By Tunde Ayeni,Abuja
THE Central Bank of Nigeria’s (CBN) decision to retain the Monetary Policy Rate (MPR) at 26.5 per cent has kept commercial lending rates above 30 per cent, prompting economists and private sector operators to renew calls for a gradual easing of monetary policy to stimulate investment and economic growth.
While the Monetary Policy Committee (MPC) defended its decision as necessary to consolidate recent gains in inflation moderation and exchange rate stability, analysts warned that prolonged high borrowing costs are weighing on business expansion, private sector credit and job creation.
The apex bank retained the benchmark interest rate at 26.5 per cent, alongside other key monetary policy parameters, citing the need to sustain its inflation-fighting strategy amid lingering domestic and global economic uncertainties.
Economists said the current policy stance has translated into average commercial lending rates of over 30 per cent, making access to credit increasingly difficult for manufacturers, small and medium-sized enterprises (SMEs) and other productive sectors of the economy.
According to them, while tight monetary policy has helped moderate excess liquidity, attract foreign portfolio investment and stabilise the foreign exchange market, the cost of borrowing has become a major constraint to investment and economic expansion.
They argued that with headline inflation showing signs of easing in recent months, the CBN now has room to begin a cautious and data-driven reduction in interest rates to support productive activities without jeopardising macroeconomic stability.
Financial analysts noted that Nigeria’s high interest rate environment has increased debt servicing costs for businesses, slowed capital expenditure and discouraged new investments, particularly in sectors requiring long-term financing.
They, however, cautioned against an aggressive rate cut, warning that inflationary pressures remain elevated due to high food prices, insecurity affecting agricultural production and persistent structural bottlenecks.
According to the analysts, any policy easing should be gradual and supported by continued fiscal reforms, improved food supply, stronger oil production and sustained stability in the foreign exchange market.
Industry stakeholders also observed that manufacturers and exporters continue to face rising financing costs, limiting their competitiveness and reducing their capacity to expand production.
They stressed that lower borrowing costs would improve access to finance, stimulate private sector investment, support industrial growth and create employment opportunities, particularly for small businesses that depend heavily on bank credit.
Market participants said the CBN’s decision was largely anticipated by investors, with the committee opting to consolidate recent macroeconomic gains rather than risk reversing progress made in stabilising prices and restoring confidence in the foreign exchange market.
They added that attention would now shift to upcoming inflation data and broader macroeconomic indicators, which are expected to influence the timing of any future monetary policy adjustment.
The development comes as policymakers continue to balance the twin objectives of curbing inflation and supporting economic growth, with many economists maintaining that the success of future monetary policy will depend not only on interest rate decisions but also on complementary fiscal and structural reforms aimed at improving productivity and reducing inflationary pressures.
