CBN’s Rate Cut: Balancing Growth, Inflation & Naira Stability
By FIDELUS ZWANSON
THE Central Bank of Nigeria’s surprise rate cut to 27.5% has sparked debate, but the apex bank insists it is no gamble. According to Director of Monetary Policy, Dr. Victor Oboh, the move is a “calibrated step” to ease borrowing costs, stimulate growth, and still hold the line against inflation and currency weakness.
The cut is expected to lower funding costs for banks, enabling cheaper loans to households and businesses. Small firms and farmers, in particular, could benefit from credit that fuels output and lowers consumer prices.
Critics worry looser monetary conditions could weaken the naira or trigger capital flight, but the CBN points to foreign reserves above $43 billion, narrowing FX spreads, and steady remittance inflows as buffers. “Our fundamentals are robust,” Oboh reassured.
At the same time, the bank is tightening liquidity through a 75% Cash Reserve Ratio on public deposits outside the Treasury Single Account. This, combined with improving agricultural output, falling transport costs, and harvest-season supplies, should keep inflationary pressures contained.
The timing reflects a global trend, with central banks from Washington to Accra slashing rates to spur growth. Nigeria’s yields remain among the most attractive in frontier markets, keeping foreign inflows strong.
The real test, however, will be whether Nigerians struggling with high living costs feel any relief. Monetary easing takes time to filter through the system, and without fiscal discipline, gains may be muted.
For now, the CBN has taken a bold bet: that growth can be unlocked without sacrificing stability. The months ahead will reveal if that gamble pays off.
