The Centre for the Promotion of Private Enterprise (CPPE) has called on banks to lower their lending rates following the Central Bank of Nigeria’s (CBN) 350-basis-point cut in the Monetary Policy Rate (MPR).

Dr Muda Yusuf, Chief Executive Officer, CPPE, made the call in a policy brief on the outcome of the 307th Monetary Policy Committee (MPC) meeting held on Tuesday.

The MPC reduced the MPR from 26.5 per cent to 23 per cent and reviewed the asymmetric corridor from +50/-450 basis points to +50/-300 basis points.

Yusuf described the decision as a significant shift from the prolonged restrictive monetary policy regime and a timely response to improving inflation and the high cost of financing businesses.

He said the adjustment could reduce the cost of capital, improve business cash flows, stimulate investment and strengthen productive capacity, particularly in manufacturing, agriculture, construction and logistics.

He, however, said the impact would depend on effective transmission, urging banks to progressively reduce lending rates on new and existing facilities.

Yusuf also said sustained moderation in interest rates could lower the Federal Government’s domestic borrowing costs and debt-service burden, creating more fiscal space for infrastructure and other development priorities.

On the foreign-exchange market, he acknowledged that the rate cut could affect interest-rate differentials and the attractiveness of naira assets, potentially creating portfolio-flow and exchange-rate risks.

He, however, said higher foreign reserves, improved stability in the foreign-exchange market and more robust external-sector buffers provided the CBN with additional room to manage the transition.”

Yusuf urged the CBN to remain vigilant and deploy monetary policy instruments, including open-market operations, when necessary to manage volatility and preserve exchange-rate stability.

He added that monetary easing should be complemented by fiscal and structural reforms to address energy costs, logistics bottlenecks, insecurity, food-production constraints, infrastructure deficits and regulatory costs.

Yusuf said the success of the policy would ultimately depend on lower commercial lending rates, increased private investment and productive-sector credit, sustained moderation in inflation and stability in the foreign-exchange market.