policy environment.

Without such transmission, the CPPE said, the rate cut would have limited impact on private investment and economic growth.

Rate cut could ease debt-service burden

The group also identified a potential fiscal benefit from lower interest rates. It said elevated market yields had increased the Federal Government’s domestic borrowing costs and contributed to pressure on its debt-service obligations.

A sustained decline in interest rates could lower the marginal cost of government borrowing and create additional fiscal space for infrastructure, security, education and healthcare.

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Naira stability remains critical

The group warned that the size of the rate cut could also create foreign exchange and portfolio-flow risks.

Lower Nigerian interest rates could reduce the interest rate differential between naira assets and foreign assets, potentially affecting the attractiveness of domestic securities to foreign portfolio investors.

The CPPE, however, said Nigeria was entering the easing cycle with stronger external buffers than during previous episodes of monetary easing.

It cited improved foreign reserves, greater stability in the foreign market and stronger external-sector buffers as factors giving the CBN more room to manage the transition.

It urged the central bank to remain prepared to use open market operations and other monetary instruments to manage excessive market volatility.

Lower rates not enough, CPPE says

The CPPE said monetary easing must be supported by supply-side reforms because a substantial part of Nigeria’s inflation remains structural.

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It identified energy costs, poor logistics, insecurity, food production constraints, infrastructure deficits and regulatory costs as factors that continue to raise production costs.

The group said addressing these constraints would help ensure that cheaper credit translates into higher investment and output rather than renewed inflationary pressure.

The CPPE said the effectiveness of the rate cut should ultimately be measured by four developments: the extent to which commercial lending rates fall, the response of private investment and productive sector credit, inflation and foreign-exchange stability.

It described the September decision as a significant turning point in the monetary policy cycle, but stressed that effective transmission would determine its impact on the wider economy.