CBN Cuts MPR to 27%: Experts Praise Move, SMEs Struggle with High Borrowing Costs
The Central Bank of Nigeria (CBN) has reduced its Monetary Policy Rate (MPR) by 50 basis points, bringing it down from 27.5% to 27%. The decision, announced at the 302nd Monetary Policy Committee (MPC) meeting in Abuja, has elicited mixed reactions from economists, policy analysts, and small business operators. While experts describe the move as a cautious step toward economic stabilization, many small and medium-sized enterprises (SMEs) say the high-interest environment continues to challenge business growth.
Economists like Dr. Paul Alaje, Chief Economist and CEO of SPM Professionals, have welcomed the rate cut as a “very good development” that introduces Nigeria’s first positive real interest rate in years. He explained that for the past two to three years, treasury bill and bond yields were lower than inflation, effectively discouraging investments. According to Alaje, lowering rates further, ideally below 15%, could help attract investments, stimulate business growth, and expand the nation’s GDP.
Other experts, including Dr. Adam Abudu of the Society for Peacebuilding and Economic Advancement, argue that a 27% MPR still stifles access to affordable credit for businesses. “Entrepreneurs have faced huge borrowing costs in recent months,” he said. “A marginal cut like this will not make life easier for SMEs. A more significant reduction is needed to support job creation and economic expansion.”
Despite these expert endorsements, SMEs in Abuja have voiced serious concerns about sustaining operations under high-interest rates. Entrepreneurs like Hajia Fateemah Bura and shop owner Alvin Bulus describe difficulties accessing loans and servicing existing debts. “How do we grow when loans are unaffordable?” Bulus lamented, noting that businesses that borrowed a few years ago are struggling under increased borrowing costs, which could lead to closures if rates remain high.
The MPC also adjusted the asymmetric corridor around the benchmark rate to +250/-250 basis points from the previous +500/-100 basis points, while retaining the Cash Reserve Ratio (CRR) at 45% for commercial banks and 16% for merchant banks. Analysts such as Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), believe that if these monetary measures are sustained alongside fiscal and structural reforms, they could unlock opportunities for investment, inclusive growth, and job creation across Nigeria.
source: nairametrics