By Our Reporter
Stakeholders in the Nigerian economy have declared support for the decision of the Monetary Policy Committee (MPC) of Central Bank of Nigeria (CBN) to reduce interest rates at its 304th meeting held from February 23 to February 24 in Abuja.
The CBN’s MPC had cut the Monetary Policy Rate (MPR) by 50 basis points to 26.50 per cent.
The committee also adjusted the asymmetric corridor to +50/-450 basis points around the MPR but retained the Cash Reserve Ratio (CRR) for Deposit Money Banks at 45 per cent and 16 per cent for Merchant Banks and maintained the Liquidity Ratio at 30 per cent.
Reacting to the development, the Nigeria Employers’ Consultative Association (NECA) said reduction of the MPR by 50 basis point was “a cautious but noteworthy signal” that authorities were responding to sustained pressures on businesses.
NECA Director-General, Mr Adewale-Smatt Oyerinde said this while commending the decision in a statement issued in Lagos.
Oyerinde said the marginal reduction might not immediately lower lending rates but reflected “a gradual shift toward supporting growth without undermining price stability”.
According to him, the overall stance remained tight, with the Cash Reserve Ratio retained at 45 per cent and the liquidity ratio at 30 per cent.
He added that the asymmetric corridor around the MPR was also maintained, reinforcing a cautious monetary approach.
“With a substantial portion of deposits still sterilised, banks’ capacity to expand credit to the real sector may remain constrained in the near term”, he said.
Oyerinde described the move as a careful balancing act aimed at moderating inflation without worsening pressures on businesses.
He noted that firms continued to grapple with high operating costs, exchange rate volatility and weakened consumer demand.
“Inflation, particularly in food, energy and transportation, remains a significant challenge to employers and households”, he said.
He stressed that the modest easing must be supported by coordinated fiscal and structural reforms to address supply-side constraints.
Such reforms, he said, should improve infrastructure and enhance productivity across key sectors of the economy.
Oyerinde urged financial institutions to ensure the MPR reduction was gradually reflected in lending conditions for manufacturers and SMEs.
He affirmed that although the MPC had not fully relaxed its tightening stance, the rate cut signalled cautious optimism.
Speaking in the same vein, the Centre for the Promotion of Private Enterprise (CPPE), praised the CBN for cutting the Monetary Policy Rate by 50 basis points to 26.5 per cent.
CPPE, in a policy brief issued in Lagos said the move is growth supportive.
It said the decision of the Monetary Policy Committee, announced by the CBN Governor, Olayemi Cardoso, reflected improving macroeconomic fundamentals and a cautious shift from aggressive tightening.
The organisation noted that sustained disinflation, stronger external reserves, an improved trade balance and relative exchange-rate stability had created room for monetary easing.
It said the rate cut could boost investor confidence and support private-sector growth, but cautioned that weak monetary transmission might limit its impact on lending rates.
The CPPE identified high cash reserve requirements, elevated lending rates, government borrowing and structural banking costs as major constraints to effective transmission.
In their own remarks, stockbrokers said the decision of the CBN to reduce interest rates signals a cautious shift toward economic growth but warned that downside risks persist.
The stockbrokers, in separate interviews said the move reflected growing confidence in macroeconomic stability, particularly amid moderating inflation and relative stability in the foreign exchange market.
The Chief Executive Officer of Wyoming Capital and Partners, Mr. Tajudeen Olayinka, said that the decision by MPC to drop MPR by 50 basis points was commendable, in view of numerous headwinds that could create shocks of different magnitudes.
“The committee was mindful of possible impact of a large interest rate cut on foreign portfolio inflows, and so, would not take interest rate decision that could hurt capital importation or disturb exchange rate stability.
“The decision to adjust interest rate to 26.5 per cent is in order. Time will come when interest rate will align with the market, and I think MPC of CBN is waiting for that opportunity to show itself”, he said.
Also speaking, Vice President of Highcap Securities, Mr David Adonri, said the rate cut suggested growing confidence by monetary authorities in the economy.
He noted that the move might had been influenced by recent moderation in inflation and appreciation of the naira, indicating a possible shift toward a pro-growth, expansionary monetary policy.
According to him, the MPC may be easing monetary policy on the assumption that fiscal interventions were beginning to address underlying structural imbalances in the economy.
“After the last reduction of MPR before this latest one, there was a spike in inflation rate.
“Perhaps current reduction indicates that the Monetary Authority is confident that prevailing economic factors now warrants relaxing monetary policy.
“This may be justified by the recent moderation in inflation rate and appreciation of the Naira.
“Meanwhile, the downside risks emanating from rural insecurity remains a big threat to inflation and financial stability”, he said.
The President of the Capital Market Academics of Nigeria (CMAN), Prof. Uche Uwaleke, also described the 50 basis points cut in interest rate by the Monetary Policy Committee (MPC) as a prudent, cautious and credibility-building move.
Speaking in Abuja, Uwaleke said the move was consistent with a central bank that wanted to consolidate macroeconomic stability.
He said the decision also aligned with the recapitalisation exercise, quoting the bank as saying that 20 banks had met the new capital thresholds.
Uwaleke noted that stability was critical during such structural adjustments adding that a measured rate cut would help to avoid unnecessary volatility.
”Headline inflation is down to 15.10 per cent, food inflation has dropped sharply, and month-on-month inflation even turned negative. That is a very strong signal that prior tightening is working.
”Reserves are at a 13-year high, the exchange rate is relatively stable, and capital inflows are improving.
”Much of the disinflation we are seeing now is the delayed effect of earlier tightening.
”If the CBN eases too quickly, it could reverse those gains, remember, inflation expectations in Nigeria are historically fragile.
”The CBN wants to consolidate credibility before accelerating easing”, he said.
Uwaleke said the 50 basis points cut signalled three objectives which hinged on supporting growth as Purchasing Managers’ Index at 55.7 points suggested expansion, preserving exchange rate stability, and anchoring inflation expectations.