Industrialists, entrepreneurs and business owners have called on the Central Bank of Nigeria to come to the aid of Micro, Small and Medium Enterprises (MSMEs) by either bringing down interest rates to single digits or creating a special intervention fund for them.

They made the call yesterday while reacting to the retention of interest rates at 27.5 per cent by the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC).

Speaking to Daily Trust, Mohammed Damakka Abubakar, founder and Managing Director of L and Z Ltd said the current rate is not feasible for any micro or medium business to borrow

“The current lending rate by commercial banks is too high and it will be suicidal for any business man to go and borrow from them. Secondly, you cannot repay it because they only give short term loans and what we need is long term loans,” he said.

He added that “In the case where the interest rate cannot be brought down to single digits, the CBN should create a special intervention fund for MSMEs.”

The Managing Director of Fumtee Ventures, Fumen Makama, told Daily Trust that with inflation slowing, the expectations of businesses was for lending rates to reduce which did not happen.

“We were expecting significant rate cuts after a long time of tightening especially now that inflation is reducing, but it didn’t happen and businesses want respite because we can’t go to banks to borrow.

“Banks borrow at over 30 per cent and no MSME can survive through that, we really want the government to do something,” he said.

Similarly, an exporter, Iliya Abubakar, told Daily Trust that although there are some interventions for exporters by the federal government, there is a need for the CBN to consider significant rates reduction.

He said: “Exporters want to expand their business but can’t borrow from Banks because of the high rates. At over 30 per cent, no business can survive with such rates.

“If that won’t work, then we need an intervention fund to ensure that MSMEs improve and contribute meaningfully to Gross Domestic product,”

The Managing Director, POMA Point Limited, Paul Oyewusi, expressed concerns over the retained CBN MPC interest rate.

He stressed that SMEs are overstretched with the interest rates, saying their cost of business was further pushed up by the increased electricity tariff, telecoms, and other necessary items for business.

“Retaining the CBN MPC interest rate at 27.5 is a lot because it makes access to credit very difficult for SMEs in Nigeria. It is obvious that many businesses don’t have access to finances from investors, especially when they are not from the tech industry.

“So, what some small businesses use to hold, keep moving and contributing to the economy is the credit, and it is as high as it is that will cripple many businesses.

“I don’t know why the government is going this route because the tariff of basic amenities has been increased, this further cripples the economy,” he said.

He described SMEs as the backbone of the country’s economy by creating employment opportunities.

“If you look at the percentage they contribute to the economy, the jobs created by SMEs, they contribute 50 per cent to the economy. How many big firms are employing people? It is these start-ups, both SMEs and MSMEs that provide the largest employment in the country. If Nigeria must stand, small businesses must be supported,” he added.

The president of the Premium Breadmarkers Association of Nigeria (PBAN), Engr Emmanuel Onuorah, urged the federal government to listen to the plea of Nigerians by reducing the interest rates.

“How can any economy survive on double-digit? It cannot work. I even thought it was going to come down.

“They should just look inward, continue to work as hard as they are doing, and see how they can bring this thing down so that businesses can begin to thrive because without credit facilities, what are you doing?

“If they are saying 27.5, what will be the lending rate from the commercial banks because you have to look at those things twice again? It has been double-digit for too long.”

How interest rates affect you

Daily Trust reports that interest rates imply the lending rates by the deposit money banks (DMBs) also referred to as lenders.

They provide credit to businesses, SMEs and companies operating across different sectors.

Each of the commercial banks in Nigeria is involved in providing credit facilities to their respective clients.

With the apex bank retaining interest rates at 27.5 per cent, each of the banks has different lending rates mostly above 30 per cent.

With companies and businesses borrowing at over 30 per cent, it adds up to the cost of doing business which invariably affects the retail prices.

The Organised Private Sector (OPS) has continued to make a case for the reduction of the borrowing rates insisting the current rate is not sustainable for the growth of the MSMEs.

The Lagos Chamber of Commerce and Industry (LCCI), in its response to the May MPC meeting where the interest rate was also retained, noted that the MSMEs, which represent the “Engine of job creation and productivity in Nigeria, are being squeezed by the high cost of credit.”

He said, “Without affordable financing, their capacity to grow, compete, and contribute to economic development is severely limited.

“Moreover, it is increasingly clear that monetary policy alone cannot curb inflation that stems from structural and supply-side inefficiencies. Coordinated action with fiscal authorities is essential to address the root causes of inflation, such as insecurity, infrastructure deficits, and food supply disruptions.”

Credit to private sector hits N78trn in Q1

Checks by our correspondent indicated that credit to private sector has hit N78 trillion as of the first quarter of 2025. It dropped to N77.8 trillion in May, according to the apex bank’s money and credit statistics data.

However, OPS says the credit remains unaffordable to small businesses which could not survive on paying 30 per cent interest rate on bank’s facilities.

‘Borrowing to remain high’

Meanwhile, a senior partner at SPM Professionals, Paul Alaje, while reacting to the development, stated that the retention of all monetary parameters means that borrowing will still remain high

“With the decision to hold rates for the third in 2025 by the CBN, it means borrowing will remain high although it is not totally surprising that rates were maintained, especially the asymmetric corridor.

