MPR cuts yet to lower borrowing costs for businesses, says Omole - The Guardian Nigeria News
Director-General of the Institute for Police and Security Policy Research (IPSPR), Dr Charles Omole, has said the Central Bank of Nigeria’s (CBN) successive reductions in the Monetary Policy Rate (MPR) have yet to translate into significantly lower borrowing costs for businesses.
Omole, in a post on his X handle, said the debate over the CBN’s decision to cut the benchmark interest rate had missed the more fundamental issue of the widening gap between the policy rate and the actual borrowing rates businesses face.
He noted that the CBN had reduced the MPR from 27.5 per cent in 2025 to 23 per cent by September 2026, representing a cumulative reduction of 450 basis points.
According to him, the reduction, while significant on paper, has had a limited impact on the cost of commercial credit.
He cited CBN data showing that in the second quarter of 2025, when the MPR stood at 27.5 per cent, the prime lending rate for top-tier corporate borrowers averaged 18.18 per cent, while the average maximum lending rate was about 29.82 per cent.
Omole said the disparity became more pronounced in 2026, when maximum lending rates remained close to 35 per cent for several months even after the MPR was reduced to 26.5 per cent, before declining to about 33 per cent in July.
He added that interest rates in some high-risk manufacturing segments had reached between 50 and 60 per cent.
Omole said the problem was not necessarily a new development or one that began with the current CBN leadership, noting that the transmission of monetary policy to commercial lending rates had suffered structural weaknesses for years.
He recalled that the Monetary Policy Committee had acknowledged the problem in 2019, noting that the benchmark rate was losing its effectiveness as an anchor for market rates.
According to him, reducing the MPR does not automatically result in cheaper commercial loans because several stages must be completed before monetary easing reaches businesses.
He, however, acknowledged the operational challenges confronting commercial lenders, including high default risks, power and infrastructure costs, liquidity requirements, inflation expectations and the cost of mobilising deposits.
Omole said the challenges could not, however, permanently justify a situation in which policy intentions and actual lending rates remained disconnected.
He also citedCBN Governor Olayemi Cardoso’s comments following the September 2026 rate decision, in which the governor described the reduction as a deliberate effort to re-anchor distorted market rates and restore effective monetary policy transmission.
Omole said the acknowledgement of the transmission problem was important but argued that the real test would be whether commercial lending rates began to respond more closely to changes in the benchmark rate.
