Why CBN’s 27% Rate Cut is a Win for Nigerians
By Nasir Dambatta
For the first time in five years, the Central Bank of Nigeria (CBN) has shifted from its prolonged tightening stance and cut the Monetary Policy Rate (MPR) by 50 basis points — from 27.5% to 27%. At first glance, the move may appear modest, even symbolic. But scratch beneath the surface, and it is clear this decision is a calculated win for ordinary Nigerians, businesses, and the wider economy.
1. Relief for Borrowers and Businesses
For months, high lending rates have squeezed businesses, especially small and medium-sized enterprises (SMEs). A reduction in the benchmark rate, however slight, will ease the cost of credit over time. This means entrepreneurs will find it a bit less daunting to access loans for expansion, job creation, and innovation. In a country where SMEs account for more than 80% of employment, that relief is not small.
2. A Vote of Confidence in Disinflation
The CBN’s decision is backed by real progress: inflation has been easing consistently for five months, dropping to 20.12% in August from July’s 21.88%. By cutting rates, the Bank is effectively telling Nigerians and investors alike: “We are confident inflationary fires are cooling.” That kind of signal matters. It strengthens credibility and reassures markets that Nigeria is on a steadier path.
3. Boost for Financial Markets and Consumers
Already, the overnight lending rate has fallen by 100 basis points to about 25.5%. This has ripple effects — cheaper borrowing for banks, which will ultimately trickle down to businesses and consumers. For households, this could mean reduced pressure on repayment costs for personal and mortgage loans. In an economy where disposable income is tight, even incremental relief counts.
4. Unlocking Growth Without Losing Guardrails
Critics may argue that cutting rates risks reigniting inflation. But the CBN’s move is cautious, not reckless. Alongside the MPR cut, it adjusted the cash reserve ratio and narrowed the interest rate corridor, showing it is easing with one hand while keeping liquidity in check with the other. It is a balancing act designed to nurture growth while protecting price stability.
5. A Signal of Policy Responsiveness
Perhaps most importantly, the cut signals that the CBN is listening — to businesses, to households, and to the realities of the marketplace. Monetary policy should not be cast in stone; it should respond to economic dynamics. By shifting course after years of hawkish tightening, the Bank is telling Nigerians that it is committed to both stability and growth.
Finally
The reduction of the MPR to 27% is more than a technical adjustment; it is a psychological boost. It tells the farmer in Kano seeking credit, the young entrepreneur in Lagos seeking a start-up loan, and the homeowner in Abuja struggling with repayments that relief is possible. It signals a new chapter where monetary policy is not just about restraining inflation but also about unlocking opportunity.
In that sense, the CBN’s cautious but deliberate move is a win — not just for the markets, but for Nigerians.
