CBN rate cut faces test as businesses await cheaper credit

The Central Bank of Nigeria’s decision to cut its Monetary Policy Rate from 26.5 per cent to 23 per cent has created a test for whether cheaper official funding conditions will reach businesses and households. The 350-basis-point reduction was made at the Monetary Policy Committee’s September 21–22 meeting. The committee also adjusted the standing-facilities corridor and retained the Cash Reserve Requirement for deposit money banks at 45 per cent.

CBN Governor Olayemi Cardoso has described the move as a reset or recalibration rather than a broad abandonment of tight monetary policy. The supplied analysis said the previous benchmark had become disconnected from actual money-market conditions, with the Nigerian Overnight Financing Rate around 22 per cent before the announcement. The macroeconomic data cited in the analysis supported the adjustment.

Headline inflation was 15.39 per cent in August, real GDP growth reached 4.43 per cent in the second quarter and external reserves stood at $55.25bn. The balance-of-payments and current-account surpluses also increased in the second quarter. However, commercial lending rates reportedly remained between 20 and 46 per cent after the decision.

The analysis said banks appeared faster to reduce returns on some savings products than to lower borrowing costs, leaving manufacturers and small businesses uncertain about the practical effect of the rate cut. The 45 per cent reserve requirement may also restrict the funds available for lending, even as it helps the CBN manage liquidity. Another concern is government borrowing.

Federal Government bond allotments rose to N7.15tn in the first nine months of 2026, compared with N3.48tn a year earlier. The commentary said attractive government securities could encourage banks to favour public debt over riskier lending to businesses, creating a crowding-out effect.