CBN Urged by LCCI to Chart bold, Clear Path as 23% Inflation Squeezes MSMEs

By Sharon Zachariah

Editor

Sharon Zachariah

Posted: May 21, 2025 at 6:09 pm, Updated: May 21, 2025 at 6:09 pm

CBN Urged by LCCI to Chart bold, Clear Path as 23% Inflation Squeezes MSMEs

CBN is under growing pressure to provide businesses with a clear, forward-looking roadmap for cutting interest rates, as inflation continues to weigh heavily on Nigeria’s fragile economy.

The Lagos Chamber of Commerce and Industry (LCCI) has called on the Central Bank of Nigeria to not just maintain its current stance on interest rates, but also offer clear signals on when and how it will ease them. Businesses, especially small ones, are struggling to plan for the future under the weight of high borrowing costs.

This call came after the CBN’s Monetary Policy Committee decided to retain the monetary policy rate at 27.5 percent. The cash reserve ratio stayed at 50 percent, and the liquidity ratio was kept at 30 percent.

According to Chinyere Almona, the Director-General of the LCCI, holding interest rates steady helps fight inflation. However, she believes that the CBN must also think about the long-term impact on businesses.

“We recommend that the Central Bank of Nigeria (CBN) adopt a cautious stance while also providing a clear signal of possible future easing, subject to sustained economic improvements,” Almona said.

She acknowledged that inflation has dropped slightly, down to 23.71%. But Almona warned that Nigeria’s economy remains in poor shape. The cost of goods is still rising because of issues like unstable exchange rates, high fuel prices, and poor infrastructure. Insecurity and food production problems only make things worse.

For businesses trying to plan their budgets or seek loans, Almona said it’s not enough to hear that rates will stay high. What they need is a detailed plan showing when and under what conditions the CBN will ease rates.

She stressed that a sudden or premature rate cut might scare off investors and send the wrong message about the CBN’s commitment to fighting inflation. But having a roadmap gives businesses hope and guidance.

“The LCCI urges the MPC to complement this rate hold with a forward-guided, data-driven roadmap for future easing. Such a strategy would provide the business community with the clarity needed for medium- and long-term planning,” Almona explained.

To reduce interest rates in the future, the CBN should look at certain signs, Almona said. These include steady drops in inflation for two or three months, more stability in the foreign exchange market, and growth in areas like small business loans and local manufacturing.

Right now, she warned, the high MPR hurts the private sector. Many small businesses, which are Nigeria’s biggest source of jobs and economic growth, can’t afford to borrow money to expand or survive.

“Without affordable financing, their capacity to grow, compete, and contribute to economic development is severely limited,” she added.

Almona said inflation in Nigeria isn’t just caused by too much money in the economy. It also stems from supply-side problems, like poor roads, low farm output, and lack of electricity. That’s why monetary policy alone won’t solve the problem.

She believes the CBN must work closely with the federal government to fix these root causes. For instance, more investment is needed in security, roads, and food production to help stabilize prices.

To help the real sector — businesses that produce goods and services — the LCCI suggested some solutions. These include:

Keeping up reforms that encourage local production and price stability.

Strengthening development finance programs, especially for manufacturing, agriculture, power, and renewable energy.

Giving more funds and support to institutions like the Development Bank of Nigeria, Bank of Agriculture, NEXIM Bank, and Bank of Industry.

Making bank interest rates more transparent so borrowers don’t face unfair extra costs.

Improving the foreign exchange system to stop black-market trading and bring back investor trust.

Almona also said the CBN must act in ways that support real economic growth while still controlling inflation. A balanced and careful strategy, based on real data, will help Nigeria build a stronger economy.

She urged the CBN and the federal government to consider the voices of business leaders when shaping future policy.

“The time is now for careful, data-informed monetary signalling coupled with strategic support for the real sector,” Almona concluded.

Her message reflects what many business owners across Nigeria feel — that without a clear vision from the CBN, their future remains uncertain.