Rate Cut Brings Psych Relief to Burdened Businesses Amid Energy, FX Woes—CPPE

Dr. Muda Yusuf, director/CEO of the Centre for the Promotion of Private Enterprise (CPPE), has commended the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) for slashing the Monetary Policy Rate (MPR) by 50 basis points to 26.5 per cent, hailing it as timely relief for businesses battered by two years of soaring costs in energy, logistics, exchange rate volatility, and sky-high interest rates.
Director/CEO of the CPPE,
Dr. Muda Yusuf, noted that the announcement by CBN Governor Olayemi Cardoso “marks a continuation of the gradual shift from aggressive monetary tightening toward measured easing. This policy direction is appropriate and growth-supportive.
It reflects improving macroeconomic fundamentals and reinforces confidence in the economy’s stabilisation trajectory.”
Yusuf emphasised that the rate cut sends a positive signal to investors and the business community, supporting improved investor sentiment, gradual easing of financing conditions, strengthening of private-sector confidence, and prospects for credit expansion.
“Even modest monetary accommodation provides psychological and financial relief,” he said, adding that the real impact will hinge on transmission effectiveness.However, Yusuf highlighted a major concern: the weak transmission mechanism between monetary policy adjustments and actual lending rates.
Despite MPR reductions, business lending rates remain elevated due to structural factors like high Cash Reserve Ratio (CRR) constraining bank liquidity, elevated deposit costs, risk premiums from macroeconomic uncertainty, crowding-out by government borrowing, and high banking operating costs.
“Unless these structural rigidities are addressed, the benefits of monetary easing may not fully translate into lower borrowing costs for manufacturers, SMEs, agriculture, and other productive sectors,” he warned.
“Strengthening policy transmission should be a priority through complementary measures to ease liquidity constraints, improve credit-risk frameworks, and reduce distortions in government domestic borrowing.”

Cowry Assets Management Limited echoed the optimism, stating: “The upshot from this MPC meeting is that a lower policy rate can gradually reduce borrowing costs for the real sector.
While lending rates may not fall immediately, the direction is now more supportive for businesses and economic activity.
With interest rates beginning to come down, fixed-income returns may become less attractive, supporting continued interest in equities and other risk assets.”