MPC retention of interest rates should improve lending to MSMEs – Experts

Experts have called on Banks to improve lending to Micro, Small and Medium Enterprises in the country following Tuesday’s decision by the Central Bank of Nigeria (CBN) to hold interest rates at 27 per cent Daily Trust reports that the Monetary Policy Committee of the Central Bank of Nigeria on Tuesday held interest rates constant […]

Experts have called on Banks to improve lending to Micro, Small and Medium Enterprises in the country following Tuesday’s decision by the Central Bank of Nigeria (CBN) to hold interest rates at 27 per cent

Daily Trust reports that the Monetary Policy Committee of the Central Bank of Nigeria on Tuesday held interest rates constant at 27 per cent following ease in inflation rates.

Reacting to the development, Executive Director at the Institute of Capital Markets at the Nasarawa State University, Keffi, Prof. Uche Uwaleke said the MPC’s decision to maintain the MPR at 27% keeping the CRR and Liquidity Ratio unchanged, is a welcome development.

He said the decision is coming against the backdrop of the narrowing and asymmetry of the standing facility corridor from +250/-250 bps to +50/-450 bps, effectively lowering the ceiling for CBN lending and widening the gap on the deposit end.

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“This adjustment signals cautious operational easing, even as headline MPR remains elevated apparently to continue to manage inflation and FX pressure.

“With the CBN’s lending window now cheaper, banks face lower marginal funding costs which should ordinarily reduce interbank volatility and encourage lending to SMEs.

“The real challenge is whether banks will translate this corridor adjustment into actual lower lending rates,” he further noted.

Prof. Uwaleke added that given fiscal pressures from deficit financing which compound inflation risk and the need to support growth, the MPC decision is quite appropriate

Also speaking, a member of Daily Trust’s Board of Economists, Dr. Rislanudeen Muhammad noted that in meeting up with CBN’s specific mandate of financial stability, MPC decision to maintain the MPR at 27% appears plausible.

Speaking further, he highlighted that “There is evident disinflationary trend in the economy and exchange rate is stable with foreign reserve increasing due in large part to funds from foreign portfolio investors that benefit from the exotic high yield in local financial assets.

“However, there is always a trade off in such economic decisions. And on this, growth is jeopardized with elevated MPR rate (being the anchor for lending rate). Also, high CRR naturally implies limited funds available to DMBs for lending purposes even if it’s going to be at an exorbitant rate.

“Fiscal authorities can attempt to mitigate this scenario by special intervention programs that will target support to industries that support job creation and improvement in GDP. Even at that, SMEs may be crowded out,” he added.

 

Interest rate retained at 27%

Similarly, the monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) retained the country’s monetary policy rate (MPR) at 27 per cent.

The MPR serves as the baseline interest rate in an economy; other interest rates used within the economy are built on it.

The decision represents the fourth time the MPC would retain the MPR, following similar calls in February, May, and July.

The MPC’s decision comes after Nigeria’s inflation rate dropped to 16.05 percent in October 2025.

Speaking at the media briefing, Cardoso said the committee members also voted to adjust the asymmetric corridor to +50 and -450 basis points around the MPR.

The governor said the committee also retained the cash reserve ratio (CRR) at 45 percent for deposit money banks (DMBs), merchant banks at 16 percent, and 75 percent for non-treasury single account (TSA) public sector deposits.

He added that the committee decided to keep the liquidity ratio unchanged at 30 per cent.

Cardoso said the MPC’s decision was “underpinned by the need to sustain the progress made so far towards achieving low and stable inflation”.

“The MPC reaffirmed its commitment to a data driven assessment of developments and outlook to guide future policy decisions,” he said.

“The committee welcomed the continued deceleration in headline inflation, year-on-year in October 2025 for the seventh consecutive month.

“This favorable development resulted from several factors, including sustained monetary policy tightening, stable exchange rate, capital flows, and surplus current account balance.”

In addition, the governor said the relative stability in the price of premium motor spirit (PMS), also known as petrol, and improved food supply supported the pace of disinflation.

 

‘Headline inflation remains high’

Cardoso said headline inflation remains high at double-digit, requiring sustained efforts towards moderating it further.

“The committee was therefore of the view that the said steady deceleration in inflation across the three measures — headline, core, and food in October 2025 — suggests that the large impact of previous tight policy measures is expected to continue in the near term,” he said.

“Thus, maintaining the current stance of policy, amidst lingering global uncertainties, would allow the effect of previous policy rate hikes to sufficiently transmit to the real economy and further reduce prices.

“Members noted that the robust performance of the external sector, evidenced by the surplus current account and steady accretion to reserves, which have contributed to stability in the exchange rate and moderation in inflation.”

Cardoso said the MPC also commended the collaborative effort of the fiscal and monetary authorities, which “led to the recent upgrade of Nigeria’s sovereign credit rating” by major credit rating agencies and the “delisting of the country from the FATF gray list”.

The CBN governor added that members acknowledged that the positive developments would further boost investor confidence and improve capital flows to the economy.

 

16 banks have met CBN’s capital requirements

Meanwhile, the CBN governor also announced that16 banks have fully met the regulatory capital requirements

He said the MPC expressed satisfaction with the sustained resilience of the banking system, with most financial soundness indicators remaining within regulatory thresholds.

“Members also acknowledged the substantial progress in the ongoing recapitalisation program, with 16 banks achieving full compliance with revised capital requirements,” Cardoso said.

He said the committee therefore urged the CBN to ensure a successful implementation and conclusion of the programme.

Speaking further, Cardoso said the banks are currently working to strengthen their financial buffers.

He explained that this is the intended outcome of the ongoing recapitalisation process, noting that 27 banks have raised capital so far.

“16 of them have fully complied. 27 of them have, through various means, raised capital,” Cardoso said

“We are monitoring the developments and from every indication, it is going in the right trajectory.”

According to the governor, the country is now focused on developing a financial sector that is fit for purpose — one capable of building strong buffers and supporting the nation effectively in the years ahead.

“Many of you will also know that many of our banks are out on the African continent, and they have been innovative in various fairs,” he said.

“Again, these buffers that they are creating will help them to be in a position to better navigate the risks in the multiplicity of countries in which they operate.

“In return, that helps Nigerians as well — the Nigerian traders, the Nigerian individuals —who go across all these various geographies.”

On March 28, 2024, CBN announced an increase in the minimum capital requirements for commercial banks with international licences to N500 billion.

Following the development, several banks announced plans to raise funds through share, bond issuances.

In January, Zenith Bank said it had raised N350.46 billion through rights issue and public offer to meet the CBN minimum capital requirement.

Guaranty Trust Holding Company Plc (GTCO), on July 4, said it had successfully priced its fully marketed offering on the London Stock Exchange (LSE).

It would be recalled that in September, the CBN governor said 14 banks fully met their recapitalisation requirements, up from eight banks in July.