CPPE commends CBN for easing credit conditions, describes decisions as timely intervention – GBN

By Omodele Adigun

The Centre for the Promotion of Private Enterprise (CPPE) has commended the Central Bank of Nigeria (CBN) and its Monetary Policy Committee (MPC) for their recent decisions to ease credit conditions in the Nigerian economy.

Muda Yusuf, its Chief Executive gave the commendation in a statement issued in Lagos on Tuesday.

It said the decisions marked a significant policy shift toward supporting growth and investment, following an extended period of aggressive monetary tightening to rein in inflation.

At its meeting on Tuesday,  the MPC announced a 50-basis-point reduction in the Monetary Policy Rate (MPR) from 27.5 percent to 27 percent.

It also adjusted the asymmetric corridor to +250/-250 basis points around the MPR.

The MPC also cut the Cash Reserve Ratio (CRR) of commercial banks by 500 basis points from 50 percent to 45 percent, while retaining the CRR for merchant banks at 16 percent and maintaining the liquidity ratio at 30 percent.

A notable new measure was the introduction of a 75 percent CRR on non-TSA public sector deposits., aimed at containing excess liquidity risks that could arise from fiscal operations.

This action is designed to prevent volatility in money supply growth that could undermine recent progress in price stability.

The CPPE said policy easing was coming  at a time when the Nigerian economy had recorded five consecutive months of declining inflation, signaling that previous tightening measures are yielding results. Having restored a measure of macroeconomic stability and slowed inflationary pressures, the MPC’s pivot toward growth is both logical and timely.

It said that by lowering the MPR and CRR, the CBN is deliberately working to improve liquidity conditions, reduce borrowing costs, and unlock capital for productive sectors of the economy.

The CPPE listed the implications of the decisions for the economy as:

The combination of lower MPR and reduced CRR should expand banks’ capacity to create credit, lowering lending rates and making financing more accessible for businesses, especially SMEs.

Investment and Growth Boost:

Lower cost of funds will encourage new investments, support business expansion, and enhance capacity utilization in the real sector. This will ultimately stimulate output growth and job creation.

A more accommodative monetary environment will enable banks to fulfill their core function of mobilizing savings and channeling them into productive investments, reinforcing financial deepening and economic growth.

The decision to impose a 75 percent CRR on non-TSA public sector deposits is a prudent measure to prevent excessive fiscal-driven liquidity injections from destabilizing the financial system.

The CPPE said while this monetary easing was a welcome development, fiscal policy must play a complementary role to fully unlock growth potential.

It advised the fiscal authorities to sustain fiscal consolidation to ensure macroeconomic stability and maintain investor confidence.

The CPPE also advised that government should prioritize critical infrastructure investment to reduce production and logistics costs, improve competitiveness, and enhance productivity.

The authorities should also strengthen the regulatory and institutional framework to foster a more business-friendly environment that attracts domestic and foreign investment.

It also advised that government should address security challenges decisively, as insecurity remains one of the most significant constraints to private sector investment and rural productivity.

The CPPE said the MPC decision represents a strategic and well-timed policy shift from a phase of stabilization to a phase of growth accelerator.

It  advised that the  new interest rate regime must be sustained and complemented by appropriate fiscal and structural reforms, these measures will:

Stimulate economic growth and job creation,

Improve private sector performance and output,

Boost government revenues through an expanded tax base, and

Moderate inflation sustainably in the medium to long term.

The CPPE expressed regards this as a step in the right direction toward building a more resilient, inclusive, and growth-oriented Nigerian economy.