The Centre for the Promotion of Private Enterprise (CPPE) has called on the Central Bank of Nigeria (CBN) to address structural bottlenecks in the financial system and push for stronger fiscal discipline to ensure that the benefits of its latest monetary easing are fully realised.
The centre’s position follows the decision of the CBN’s Monetary Policy Committee (MPC) to cut the interest rate to 26.5 per cent.
Pinnacle Daily earlier reported that after its MPC meeting on Tuesday, CBN adjusted the Monetary Policy Rate (MPR), the benchmark interest rate, downward by 50 basis points to 26.5 per cent from 27.0 per cent, signalling a gradual shift from aggressive tightening toward measured easing.
In a statement by its Chief Executive Officer, Dr. Muda Yusuf, CPPE described the lowering of the benchmark interest rate as growth-supportive and reflective of improving macroeconomic fundamentals.
It stressed that the effectiveness of the rate cut would depend largely on whether it translates into lower borrowing costs for businesses and households.
“The policy direction is appropriate and growth-supportive.
“However, the real economy will only feel the impact if the transmission mechanism improves and fiscal pressures are contained,” CPPE said.
It expressed concerns that a persistent weakness in monetary policy transmission remains a major constraint.
It noted that despite adjustments to the benchmark rate in the past, lending rates to businesses have remained elevated due to structural liquidity constraints, high deposit costs, risk premiums driven by macroeconomic uncertainty, and the crowding-out effects of significant government domestic borrowing.
The group argued that unless these rigidities are addressed, monetary easing may not translate into meaningful reductions in lending rates for manufacturers, small and medium-scale enterprises, agriculture, and other productive sectors.
“Monetary easing must reach the real economy to deliver meaningful growth outcomes,” CPPE said.
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It stressed that complementary liquidity measures and reforms to credit-risk frameworks would be necessary to strengthen policy transmission.
Beyond transmission concerns, the group identified fiscal vulnerabilities as a critical risk to sustaining the gains of monetary easing.
It warned that elevated public debt levels, persistent fiscal deficits, and a heavy debt-service burden could undermine the impact of rate cuts if not addressed decisively.
“Sustainable macroeconomic stability requires credible fiscal consolidation,” CPPE stated.
It pointed out that stronger non-oil revenue mobilisation, expenditure rationalisation, improved fiscal transparency and a credible deficit-reduction strategy were essential to prevent continued fiscal pressures from offsetting monetary accommodation through crowding-out in the financial system.
CPPE also emphasised the need for closer coordination between fiscal and monetary authorities, noting that easing on the monetary side must be supported by disciplined fiscal management to reinforce investor confidence and macroeconomic stability.
The group maintained that while the easing cycle presents opportunities for improved investor sentiment, credit expansion, and capital market gains, these benefits would only materialise fully if structural and fiscal reforms accompany the policy shift.
“If supported by structural reforms and disciplined fiscal management, the current policy direction could unlock a stronger investment cycle and more durable economic growth,” CPPE added.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X
