Business leaders expect the Monetary Policy Committee to retain the 26.5% benchmark rate despite mounting calls for lower borrowing costs

Nigeria’s Central Bank is widely expected to keep the CBN interest rate unchanged at 26.5 per cent when the Monetary Policy Committee (MPC) begins its two-day meeting on Monday, as economists and business leaders warn that heightened geopolitical tensions could reignite inflationary pressures despite growing calls for lower borrowing costs.

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The projection comes as the apex bank prepares to announce its latest monetary policy decision against the backdrop of renewed uncertainty in global energy markets and concerns that rising crude oil prices could reverse recent progress in moderating inflation.

Leading voices from the organised private sector acknowledged that Nigerian businesses, particularly manufacturers, would welcome a reduction in interest rates to stimulate investment and reduce financing costs.

However, they argued that prevailing global conditions make an immediate policy easing unlikely.

The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the escalation of tensions involving the United States and Iran had altered the inflation outlook and strengthened the case for maintaining the current benchmark rate.

“What I expect is a hold because it is possibly too soon to relax the MPR because of the current geopolitical issues.

We have seen a very dramatic escalation, and this has implications for major macroeconomic indicators, particularly the general price level.

Energy prices feed strongly into inflationary pressures, and crude oil prices have risen above $84. The inflation outlook is looking very disturbing,” Yusuf said.

He added that while high interest rates continue to burden businesses, the Central Bank would probably prioritise price stability over monetary easing.

“It is unlikely there will be a rate cut. It is also not likely that there will be a further increase because the last inflation figure showed only a marginal deceleration.

Although I don’t mind a rate cut because interest rates are too high, given the prevailing global conditions, especially the Middle East conflict, people hoping for a rate cut should exercise more patience,” he said.

The President of the Lagos Chamber of Commerce and Industry, Leye Kupoluyi, also stressed that lower borrowing costs would provide much-needed relief for businesses facing rising operational expenses.

“Everyone wants a reduced interest rate. Interest rate is a major part of the cost of doing business because everybody needs funds for their business.

If the interest rate is high, the cost of business will be very high. The lower the interest rate, the better.

It will allow businesses to plan and borrow money instead of relying on short-term loans that ultimately increase costs for consumers,” Kupoluyi said.

Despite supporting a reduction in lending costs, Kupoluyi urged businesses to await the MPC’s assessment of domestic and global economic conditions.

“Let’s see what they come up with. We have to look at it both ways. But definitely, for interest rates to come down, it is for the benefit of industry, businesses, and ultimately the customer,” he added.

Professor of Economics and Public Policy at the University of Uyo, Prof Akpan Ekpo, shared a similar outlook, arguing that uncertainty surrounding the conflict between the United States and Iran was likely to encourage policymakers to adopt a cautious stance.

“Many people would like a reduced interest rate because the MPR is the anchor rate for bank lending. But my worries are the US-Iran war.

We don’t know when it is going to end. For that reason, I suspect they might keep the rate the same for a while,” Ekpo said.

He warned that a prolonged conflict could place additional pressure on inflation, potentially forcing the Central Bank to tighten monetary policy rather than loosen it.

“If I were with the MPC, I would hold the rate the way it is for now and wait for the next meeting.

With the Iran-US war, inflation may go up. When inflation goes up, the MPC would be inclined to increase rates to contain inflation.

The government should instead focus on the manufacturing sector so that we can create jobs,” he added.

The Chief Executive Officer of Economic Associates, Dr Ayo Teriba, said the committee would likely rely on broader economic indicators unavailable to the public before reaching its decision.

“Every reasonable person wants to see lower interest rates. We have seen stable exchange rates, and inflation has hovered around 15 per cent for six months.

But the committee will determine whether this is the right time to ease policy. I don’t have access to the information they have, so I will wait for them to explain whatever decision they take,” Teriba said.

Although Teriba noted that the Middle East tensions had not yet significantly altered Nigeria’s inflation trajectory, he cautioned against assuming that the MPC would respond solely to public expectations.

“I’d like to see the monetary policy rate and the CRR come down, but I accept my limitation that I don’t have access to the information available to the MPC. I will wait to be informed by them,” he said.

The expectations come despite findings from the Central Bank’s latest Inflation Expectations Survey showing that 61.1 per cent of Nigerians favour a reduction in interest rates ahead of the MPC meeting.

Many businesses argue that elevated borrowing costs have constrained expansion, particularly in the manufacturing sector, where access to affordable long-term financing remains essential for increasing production, creating jobs and supporting economic growth.

The MPC has maintained a tight monetary stance over recent meetings in an effort to tame inflation and stabilise the foreign exchange market.

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While recent inflation figures have shown signs of moderation, policymakers continue to balance domestic economic needs against external risks, making this week’s meeting another critical test of Nigeria’s monetary policy direction.