The Central Bank of Nigeria’s (CBN) decision to reduce the Monetary Policy Rate (MPR) by 50 basis points to 27% has sparked a flurry of reactions from economists, policy analysts, and small business operators.
While some experts hailed the move as a cautious but necessary step toward stabilizing the economy, others—especially small and medium-sized enterprises (SMEs) argue that the high-interest environment continues to stifle business growth.
Speaking in an exclusive chat with Nairametrics, Dr. Paul Alaje, Chief Economist and CEO of SPM Professionals, described the rate cut as a “very good development” that requires cautious optimism.
He stressed that while inflationary figures remain “questionable” and largely driven by base year adjustments, the policy now provides Nigeria with its first positive real interest rate in years.
“For about two to three years, the rate has been largely negative. And if you ask me what I mean by that, if you check what rates are, treasury bill rates, and all those, they were lower than inflation.
“So, what it means is that if you invest in bonds or Treasury Bills, inflation is taking more, which, of course, is a negative investment.
“To my mind, interest rates should go far below 15% so that it’s easier for investors to put money in businesses and we can see an expansion in our economy. We can also see expansion in our GDP,” Alaje said.
Other experts speak
Dr. Adam Abudu of the Society for Peacebuilding and Economic Advancement echoed similar sentiments, arguing that the interest rate at 27% stifles business growth.
“Businesses need access to affordable credit to create jobs and expand investments. The current policy discourages borrowing and, by extension, hinders economic growth,” he said.
“Cutting the MPR 27%, in my opinion, will not really make life easier for SMEs. Entrepreneurs have had to bear the brunt of huge costs of borrowing and high inflation rates in the last few months. For me, if there will be reduction, it has to be more significant rather than marginal,” he added.
In an earlier policy commentary sent to Nairametrics by the CEO of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, the group hailed the CBN’s latest monetary policy actions as a “strategic and well-timed” shift from economic stabilization to growth acceleration.
He noted that if sustained and complemented by fiscal and structural reforms, the move could unlock significant opportunities for investment, job creation, and inclusive economic expansion.
“The MPC’s decision represents a strategic shift. If sustained and matched by fiscal discipline, infrastructure delivery, and stronger institutions, this policy direction could position Nigeria on a path toward sustainable, inclusive, and resilient economic growth,” CPPE noted.
SMEs voice concerns
Speaking with entrepreneurs in Abuja on Tuesday, following the conclusion of the MPC meeting, many SMEs expressed frustration over their inability to access loans or service existing debts due to the high-interest rates.
Hajia Fateemah Bura, an entrepreneur in Abuja, shared her struggles in securing affordable credit to support her business. She noted that while financing is crucial for growth, the high cost of borrowing has made it increasingly difficult to sustain operations.
“What I can say is that collecting loans from banks is not easy. The interest rate is too high for me and many of us. How do they want us to survive or continue our business?” Levy noted.
A shop owner at Wuse Market, Alvin Bulus lamented that with the interest rate at 27%, most small businesses will be unable to access much-needed funding.
“How do we grow when loans are unaffordable? Many of us rely on these facilities to keep our businesses afloat, but the cost is just too high,” he said.
He further explained that businesses that secured loans a few years ago—when the interest rate was a bit lower around 20%—are now struggling under the weight of increased borrowing costs.
“This just means more businesses will fold up,” he stated.
What you should know
At its 302nd meeting in Abuja, the CBN reduced the MPR by 50 basis points, bringing it down from 27.5% to 27%.
In addition, the MPC adjusted the asymmetric corridor around the benchmark rate to +250/-250 basis points, compared to the previous +500/-100 basis points.
The Committee retained the Cash Reserve Ratio (CRR) for commercial banks at 45 per cent, while that of merchant banks was set at 16 per cent.
I am still appealing to the MPC through the CBN to reduce the MPR to 15 or16 so as help SMEs strive in this difficult time. The LG many small businesses are gone.