By Seun Ibiyemi
The Centre for the Promotion of Private Enterprise (CPPE) has said the Central Bank of Nigeria’s 350-basis-point reduction in the Monetary Policy Rate (MPR) could ease the Federal Government’s domestic borrowing costs and create additional fiscal space for development spending.
The CBN’s Monetary Policy Committee (MPC) reduced the MPR from 26.5 per cent to 23 per cent at its meeting on September 22, 2026, in a major adjustment to the country’s monetary policy framework.
Reacting to the decision, CPPE Chief Executive Officer, Dr Muda Yusuf, said the reduction could gradually moderate the cost of government borrowing if lower interest rates are transmitted across the government securities market.
According to him, the prolonged high-interest-rate environment had contributed significantly to the Federal Government’s domestic debt-service burden, as government securities attracted elevated yields.
“A sustained moderation in interest rates should reduce the marginal cost of government borrowing and, over time, moderate domestic debt-service costs,” CPPE said.
The organisation noted that any resulting fiscal savings could create additional room for spending on infrastructure, security, education, healthcare and other development priorities.
However, it stressed that the expected fiscal benefit would depend on the extent to which the MPR reduction translates into lower yields in the government securities market.
Beyond government finances, the CPPE said the rate cut could ease financing constraints confronting businesses and stimulate private-sector investment.
It noted that commercial lending rates had remained high, affecting manufacturing, agriculture, construction, logistics and other sectors with long investment cycles.
The organisation said lower borrowing costs could improve business cash flows, reduce the cost of capital and support investment and job creation.
It urged banks to reflect the new monetary policy environment in the pricing of credit, warning that weak transmission would limit the impact of the rate cut on economic growth.
The organisation also cautioned that the magnitude of the rate reduction could create foreign exchange and portfolio-flow risks.
It said the widening difference between Nigeria’s monetary policy direction and tightening measures by some major global central banks could affect the attractiveness of naira-denominated assets and potentially trigger portfolio-flow reversals.
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However, the CPPE said improved foreign reserves, greater stability in the foreign exchange market and stronger external-sector buffers had provided Nigeria with more policy headroom.
It urged the CBN to remain vigilant and deploy monetary policy instruments, including open-market operations, where necessary to manage excessive volatility and preserve exchange-rate stability.
The CPPE stressed that monetary easing alone would not guarantee sustainable economic recovery, citing energy costs, logistics bottlenecks, insecurity, food-production constraints, infrastructure deficits and regulatory costs as continuing sources of inflationary pressure.
It therefore called for complementary fiscal and structural reforms to reduce production costs, improve productivity, strengthen food and energy security and expand domestic productive capacity.
The organisation said the effectiveness of the latest MPR reduction should be measured by the movement of commercial lending rates, private investment and productive-sector credit, inflation and foreign exchange market stability.
