Muda Yusuf Backs CBN’s Rate Cut as Boost for Businesses and Recovery

Economist and financial analyst Dr Muda Yusuf has welcomed the Central Bank of Nigeria’s decision to lower its benchmark interest rate from 26.5% to 23%, calling the move a “timely reset” that could ease pressure on businesses and support economic recovery.

Policy shift

1. The CBN’s 307th Monetary Policy Committee meeting approved the rate reduction after Nigeria recorded two successive monthly declines in inflation.
2. Yusuf, chief executive of the Centre for the Promotion of Private Enterprise, said the scale of the cut had been largely unforeseen and marked a major departure from the extended period of tight monetary policy.
3. He said the decision indicated a rebalancing of policy toward growth, investment and recovery, while still aiming to protect price stability and the soundness of the financial system.
4. Yusuf described the timing as appropriate because inflation was moving in a more favourable direction, while the economic costs of keeping monetary conditions excessively restrictive were becoming increasingly visible.

Realignment with market conditions

Yusuf said the previous policy setting had created a growing gap between the 26.5% Monetary Policy Rate, inflation of approximately 15.4% and money-market rates of about 20%. In his view, that divergence weakened the benchmark’s role as a policy signal and raised questions about how effectively monetary decisions were reaching the wider economy.

He argued that setting the MPR at 23% should be understood as more than a conventional easing measure. The new rate brings the policy framework closer to prevailing macroeconomic and financial-market conditions. He added that the CBN’s description of the move as a recalibration, or reset, underscored its broader significance for monetary-policy management.

Expected impact on businesses

Yusuf said the real economy stood to benefit particularly strongly because expensive credit had become a major obstacle to investment, output, working-capital management and employment creation.

Commercial borrowing costs remain too high for many companies to justify productive investment, he said, especially in manufacturing, agriculture, construction and logistics. These industries often require lengthy investment periods while operating with relatively narrow profit margins.

The lower benchmark rate could create room for cheaper capital, healthier corporate cash flows, higher investment and greater productive capacity across the Nigerian economy, Yusuf said.