CBN Cuts MPR to 23%, But Banks Still Charge 27% to 30% on Loans

The Central Bank of Nigeria has cut the Monetary Policy Rate by 350 basis points to 23%, its lowest level since February 2024. But businesses waiting for cheaper credit may wait longer, because commercial lending rates remain stuck around 27% to 30%.

The Monetary Policy Committee reset the benchmark from 26.5% to 23%. CBN Governor Olayemi Cardoso described the move as a reset and recalibration aimed at improving the effectiveness of monetary policy, rather than a dramatic shift towards cheaper money.

What the CBN Changed

The apex bank retained the Cash Reserve Requirement for deposit money banks at 45% and for merchant banks at 16%. It also recalibrated the Standing Facilities Corridor to +50/-300 basis points around the new 23% MPR.

According to the CBN, the changes are designed to bring the policy framework closer to prevailing financial market conditions and improve how monetary policy transmits through the economy.

Manufacturers Not Convinced Yet

The Manufacturers Association of Nigeria welcomed the reduction but warned its impact could remain limited if lending rates stay around 27% to 30%. MAN Director-General Segun Ajayi-Kadir said manufacturers were particularly concerned about the actual interest rates they pay when approaching banks for credit.

High borrowing costs make it more expensive for manufacturers to finance raw materials, inventories, machinery and expansion. Those costs can feed straight into production expenses and eventually into consumer prices.

LCCI: The Real Test Is at the Banks

The Lagos Chamber of Commerce and Industry raised similar concerns. The chamber said the crucial issue is whether the lower MPR translates into affordable loans and greater access to credit, especially for small and medium-sized businesses.

LCCI noted that banks also weigh borrowers' cash flow, collateral, credit history and sector risks when pricing loans. That means an MPR cut does not automatically produce an equivalent fall in lending rates.

For Nigerians seeking credit, the real test will be what happens at commercial banks. Until lending rates drop meaningfully, individuals and businesses could keep paying expensive loans despite the CBN's substantial cut to its benchmark rate.

A separate outlook from Bismarck Rewane, Managing Director of Financial Derivatives Company, suggests the naira may depreciate following the 350 basis point cut. Rewane said lower interest rates could reduce returns on naira assets and put pressure on the currency.

What It Means for Borrowers

The gap between the 23% MPR and the 27% to 30% banks charge tells the story. Policy has moved, but pricing has not. For Nigerian businesses, the cost of working capital, equipment and expansion still depends on bank risk assessments, not on the CBN's benchmark alone. If the naira also weakens on lower yields, import-heavy manufacturers could face a double squeeze: costly credit and costlier inputs.