Paragraph 1: The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is facing mounting pressure from manufacturers and business owners to cut the benchmark interest rate, currently at 27.50%. This expectation stems from the MPC’s consistent hold stance throughout the first half of the year, despite a steady decline in headline inflation. The latest data from the National Bureau of Statistics (NBS) reveals that headline inflation eased to 22.22% in June 2025, down from 22.97% in May 2025, attributed to softening energy prices and favorable base effects. However, food inflation bucked this trend, rising to 3.25% in June 2025, driven by increases in the prices of essential food items like peas, pepper, shrimps, crayfish, meat, tomatoes, plantain flour, and ground pepper.
Paragraph 2: The manufacturers’ call for a rate cut is rooted in the high cost of borrowing, which hinders their competitiveness, especially against imports from low-cost environments. The Director-General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, stressed that borrowing at rates exceeding 30-35%, a consequence of the high MPR, undermines profitability and production, making it difficult for manufacturers to compete effectively. He anticipates a reduction in the benchmark rate, not just a hold, to alleviate these challenges. This sentiment is echoed by the President of the Association of Small Business Owners of Nigeria (ASBON), Dr. Femi Egbesola, who advocates for a modest rate cut to stimulate business activity and support economic recovery.
Paragraph 3: Dr. Egbesola argues that the current high MPR translates into lending rates well above 30%, constraining access to credit for small and medium-sized enterprises (SMEs). This limited financing, coupled with high operational costs, hampers productivity and job creation. He suggests a modest reduction of 50 to 100 basis points would provide much-needed relief to the real sector without jeopardizing monetary stability. The recent marginal drop in inflation and signs of exchange rate stability, he argues, support the case for a slight downward review.
Paragraph 4: A contrasting perspective comes from Dr. Muda Yusuf, founder/CEO of the Centre for the Promotion of Private Enterprise (CPPE). While acknowledging the slight deceleration in headline inflation, he points to concerning trends, such as rising month-on-month inflation for both food and core components. He also highlights persistent challenges like high energy and logistics costs, exchange rate volatility, import costs, insecurity impacting food prices, and cross-border food exports driven by currency differentials. These factors, in his view, support the CBN’s likely decision to hold the rate. However, Dr. Yusuf personally favors a relaxation of the tightening policy through a rate cut.
Paragraph 5: Segun Kuti-George, National Vice President of the Nigerian Association of Small-Scale Industrialists (NASSI), also expects the MPC to maintain the current rate, prioritizing inflation and exchange rate control. He notes the recent stability of the dollar as a justification for this stance. The diverging views within the business community and among analysts reflect the complex economic landscape and the trade-offs involved in monetary policy decisions.
Paragraph 6: The MPC’s impending decision has sparked debate among analysts, dividing them into two camps. “Doves” advocate for a modest rate cut, citing cooling inflation, a more stable naira, and signs of progress in economic reforms. They believe a rate reduction would stimulate economic activity. Conversely, “hawks” caution against premature easing, arguing that it could reverse the gains achieved in FX reforms and inflation deceleration, particularly given ongoing food supply shocks and global economic risks. The market awaits the MPC’s decision and the tone of the accompanying communiqué, which will signal the CBN’s future policy direction. The ultimate decision will have significant implications for businesses, lending rates, and the overall Nigerian economy.
