As the Central Bank of Nigeria’s Monetary Policy Committee (MPC) meets on Monday, anticipation is running high. For the first time in nearly two years, the signals suggest the apex bank may finally ease the screws it has kept so tightly fastened on the economy. Inflation is cooling after a historic surge, the naira has found firmer ground in the foreign exchange market, and businesses are daring to hope again. The big question is whether the CBN will act, and if so, how far it will go.
For two years, Nigerians have lived under one of the most aggressive tightening regimes in the country’s monetary history. The benchmark interest rate, the Monetary Policy Rate (MPR), climbed from 18.5 percent in mid-2023 to 27.5 percent by early 2025. In just twelve months of 2024 alone, the rate was hiked four times, leaping from 22.75 percent in March to 27.25 percent by September. By the start of this year, it peaked at 27.50 percent and has since stayed there. The intention was never in doubt: tame runaway inflation and defend a battered naira.
To be fair, the campaign yielded results. Inflation, which ballooned to an eye-watering 34.2 percent in June 2024, the highest in nearly three decades, has steadily receded, dropping to around 20.12 percent in August this year. For households accustomed to double-digit food price hikes month after month, statistics are meant to be at least a sign of relief, but on the contrary, hunger, not statistics, has remained Nigeria’s true inflation figure. The naira, though far from strong, is no longer in freefall, trading at roughly N1,531 to the dollar in recent weeks. After months when exchange rates shifted like sand in the wind, stability, however fragile, has returned.
But success has come at a steep price. Borrowing costs have climbed beyond the reach of ordinary Nigerians and the businesses that drive the real economy. For Small and Medium Enterprises (SMEs), more than 40 million of them have borne the brunt. The artisans in the SME sector who are core entrepreneurs have been forced to shelve expansion plans, cut jobs, or retreat into costly informal financing. Even households have not been spared. Mortgages, personal loans, and consumer credit repayments have eaten deep into disposable incomes, leaving families with less to spend on essentials, let alone savings.
This is why a potential rate cut matters so profoundly. For SMEs, lower borrowing costs could be the oxygen they have been starved of. A roadside food vendor who abandoned plans to own a modern and decent restaurant because of double-digit loan rates might dust off expansion plans. Farmers, traders, and tech startups could finally access cheaper credit to restock, grow, and innovate. When SMEs breathe, the economy breathes with them, and they account for over 80 percent of businesses and about half of Nigeria’s workforce.
Households, too, would feel the difference almost immediately. Individuals drowning in personal loan obligations could suddenly see room in their budget for both debt repayment and daily living. Less money spent servicing loans means more money spent on food, clothing, education, and leisure. And more spending, in turn, feeds into the retail and manufacturing sectors, creating a virtuous cycle of growth.
The ripple effects would extend across the economy. The construction and real estate sectors could experience renewed demand as mortgage rates fall, while consumer confidence could power retail and manufacturing. Even the capital markets would shift: with fixed-income returns declining, investors may channel more funds into equities or productive ventures.
Of course, there are trade-offs. Banks could see their juicy interest margins trimmed, though higher loan volumes may compensate. Foreign investors might balk if the naira becomes less attractive, putting pressure on the very stability the CBN has fought to achieve. And most importantly, if the rate cut is too steep, inflationary pressures could resurface, undoing months of painful restraint.
Here lies the crux of the matter, the balancing act. The MPC must decide whether the time has come to loosen policy enough to spur growth, but not so much that the economy is thrown back into the chaos of spiraling prices and exchange rate shocks. It is a narrow path to tread, and Nigerians have seen what happens when the balance tilts too far.
Yet, the bigger risk now may not be moving too fast but moving too slowly. An economy cannot grow on tight money forever. With inflation easing and the naira steady, the argument for giving businesses and households breathing room is compelling. If the CBN seizes this moment, it could mark the beginning of a new cycle, one where policy is not just about survival but about recovery and renewal.
As Monday’s meeting approaches, one thing is clear: the stakes could not be higher. For millions of Nigerians, especially from a farmer eyeing a loan for fertilizer to a trader struggling to restock her shop to families hoping to finally afford a home of their own, the MPC’s decision will not just be a technical adjustment of rates. It will be a verdict on whether the time has come to shift from battling crises to building growth.
And here is the truth the CBN cannot afford to ignore: Nigerians have suffered enough. The time for excessive caution is over. A decisive, well-judged rate cut is no longer just an option; it is an obligation. If the CBN, under Governor Olayemi Cardoso’s leadership, and his MPC dithers or delivers half-measures, it risks condemning the economy to stagnation and ordinary citizens to another lost season of survival. What Nigeria needs now is boldness. Anything less would be a betrayal of the very people monetary policy is meant to serve.
Blaise, a journalist and PR professional, writes from Lagos, and can be reached via: [email protected]