The Centre for Promotion of Private Enterprise (CPPE) has commended the Central Bank of Nigeria (CBN) and its Monetary Policy Committee (MPC) for the recent decision to ease credit conditions in the Nigerian economy.
According to Muda Yusuf, chief executive officer at CPPE, the development marks a significant policy shift toward supporting growth and investment, following an extended period of aggressive monetary tightening to rein in inflation.
At its latest meeting, the MPC announced a 50-basis-point reduction in the Monetary Policy Rate (MPR) from 27.5 per cent to 27 per cent. It also adjusted the asymmetric corridor to +250/-250 basis points around the MPR.
Read also: CBN eases MPR to 27%, first time since 2020
In addition, the MPC cut the Cash Reserve Ratio (CRR) of commercial banks by 500 basis points, from 50 per cent to 45 per cent, while retaining the CRR for merchant banks at 16 per cent and maintaining the liquidity ratio at 30 per cent.
A notable new measure was the introduction of a 75 per cent CRR on non-TSA public sector deposits, aimed at containing excess liquidity risks that could arise from fiscal operations.
Yusuf noted that the policy easing comes at a time when the Nigerian economy has recorded five consecutive months of declining inflation, signalling that previous tightening measures are yielding results.
“Having restored a measure of macroeconomic stability and slowed inflationary pressures, the MPC’s pivot toward growth is both logical and timely.
“High interest rates in recent quarters have significantly constrained private sector credit, increased the cost of funds, and weighed on business expansion. By lowering the MPR and CRR, the CBN is deliberately working to improve liquidity conditions, reduce borrowing costs, and unlock capital for productive sectors of the economy,” he said.
Yusuf explained that the implication for the Nigerian economy would include improved credit conditions, as the combination of lower MPR and reduced CRR is expected to expand banks’ capacity to create credit, lowering lending rates and making financing more accessible for businesses, especially SMEs.
He said that the lower cost of funds will encourage new investments, support business expansion, and enhance capacity utilisation in the real sector. “This will ultimately stimulate output growth and job creation.”
“A more accommodative monetary environment will enable banks to fulfil their core function of mobilising savings and channelling them into productive investments, reinforcing financial deepening and economic growth.
Read also: FIRS, CBN, NEXIM, UBA, NDIC to lead discussion on digital economy
“The decision to impose a 75 percent CRR on non-TSA public sector deposits is a prudent measure to prevent excessive fiscal-driven liquidity injections from destabilizing the financial system,” he said.
While this monetary easing is a welcome development, CPPE emphasises that fiscal policy must play a complementary role to fully unlock growth potential.
He stressed that government should prioritize critical infrastructure investment, strengthen the regulatory and institutional framework, address security challenges and strengthen the regulatory and institutional framework to unlock the nation’s growth potential.
