Dare Babalola
The Centre for the Promotion of Private Enterprise (CPPE) has hailed the Central Bank of Nigeria’s (CBN) decision to reduce the Monetary Policy Rate (MPR) by 50 basis points to 26.5% as a positive step towards stimulating economic growth.
In a policy brief on Tuesday, CPPE Chief Executive Officer Dr Muda Yusuf said the move reflects improving macroeconomic fundamentals, including sustained disinflation, with headline inflation declining consistently for eleven consecutive months, improved external reserves, and relative exchange-rate stability.
The rate cut is expected to boost investor sentiment, ease financing conditions, and strengthen private-sector confidence, potentially leading to credit expansion. Dr Yusuf noted that the CBN’s decision demonstrates responsiveness to data and reinforces policy credibility.
However, he highlighted concerns about the weak transmission mechanism between monetary policy adjustments and actual lending rates in the real economy, citing structural constraints such as high Cash Reserve Ratio, elevated cost of deposits, and risk premiums.
To maximize the impact of the rate cut, CPPE emphasised the need for fiscal consolidation, including stronger non-oil revenue mobilisation, expenditure rationalisation, and reduced dependence on high-cost domestic borrowing.
“Without fiscal consolidation, monetary easing could be undermined by continued fiscal pressures and crowding-out effects in the financial system,” Dr Yusuf warned.
The think tank identified opportunities for investors in fixed income, equities, and real sector investments, particularly in agro-processing, manufacturing, and export-oriented businesses.
Sectors likely to benefit include banking, consumer goods, and construction, as appreciating and stabilizing exchange rate moderates input costs.
Dr Yusuf urged the CBN to strengthen policy transmission and ensure monetary easing reaches the real economy, while calling for policy coordination between fiscal and monetary authorities to achieve sustainable macroeconomic stability.
