Impact of 27% MPR Retention on the Economy
Nigeria’s monetary authorities have again held firm on the 27% Monetary Policy Rate (MPR), opting to maintain a tight policy stance as they work to consolidate delicate macroeconomic gains achieved over the past months.
The 27% MPR retention—announced on Tuesday by Central Bank of Nigeria Governor, Olayemi Cardoso, after the Monetary Policy Committee’s 303rd meeting—marks the fourth consecutive hold this year, reinforcing the CBN’s priority on disinflation, exchange-rate stability, and investor confidence.
All 12 MPC members voted to maintain the current monetary stance, a move that underscores the bank’s long-term strategy of allowing previous policy measures to fully filter through the economy.
According to Cardoso, the decision reflects the committee’s conviction that Nigeria has entered a crucial stabilization phase and requires policy continuity, not abrupt shifts.
While the move has drawn mixed reactions, a broad segment of the Organised Private Sector (OPS) has welcomed the pause, acknowledging that the economy is gradually finding its footing after years of volatility.
OPS Commends Decision but Demands Roadmap to Lower Rates
The President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, described the MPC’s choice as pragmatic, given recent improvements in inflation, FX stability, and capital flows.
He noted that businesses have been anticipating an eventual rate cut, but the CBN’s cautious posture is understandable as it continues to safeguard the gains recorded so far.
Idahosa explained that maintaining investor confidence remains central to economic recovery.
He said the decision sends “a signal to international investors that the Nigerian market remains stable,” especially at a time when global financial markets are crowded with uncertainties.
He added that the CBN is clearly mindful of the Federal Government’s target of reducing inflation to 15% by year-end, a goal that now appears within reach following seven months of consistent deceleration.
Despite commending the retained rate, Idahosa noted that high borrowing costs remain a structural burden for businesses and expressed hope that the CBN will adjust the MPR once inflation and FX indicators demonstrate stronger resilience.
Small-Scale Businesses See Stability but Demand Relief
National Vice President of the National Association of Small-Scale Industrialists, Segun Kuti-George, assessed the decision as confirmation that the CBN is satisfied with the economy’s current direction.
He argued that reducing the MPR prematurely could disrupt the gains in inflation, which has eased to about 16%, its lowest level in years.
Kuti-George emphasised that stable rates help businesses plan better.
He said,
“If the rate cannot come down now, it should at least remain stable.”
According to him, predictable monetary conditions reduce uncertainty in pricing, procurement, and long-term transactions—areas where volatility previously undermined business growth.
For many small manufacturers, the biggest benefit from the 27% MPR retention is not affordability but predictability. Stakeholders insist that stability itself is a form of relief.
MSME Leaders Question Disconnect Between Falling Inflation and High Rates
However, not all segments of the OPS agree that the CBN is moving in the right direction.
The Director-General of the Nigerian Association of Small and Medium Enterprises, Eke Ubiji, argued that the MPC must reconsider the persistently high rates, insisting that the current framework inadvertently stifles MSME lending.
Ubiji questioned why inflation has fallen consistently, yet borrowing costs remain prohibitively high.
According to him,
“There is no correlation. If inflation is decreasing every month but the interest rate remains unchanged, something is wrong somewhere.”
He acknowledged that institutions like the Bank of Industry have disbursed trillions of naira this year, but access remains limited because of stringent loan conditions and high interest rates that discourage borrowers.
Ubiji emphasised that unless the MPR is lowered, development financing will remain inaccessible to many MSMEs—despite the availability of funds.
CPPE: CBN Acting Cautiously Amid Global Uncertainty
Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, described the CBN’s position as prudent and aligned with global economic realities.
He noted that uncertainties persist in the international economy, making caution essential.
He pointed out that the new asymmetric corridor, adjusted to +50/-450 basis points, is designed to incentivise banks to lend more and place fewer idle funds with the CBN.
Yusuf urged the government to continue addressing structural issues driving inflation, particularly supply-chain disruptions and insecurity.
Why the CBN Is Sustaining the 27% MPR Retention Strategy
Beyond inflation control, the CBN’s decision is tied to a broader macroeconomic framework that includes stabilizing the naira, strengthening foreign reserves, and rebuilding investor trust.
Cardoso revealed that Nigeria’s foreign reserves have risen to $46.7bn—up from $42.7bn in September—and now provide roughly 10 months of import cover.
He attributed the improvements to rising non-oil exports, better oil production, stronger remittances, and renewed portfolio inflows facilitated by a more transparent FX market.
The governor also noted that the FX market is now more liquid, with daily turnover averaging $500m without heavy CBN intervention.
He highlighted that Nigerians can now use naira cards abroad with fewer restrictions, a significant improvement from previous years.
Domestic Growth Indicators Show Strengthening Momentum
GDP growth accelerated to 4.23% in Q2, while the PMI climbed to 56.4 in November, the highest in five years.
The MPC said these indicators reflect improving business confidence and stronger non-oil activity.
Banks are also progressing with recapitalisation, with 16 already fully compliant. According to Cardoso, this recapitalisation will enable Nigerian banks to expand across Africa and manage emerging risks.
Caution Ahead of Festive Season
Some analysts believe the MPC held the rate partly because end-of-year spending typically triggers price pressures.
Arthur Stevens Asset Management CEO, Olatunde Amolegbe, said he expected a slight easing but understands the committee’s caution.
He noted that rising insecurity could also affect food prices, making the CBN wary of loosening policy prematurely.
While the 27% MPR retention has drawn mixed reactions, most stakeholders agree that Nigeria’s fragile stability must be protected.
The CBN’s cautious strategy underscores a long-term vision centered on transparency, investor confidence, and measured reforms.
As inflation declines, the naira stabilises, and reserves rise, pressure will continue to mount for interest-rate reductions.
But until the monetary authorities are fully convinced that macroeconomic gains are locked in, the CBN appears determined to stay the course.
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