On Tuesday, the Monetary Policy Committee (MPC) announced a reduction in the Monetary Policy Rate (MPR) by 50 basis points, bringing it down from 27.5 per cent to 27 per cent.
The Centre for the Promotion of Private Enterprise (CPPE) has commended the Central Bank of Nigeria’s move to ease credit conditions, describing it as a timely and necessary pivot toward growth following a prolonged period of tight monetary policy.
Specifically, the MPC reduced the MPR by 50 basis points to 27 per cent. In addition, it lowered the Cash Reserve Ratio (CRR) for commercial banks from 50 per cent to 45 per cent, while maintaining the CRR for merchant banks at 16 per cent and retaining the liquidity ratio at 30 per cent. The asymmetric corridor around the policy rate was adjusted to +250/-250 basis points.
A notable innovation in the policy was the introduction of a 75 per cent CRR on non-Treasury Single Account (TSA) public sector deposits. The Central Bank stated that this measure is intended to mitigate excess liquidity risks arising from fiscal operations that could potentially undermine recent gains in price stability.
Muda Yusuf, Chief Executive of CPPE, stated that the easing came at a critical time, as Nigeria has experienced five consecutive months of declining inflation. “With stability gradually returning and inflationary pressures easing, the MPC’s shift toward growth is both sensible and timely,” he said.
He further explained that the previously high interest rates had restricted private sector credit, increased borrowing costs, and limited business expansion. By reducing the policy rate and CRR, Mr. Yusuf noted, the Central Bank is deliberately aiming to enhance liquidity, lower borrowing costs, and free up capital for productive sectors.
The CPPE highlighted four major implications of the policy shift. Firstly, improved credit conditions are expected to expand banks’ lending capacity, making financing more accessible, particularly for small and medium-sized enterprises.
Secondly, lower funding costs are likely to encourage new investments, support business expansion, increase capacity utilisation in the real sector, and ultimately boost job creation and output. Thirdly, a more accommodative monetary stance enables banks to better mobilise savings and channel funds into productive investments, reinforcing economic growth.
Fourthly, the 75 per cent CRR on non-TSA deposits is viewed as a safeguard against fiscal-driven liquidity surges that could destabilise the financial system.
The think-tank emphasized that monetary easing alone is not enough; fiscal authorities must act in concert to unlock the economy’s full potential. CPPE called for sustained fiscal consolidation to preserve investor confidence, priority investments in infrastructure to reduce production and logistics costs, strengthened regulatory institutions to attract private capital, and decisive action against insecurity, which continues to hinder rural productivity and investment.
“The MPC’s decision represents a strategic and well-timed shift from stabilisation toward growth acceleration,” Mr. Yusuf said. “If maintained and complemented by appropriate fiscal and structural reforms, these measures will stimulate economic growth, generate jobs, enhance private sector output, broaden the government revenue base, and sustainably moderate inflation in the medium to long term.”
The CPPE described the Central Bank’s decision as a significant step toward fostering a more resilient, inclusive, and growth-oriented Nigerian economy.
