LCCI: CBN interest rate cut signals shift from aggressive monetary tightening to stabilisation phase

By Abubakar Yunusa

The Lagos Chamber of Commerce and Industry (LCCI) says the decision of the monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) to reduce the monetary policy rate (MPR) to 26.50 percent marks a shift from aggressive monetary tightening to a stabilisation phase.
On Tuesday, the MPC of the apex bank reduced the MPR, which benchmarks interest rate, from 27 percent.
Chinyere Almona, director-general (DG) of LCCI, in a statement described the move as a cautious but positive step anchored on disinflation, exchange rate convergence, and improved supply-side conditions.
Almona noted that inflation has moderated for 11 consecutive months to 15.1 percent in January 2026, reflecting the impact of recent macroeconomic reforms and improved policy discipline.
While other monetary parameters were retained, suggesting that liquidity conditions remain restrictive, the LCCI DG said the rate cut sends a critical confidence signal to the organised private sector (OPS) and creates a pathway for a gradual reduction in the cost of capital.
“However, businesses still require tangible relief in financing costs to restore production, expand capacity, and preserve jobs,” Almona said.
“For domestic and foreign investors, this decision reinforces Nigeria’s transition from reform-induced adjustment to stabilisation-driven expansion.
“Beyond this action, we expect to see improved policy predictability, strengthened real return expectations, and support for medium-term investment planning, particularly in manufacturing, agro-processing, local drug production, and export-oriented industries.
“Nonetheless, high reserve requirements on banks, weak and slow credit transmission, and structural rigidities may continue to blunt the impact of monetary easing on real-sector activity.”
The LCCI DG said the government must intensify efforts to address impediments in the business environment and attract foreign direct investment into key sectors, including renewable energy, transport logistics, agro-processing, and oil and gas.
Almona said Nigeria should sustain efforts to expand local refining capacity and build lasting industrial systems that outlast political administrations.
She also called for a calibrated but sustained monetary easing cycle anchored on inflation outcomes and real-sector performance, alongside accelerated reforms in power supply, logistics, agriculture, and the regulatory environment.
“We expect the recently launched digital single window by the Nigerian Customs Service to ease transactions at the ports,” she said.
“We see the rate cut as a bridge from reform to results. We want to see more credit to the private sector for productive activities, more investment in critical infrastructure (with the expected higher allocations from FAAC due to the recent Executive Order on direct revenue remittance by the NNPC), government commitment to a continued transparency in the FOREX market, and strong support to building our local refining capacity in both the oil and gas and solid minerals sectors.”
The director-general said with firm coordination between monetary and fiscal authorities, the Nigerian economy will make good progress towards achieving a gross domestic product (GDP) growth rate above 5 percent in the short term.
Similarly, the Nigeria Employers’ Consultative Association (NECA) described the rate cut as a cautious but noteworthy signal that authorities are responding to sustained pressures on businesses.
In a statement, Adewale-Smatt Oyerinde, NECA DG, said the marginal reduction may not immediately translate into lower lending rates but reflects a gradual shift towards supporting growth without undermining price stability.
Oyerinde noted that the overall stance remains tight, with the cash reserve ratio retained at 45 percent and the liquidity ratio at 30 percent, while the asymmetric corridor around the MPR was also maintained.
“With a substantial portion of deposits still sterilised, banks’ capacity to expand credit to the real sector may remain constrained in the near term,” the DG said.
Oyerinde described the move as a balancing act aimed at moderating inflation without worsening business pressures, noting that firms continue to grapple with high operating costs, exchange rate volatility, and weak consumer demand.
He stressed that the modest easing must be complemented by coordinated fiscal and structural reforms to address supply-side constraints, improve infrastructure, and enhance productivity across key sectors of the economy.
The NECA boss also urged financial institutions to ensure that the MPR reduction is gradually reflected in lending conditions for manufacturers and small and medium-sized enterprises (SMEs).
Oyerinde said sustained improvements in inflation, exchange rate stability and investor confidence will determine scope for further easing that supports growth and employment.