KEY POINTS
• NECA commends the CBN for cutting the MPR from 26.5 per cent to 23 per cent.
• The association says the 45 per cent CRR means monetary conditions remain relatively tight.
• It wants the rate reduction to translate into lower lending costs for businesses.
MAIN STORY
The Nigeria Employers’ Consultative Association (NECA) has welcomed the Central Bank of Nigeria’s (CBN) decision to reduce the Monetary Policy Rate (MPR) from 26.5 per cent to 23 per cent.
NECA Director General, Mr Adewale Smatt Oyerinde, described the move as a significant adjustment following a prolonged period of tight monetary conditions.
However, he said the association would monitor how the decision affects actual lending rates, stressing that a lower policy rate does not automatically mean cheaper credit for businesses.
Oyerinde pointed to the retention of the Cash Reserve Requirement (CRR) for Deposit Money Banks at 45 per cent as an indication that monetary conditions remained relatively tight.
He said the lower MPR could eventually support reduced lending rates and improve access to working capital and investment financing, particularly for manufacturers and Small and Medium Enterprises (SMEs). He added that the speed and extent of the transmission would depend on how banks adjusted their lending rates.
NECA said the August 2026 headline inflation rate of 15.39 per cent also meant that the new MPR remained above prevailing inflation.
“The reduction therefore, represents a measured easing rather than a shift to broadly accommodative monetary policy,” Oyerinde said.
The revised interest rate corridor of plus 50 and minus 300 basis points places the Standing Lending Facility at 23.5 per cent and the Standing Deposit Facility at 20 per cent.
According to Oyerinde, the adjustment could help liquidity management and strengthen the transmission of monetary policy.
THE ISSUES
- The impact of the MPR cut on businesses will depend on whether commercial banks translate the lower policy rate into reduced lending rates. NECA said this transmission would determine the extent to which businesses benefit from the adjustment.
- Manufacturers and other businesses continue to face high input, energy, logistics and foreign exchange related costs. These pressures could limit the benefits of any improvement in financing conditions.
- The retention of the 45 per cent CRR indicates that the CBN is maintaining a relatively tight monetary environment despite the reduction in the policy rate, according to NECA.
WHAT’S BEING SAID
“August 2026 headline inflation at 15.39 per cent means that the new 23 per cent MPR remains above the prevailing inflation rate.” – Adewale Smatt Oyerinde, NECA Director General
“NECA will, therefore, continue to monitor the transmission of the policy rate reduction to actual lending rates and advocate for a sustained and predictable path towards lower financing costs.” – Adewale Smatt Oyerinde, NECA Director General
WHAT’S NEXT
NECA said it would continue monitoring the effect of the MPR reduction on lending rates while advocating measures to lower financing costs and improve access to credit.
Oyerinde also called for further strategic support for manufacturers to ease their financing burden.
BOTTOM LINE
NECA described the MPR reduction as a positive development but said its impact would depend on how quickly lower policy rates translate into cheaper credit for businesses. The association also called for measures to improve financing access for manufacturers.
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