“It is however worthy of note that the CBN is trying to sustain its fight against inflation but it should be recognised that monetary intervention is just about 65, the other 35 comes from the fiscal side.

“Therefore as long as we have excess liquid from FAAC which is about N1.9trn for June, it may trigger inflation,” he said

Alaje added, “In the short term, inflation is predicted to moderate in the first to second quarter of next year.”

He, however, expressed concerns that the gains of the CBN “may be thwarted when election campaigns start and politicians begin to spend in dollars which will also affect the foreign reserves,”

Why MPC held rates – Cardoso

The CBN MPC kept Monetary Policy Rate (MPR) unchanged at 27.5% on signaling continued caution as inflation slows for a third consecutive month but underlying pressures persist, according to the apex bank.

The decision marks the third straight pause in the current tightening cycle, Daily Trust can report.

All 12 MPC members, the CBN Governor Olayemi Cardoso said, voted to hold the MPR, maintain the asymmetric corridor at +500/-100 basis points, retain the Cash Reserve Ratio at 50% for deposit money banks and 16% for merchant banks, and keep the liquidity ratio at 30%.

Cardoso said the committee’s decision was “premised on the need to sustain the momentum of disinflation and sufficiently contain price pressures.”

Daily Trust reports that inflation eased to 22.22% in June from 22.97% in May, driven by declines in energy prices and improved foreign exchange stability.

However, month-on-month inflation rose slightly to 1.68%, from 1.53%, with food and core inflation also accelerating due to higher costs in services, housing, and communication.

Cardoso reaffirmed the CBN’As long-term commitment to price stability, emphasising the goal of bringing inflation back to single digits.

“The Committee remains committed to the Bank’s price stability mandate and would take appropriate measures to foster stability and confidence in the economy,” he said.

Despite some encouraging signs, Cardoso highlighted significant risks ahead, including geopolitical tensions and ongoing global trade disruptions that could further inflate import costs.

“The continued global uncertainties associated with tariff wars and geopolitical tensions could further exacerbate supply chain disruptions,” the governor warned.

Looking ahead, the CBN expects further inflation easing in the coming months, buoyed by tight monetary conditions, harvest-season food supplies, and a stable naira, Cardoso stated.

However, he stressed the need to remain cautious, given “persistent uncertainty in the policy environment and underlying price pressures.”

He also acknowledged the role of government efforts to improve food security and urged continued support for farmers through timely provision of seedlings, fertilizers, and other inputs critical to the 2025 growing season.

“The MPC will continue to undertake rigorous assessment of economic conditions, price developments, and outlook to inform future policy decisions,” Cardoso assured.

The CBN governor reiterated that the apex bank’s aim is to cut inflation figures to a single digit, medium to long term.

He noted that the decision to maintain interest rates was supported by recent macroeconomic developments, which were anticipated to positively influence price dynamics in the near to medium term.

These include the stability in the foreign exchange market with the resultant appreciation of the exchange rate and the gradual moderation in the price of fuel prices.

‘8 banks meet recapitalisation requirements’

Speaking further, the CBN governor said eight banks had fully met their recapitalisation requirements.

He said other banks had taken steps towards complying with the deadline, adding that one bank had listed its shares on the London Stock Exchange (LSE).

“Members also noted the continued stability in the banking system evidenced by the stable financial soundness indicators (FSIs) which will further be supported by the ongoing banking recapitalisation exercise.

“The MPC noted that eight banks have fully met their recapitalisation requirements while others are making progress towards meeting the deadline.

“The committee, thus, urged the management of the bank to sustain its oversight of the banking system to ensure continued resilience, safety, and soundness of the financial system.”

While responding to questions during the press briefing, Cardoso said “we have one bank that has raised a significant amount of money on the London Stock”.

“That clearly is a reflection of the way that the international investors view the banking system.

“I was again very privileged to have a conversation with a good number of them about three or four weeks before this listing took place and really and truly, a lot of interest internationally on putting money on the Nigerian financial system,” he said.

According to Cardoso, the key point is that the CBN, as the regulator, will continue to fulfill its role in ensuring that the system, actors, and players build resilience, maintain adequate buffers and operate within the rules.

He noted that this is crucial for maintaining investor confidence in the sector.

On March 28, 2024, the CBN announced an increase in the minimum capital requirements for commercial banks with international licences to N500 billion.

Following the development, several banks announced plans to raise funds through share, bond issuances.

In January, Zenith Bank said it had raised N350.46 billion through rights issue and public offer to meet the CBN minimum capital requirement.

Similarly, Guaranty Trust Holding Company Plc (GTCO), on July 4, said it had successfully priced its fully marketed offering on the London Stock Exchange (LSE).

External reserve hits $40.1bn

Speaking further, Cardoso said Nigeria’s external reserve had climbed to $40.11 billion as of July 2025.

Cardoso noted that the $40.11 billion reserve level represents approximately 9.5 months of import cover, signaling a significant boost to Nigeria’s foreign currency buffer.

This is the highest level recorded since November 2024 when it hit $40.2 billion making this a significant rebound in Nigeria’s foreign currency buffers amid ongoing efforts to stabilize the exchange rate and rebuild investor confidence. (Daily Trust)