CPPE Calls on CBN to Lower Interest Rates to Support SMEs

The Centre for the Promotion of Private Enterprise (CPPE) has urged the Central Bank of Nigeria (CBN) to ease its current monetary stance by lowering policy rates in order to boost access to credit for small and medium-sized enterprises (SMEs). The call comes amid concerns that Nigeria’s tight monetary policies, though aimed at stabilizing the naira and curbing inflation, are inadvertently stifling private sector growth and making it increasingly difficult for businesses to thrive.

Speaking against the backdrop of recent economic data, CPPE argued that while the monetary tightening measures adopted by the apex bank may have yielded some positive results—such as curbing inflationary pressures and stabilizing the foreign exchange market—the impact on productive sectors of the economy has been less encouraging. SMEs, which account for over 80 percent of employment in Nigeria and are key contributors to GDP, are reportedly struggling to cope with high borrowing costs that limit their ability to expand operations, invest in innovation, or create jobs.

The call for a rate cut reflects a broader debate on balancing inflation control with economic growth. Since 2023, the CBN has embarked on a series of rate hikes, raising the Monetary Policy Rate (MPR) to historically high levels as part of its fight against double-digit inflation and currency depreciation. While these measures helped in stabilizing the naira—especially with recent improvements in foreign exchange inflows and reserves—the unintended consequence has been credit contraction, with banks charging prohibitive lending rates to businesses and individuals.

According to CPPE, the high interest rate regime has made credit inaccessible to most SMEs, leaving them vulnerable to rising operational costs, inflationary pressures, and weak consumer demand. Many entrepreneurs have resorted to informal borrowing channels, often at even higher costs, which undermines financial inclusion efforts. The group stressed that unless the CBN recalibrates its approach to monetary policy, Nigeria risks undermining the backbone of its economy.

Analysts note that SMEs are essential not only for job creation but also for innovation and local value addition. They argue that empowering SMEs with affordable financing could stimulate broader economic recovery, expand the tax base, and reduce Nigeria’s dependence on imports. CPPE’s recommendation therefore emphasizes a more balanced approach where monetary stability does not come at the expense of real sector growth.

The debate also comes at a time when Nigeria’s economy is experiencing cautious optimism. Inflation has been on a gradual decline for several months, partly due to improved agricultural output and the relative stability in foreign exchange markets. Recent data also suggest that the fiscal side is beginning to align with monetary reforms, with government revenues improving and efforts to curb smuggling and oil theft yielding results. This progress, CPPE argues, provides the CBN with some room to relax its policy stance without jeopardizing macroeconomic stability.

Industry operators echoed CPPE’s concerns, warning that without affordable credit, many SMEs could be forced out of business, leading to job losses and increased poverty. They pointed out that the high cost of doing business in Nigeria—driven by multiple taxation, high energy costs, poor infrastructure, and insecurity—already puts local businesses at a disadvantage. Adding high interest rates to this mix, they argue, creates a hostile environment that discourages entrepreneurship and private investment.

Some experts have also suggested alternative approaches that could strike a balance between curbing inflation and supporting growth. These include targeted interventions for priority sectors, concessional lending for SMEs, and greater reliance on supply-side policies to address structural issues driving inflation. By focusing on productivity improvements and reducing bottlenecks in sectors like agriculture, energy, and manufacturing, the government could ease inflationary pressures without over-relying on monetary tightening.

The CBN, for its part, has maintained that its current policy stance is necessary to safeguard economic stability and restore investor confidence. Officials insist that lowering rates too quickly could reverse gains made in stabilizing the naira and controlling inflation. However, they have also hinted at exploring targeted credit schemes to support critical sectors, suggesting some recognition of the need to balance monetary orthodoxy with developmental objectives.

CPPE’s intervention has reignited the policy debate, with calls for a more nuanced strategy that recognizes the unique challenges of Nigeria’s economy. Observers believe that if the CBN can successfully blend monetary discipline with targeted support for SMEs, the country could achieve a more sustainable recovery trajectory.

For millions of entrepreneurs and small business owners across Nigeria, the hope is that this advocacy will translate into tangible relief. Affordable credit could mean more investment in local production, more job opportunities for young Nigerians, and stronger resilience against external shocks. As Nigeria continues its reform journey, the role of SMEs will be central in determining whether economic growth translates into broad-based prosperity.

In the coming months, attention will be on how the CBN responds to such calls. If policymakers can find common ground with private sector advocates like CPPE, Nigeria may move closer to achieving a healthier balance between stability and growth—one where SMEs no longer struggle under the weight of prohibitively high interest rates but instead become catalysts of economic transformation.