CBN rate hold keeps borrowing costs above 30%, economists renew calls for cuts

The Central Bank of Nigeria (CBN) is under renewed pressure to begin easing its tight monetary policy as economists, financial analysts and business leaders argued that persistently high interest rates are constraining private sector growth, limiting access to credit and slowing job creation despite signs of easing inflation.

The renewed calls followed the decision of the Monetary Policy Committee (MPC) to retain the Monetary Policy Rate (MPR) at 26.5% at the conclusion of its 306th meeting, which analysts say keep borrowing costs at over 30% for businesses.

Nairametrics reported earlier that the CBN announced the decision at the end of its 306th MPC meeting held in Abuja on July 20 and 21, 2026, maintaining its tight monetary policy stance amid efforts to sustain the moderation in inflation and preserve macroeconomic stability.

The decision has drawn mixed reactions, with some experts urging the apex bank to begin easing borrowing costs if inflation continues to moderate, while others support maintaining a tight policy stance to reinforce price stability, exchange rate stability and investor confidence.

What they are saying

The experts, who spoke separately to Nairametrics, expressed varying reactions to the CBN’s decision.

• “The direction of inflation is becoming more encouraging. While caution remains necessary, the monetary authorities should begin discussing when and how to gradually reduce interest rates if inflation continues to decelerate,” Thomas Amusan, CEO of Kwik Consulting, said.
• “When interest rates remain elevated for an extended period, businesses postpone expansion, manufacturers face higher financing costs and private sector investment slows. At some point, monetary policy has to balance inflation control with economic growth,” Amusan added.

The CEO of a manufacturing outfit in Abuja, Sharon Nwosu, snoted that while the fight against inflation is important, the CBN must also recognise the enormous cost of tight monetary policy on investment, manufacturing, agriculture and small businesses.

• “I think the priority now should remain price stability. Once inflation shows a convincing downward pattern, then monetary easing becomes feasible,” economic analyst Hassan Oyeleke said.

Investment banker Tunde Adeyemi said the MPC’s decision could improve investor confidence and support capital market activities by providing greater policy predictability, although he also argued that continued monetary tightening remains necessary.

CBN’s decision keeps borrowing costs elevated

The experts said the decision means borrowing costs are likely to remain elevated for businesses and households as the apex bank continues to prioritise price stability and exchange rate stability.

• “Maintaining the rate could reinforce investor confidence, support exchange-rate stability and provide a clear signal of policy discipline at a time of global uncertainty,” Oyeleke said.

According to Nwosu, most SMEs cannot access loans at interest rates above 30%, while businesses are spending more on servicing debt than investing in production, innovation and employment.

• “We need affordable financing for agriculture, manufacturing, technology and other productive industries. Without that, SMEs will continue to struggle despite improvements in headline macroeconomic indicators,” Nwosu added.

However, Adeyemi noted that while the private sector has been worried about continuous tightening, retaining the rate provides predictability and may encourage investors who have been sitting on the sidelines.

Adeyemi also said that continued monetary tightening remains necessary, highlighting the differing views among analysts on the appropriate timing of any future rate cuts.

Private sector credit improves

Despite the high interest rate, latest CBN data showed that credit to Nigeria’s private sector increased to N81.04 trillion in May 2026 from N80.59 trillion in April.

Credit to the government also rose during the period, increasing to N40.37 trillion from N39.6 trillion.

The increase in private sector credit suggests that lending has continued to expand despite the elevated interest rate environment, although businesses continue to complain that the cost of borrowing remains a major constraint to investment and expansion.

What you should know

The CBN retained all key monetary policy parameters at the meeting.

• The MPR was retained at 26.5%.
• The Cash Reserve Ratio was maintained at 45% for commercial banks and 16% for merchant banks.
• The Standing Facilities Corridor remained at +50/-450 basis points around the MPR.
• The CRR on non-Treasury Single Account public sector deposits was retained at 75%.

Headline inflation declined marginally to 15.91% in June from 15.93% in May, while Nigeria’s external reserves rose above $52 billion, reaching their highest level since 2009.

The improved macroeconomic indicators have strengthened the case for future monetary easing, but analysts say the CBN may remain cautious until inflation records a more sustained downward trend.