CPPE Calls on Nigerian Banks to Pass on CBN’s 350bps Cut and Lower Lending Rates for Borrowers

In a swift response to the Central Bank of Nigeria’s (CBN) recent 350‑basis‑point reduction in the Monetary Policy Rate (MPR), the Centre for the Promotion of Private Enterprise (CPPE) has publicly urged commercial banks to lower lending rates for businesses. The think‑tank argues that the policy move, announced in June 2026, should translate into tangible credit cost reductions for small and medium enterprises (SMEs) that are still grappling with high borrowing expenses.

Why the CBN’s 350bps Cut Matters for the Real Economy

The CBN’s decision to trim the MPR by 350bps marks the most aggressive monetary easing since the 2022 inflation surge. By lowering the benchmark rate, the central bank aims to ease financing conditions, stimulate investment, and curb the persistent price pressures that have eroded purchasing power across Nigeria and the wider West African region.

For banks, the MPR serves as the reference point for the cost of funds. A lower MPR reduces the interest they pay to the central bank, theoretically freeing up room to pass on savings to borrowers. However, the transmission of policy rates to retail lending has historically been uneven, with banks citing risk premiums, capital adequacy constraints, and operational costs as reasons for maintaining higher loan rates.

CPPE’s call is therefore a reminder that the policy easing is only as effective as its implementation at the bank‑customer interface. If banks keep their prime lending rates unchanged, the intended boost to credit growth could stall, leaving SMEs to shoulder the burden of expensive financing.

CPPE’s Core Arguments for Faster Rate Transmission

During a press briefing on 22 September 2026, CPPE’s Executive Director, Dr Chidi Okonkwo, outlined three key reasons why banks should act swiftly:

• Economic stimulus: Lower borrowing costs can accelerate capital expenditure, especially in manufacturing, agribusiness, and technology sectors that are pivotal for job creation.
• Inflation control: By encouraging productive investment rather than speculative borrowing, a healthier credit environment can help dampen demand‑pull inflation.
• Financial inclusion: Reducing rates can make formal credit more attractive to informal sector operators, nudging them towards the banking system and improving overall financial stability.

Okonkwo emphasized that the CPPE’s research shows a direct correlation between loan pricing and SME growth rates. When interest rates exceed 15%, many small firms either delay expansion or abandon projects altogether.

Banking Sector Response: Lower Lending Rates Mixed Picture

Since the CBN’s announcement, major banks such as FirstBank, Guaranty Trust Bank (GTB), and Access Bank have issued statements indicating a “review of pricing structures.” Yet, analysts note that the headline prime rates published on bank websites remain largely unchanged, hovering between 14.5% and 16% for corporate loans.

One reason cited is the lingering credit risk from the 2024‑2025 loan defaults that saw non‑performing loan ratios climb to 6.2% across the sector. Banks argue that they must balance the need for lower rates with the imperative to preserve capital buffers, especially as the Basel III implementation timeline extends into 2027.

Nevertheless, a few niche lenders and fintech‑enabled banks have begun offering promotional rates as low as 12% for qualified SMEs, signalling that lower rates are feasible when risk assessment tools are sharpened.

Implications for SMEs Across Africa

While the CPPE’s demand is rooted in the Nigerian context, the ripple effects extend to other African economies facing similar monetary tightening cycles. Ghana’s Bank of Ghana, South Africa’s Reserve Bank, and Kenya’s Central Bank have all signalled modest policy easing in 2026, yet commercial banks in those markets also wrestle with translating cuts into borrower‑friendly rates.

For Nigerian SMEs that export to regional markets—such as cocoa processors in Ogun State or textile manufacturers in Lagos—cheaper credit can enhance competitiveness against firms in Ghana, Kenya, or Egypt that may already benefit from lower financing costs.

Moreover, the African Development Bank’s 2026 “Financing for Growth” report highlights that a 1% reduction in average loan rates could unlock an additional US$3 billion in private sector investment across the continent. This underscores why CPPE’s push is not merely a local grievance but part of a broader continental agenda for inclusive growth.

Policy Recommendations and the Way Forward

CPPE outlined a concise set of policy levers that could accelerate the pass‑through of the CBN’s rate cut:

1. Transparent rate‑setting: Banks should publish a clear schedule of loan pricing tiers linked directly to the MPR, allowing borrowers to see how reductions affect them.
2. Risk‑adjusted pricing models: Adoption of advanced credit scoring—leveraging mobile money data, utility payments, and supply‑chain information—can lower perceived risk and justify cheaper rates.
3. Regulatory incentives: The CBN could introduce a “rate‑pass‑through” incentive, rewarding banks that achieve predefined reductions in average SME loan rates.
4. Capacity building for SMEs: Training programmes that improve financial literacy and documentation readiness can reduce banks’ underwriting costs, making lower rates more sustainable.

Implementing these steps would require coordinated action among the CBN, the Nigeria Deposit Insurance Corporation (NDIC), and industry bodies such as the Association of Banks in Nigeria (ABN).

What Businesses Can Do Now

While advocacy continues, SMEs can take proactive measures to position themselves for lower rates when banks eventually adjust pricing:

• Strengthen credit profiles: Maintain up‑to‑date financial statements, settle existing obligations promptly, and diversify revenue streams.
• Explore alternative lenders: Fintech platforms like Carbon, FairMoney, and Renmoney often offer more flexible terms, especially for digitally‑savvy firms.
• Negotiate rate reviews: Engage directly with relationship managers, presenting a clear case for why a reduced rate aligns with the bank’s risk appetite post‑MPR cut.

By being prepared, businesses can seize the first wave of cheaper credit as banks begin to recalibrate their loan books.

FAQ

Q: How much did the CBN cut the Monetary Policy Rate in 2026?
A: The CBN reduced the MPR by 350 basis points, moving it from 24.75% to 21.75%.

Q: Will all types of loans see lower rates immediately?
A: Not necessarily. The transmission to retail and SME loan rates can lag due to banks’ risk assessments and operational costs. However, the expectation is that rates will gradually adjust over the next 6‑12 months.

Q: What role can fintech play in delivering cheaper credit?
A: Fintech firms often use alternative data and automated underwriting, which can reduce risk premiums and pass on lower rates to borrowers, especially for short‑term working capital needs.

Source: Nairametrics – CPPE urges banks to lower lending rates after CBN’s 350bps cut

Related Reading

• CBN Resets Monetary Policy Rate, Citing Disconnect with Market Rates
• Ineos Gas Price Crisis Halts UK Production over Sky‑high Gas Prices
• Petrol and Gas Surges Drive Cost of Living Nigeria Beyond Reach