LCCI Bemoans CBN’s Rate Retention

…Says 27.5% Interest Depressing Businesses

The Central Bank of Nigeria (CBN) has again retained its key monetary policy parameters, including the Monetary Policy Rate (MPR) at a high 27.5 percent, a move that continues to draw sharp criticism from the Lagos Chamber of Commerce and Industry (LCCI) as detrimental to business growth and economic recovery.

Reading the communiqué from the committee’s meeting held on Tuesday, the CBN Governor, Olayemi Cardoso, said the decision to hold rates steady reflects a strategic commitment to consolidating the recent gains in macroeconomic stability and ensuring that inflationary risks are further curtailed.

Olayemi Cardoso explained the decision as necessary “to sustain the momentum of disinflation and sufficiently contain price pressures,” underscoring a commitment to “consolidating recent gains in macroeconomic stability” and curtailing inflationary risks amid external uncertainties like tariff wars and geopolitical tensions. The MPC also maintained the asymmetric corridor at +500/-100 basis points, the Cash Reserve Ratio (CRR) for deposit money banks at 50 percent, and other liquidity ratios unchanged.

However, the LCCI, has expressed deep concern over the “depressing burden” that the prolonged high-interest rate places on businesses, especially small and medium enterprises (SMEs).

Director general of LCCI,  Dr. Chinyere Almona, stated, “While we appreciate that the current reforms may have started to have some impact on stabilising the exchange rates, easing headline inflation, and increasing government revenue, the interest rate at 27.5 percent remains a depressing burden on businesses.”

Almona urged the MPC to “strike a careful balance between preserving macroeconomic stability and supporting economic recovery,” noting that the recent extension of the 2024 federal budget’s capital expenditure to December 2025 would increase liquidity and potentially exacerbate inflationary pressures.

Emphasising the heavy cost of credit accessibility, Almona lamented, “We recognise that the current interest rate environment is tight, making access to credit beyond the affordability of small businesses. The private sector is being crowded out of funding.” She called for “targeted, non-cash measures in the form of concessionary interest rates to small businesses” and urged coordination with fiscal authorities “to resolve key drivers of inflation such as insecurity, infrastructure deficits, and disruptions in food supply chains.” The LCCI also recommended transparency in lending practices and development finance initiatives to ensure fair borrowing.

Governor Cardoso highlighted that headline inflation has eased for the third consecutive month, supported by moderation in energy prices and exchange rate stability. Yet, the MPC remained cautious about the “month-on-month uptick in headline inflation,” pointing to persistent structural price rigidities particularly in food and non-food sectors—factors justifying maintaining the high-interest stance.

Dr. Almona, however, argued that while the MPC’s policy stability offers short-term reassurance, it “does not alleviate the burden of high borrowing costs faced by businesses.” She warned against complacency following the recent rebasing of inflation figures, which lowered inflation from 34.8 per cent in December 2024 to 24.48 percent in January 2025, reminding that fundamental inflation drivers remain unaddressed, including insecurity, energy costs, logistics, and forex volatility.

The LCCI urged authorities to couple monetary policy with structural reforms, infrastructure development, and energy sector improvements to create a business environment conducive to growth.

Dr. Almona said “A coordinated approach is essential for sustained inflation control and economic resilience. We also look forward to managed rate cuts before year-end to support the new tax regime and economic expansion”.

Meanwhile, the MPC reiterated its confidence in Nigeria’s banking sector stability, noting that eight banks have met minimum recapitalisation requirements while others are on track. The committee urged continued regulatory oversight to sustain the system’s resilience.

This unfolding tension captures Nigeria’s delicate economic balancing act. The CBN remains focused on curbing inflation through a tight monetary policy, while the LCCI presses for reductions in borrowing costs to invigorate private enterprise, particularly in sectors vital to growth such as agriculture, power, and infrastructure. As Dr. Almona put it, “The interest rate at 27.5 percent is choking business operations, discouraging investment, and threatening the country’s long-term industrial competitiveness”. The coming months will test whether these divergent perspectives can converge towards a policy equilibrium that supports Nigeria’s broader economic recovery.

In its latest decision, the MPC retained the Monetary Policy Rate (MPR) at 27.50 percent, maintained the asymmetric corridor around the MPR at +500/-100 basis points, held the Cash Reserve Ratio (CRR) for Deposit Money Banks at 50.00 per cent, CRR for Merchant Banks at 16.00 percent, and left the Liquidity Ratio unchanged at 30 percent.

Cardoso explained that “the decision was premised on the need to sustain the momentum of disinflation and sufficiently contain price pressures. Maintaining the current policy stance will continue to address the existing and emerging inflationary pressure.”

The committee acknowledged that headline inflation eased for the third consecutive month in June 2025, buoyed by moderation in energy prices and continued exchange rate stability. However, the MPC expressed concern over the month-on-month uptick in headline inflation, which signals the persistence of structural price rigidities and core inflation drivers.

“Despite the positive trend in headline inflation, the rise in monthly inflation rates suggests underlying pressures still exist, especially from food and non-food segments,” Cardoso stated.

The MPC also flagged external risks, such as the ongoing tariff wars and geopolitical tensions, which could disrupt global supply chains and lead to higher import prices. These uncertainties reinforce the need for a cautious and vigilant policy stance.

On the banking sector, the committee expressed confidence in the continued resilience of the financial system, pointing to stable Financial Soundness Indicators (FSIs) and progress in the ongoing banking recapitalisation programme. It disclosed that eight banks have already met the new capital requirements, with others on track to meet the set deadline.

To ensure ongoing stability in the financial system, the Committee urged the CBN Management to “sustain its oversight of the banking system to ensure continued resilience, safety and soundness.”

Looking ahead, staff projections from the Bank indicate a further decline in inflation, supported by the tight monetary policy environment, a stable exchange rate, declining petrol prices, and anticipated moderation in food prices as the harvest season approaches.

However, the committee noted that policy uncertainties and price rigidities require sustained vigilance. “Monetary policy will need to maintain its current stance until risks to inflation recede sufficiently,” the Governor noted.

The MPC reiterated its commitment to the CBN’s core mandate of price stability, adding that it would take “appropriate measures to foster stability and confidence in the economy” going forward.

This latest decision underscores the CBN’s strategic approach to navigating Nigeria’s economic recovery amidst global and domestic challenges, balancing the dual goals of taming inflation and maintaining financial system stability.

The committee urged the CBN to maintain a close supervision of the Nigerian banks to maintain the stability of the banking system.