MONETARY POLICY COMMITTEE CONSIDERATION
As the Central Bank of Nigeria’s Monetary Policy Committee (MPC) convenes for its scheduled third meeting in 2025, the Lagos Chamber of Commerce and Industry (LCCI) wishes to provide some perspectives of the private sector for the consideration of the Committee.
While we appreciate that the current reforms may have started to have some impact on stabilizing the exchange rates, easing headline inflation, and increasing government revenue, we must restate that interest rate at 27.5% remains a depressing burden on businesses. We therefore desire to see a reduction in the Monetary Policy Rate (MPR). Having examined key economic indicators, including inflation dynamics, exchange rate movements, fiscal developments, and global monetary trends, we may expect to see a possible hold on the MPR by the Committee.
The LCCI emphasizes the need for the MPC to strike a careful balance between preserving macroeconomic stability and supporting economic recovery—especially in light of the extension of the capital expenditure component of the 2024 federal budget to December 2025. The ongoing structural reforms and evolving domestic and external economic conditions are factors to be considered. We estimate that this budget extension could increase liquidity in the system as more capital funds are released, potentially exacerbating inflationary pressures. The Committee should consider this.
While headline inflation declined marginally to 22.22% in June from 22.79% in May, the rate remains significantly above the Central Bank’s target. Nigerian businesses and households continue to grapple with high operating and living costs, increasing the cost of credit. In our view, and consistent with our earlier position, rate hikes alone cannot curb inflation. The Committee must recommend to the CBN that targeted interventions be provided to boost our growth sectors like agriculture, power, and infrastructure.
We recognize that the current interest rate environment is tight, making access to credit above the affordability of small businesses, and the private sector is being crowded out of funding. We therefore urge the Central Bank to complement its conventional policy tools with targeted, non-cash measures in the form of concessionary interest rates to small businesses. A coordinated approach with fiscal authorities is essential to resolving key drivers of inflation such as insecurity, infrastructure deficits, and disruptions in food supply chains.
To support the real sector while maintaining price stability, the LCCI recommends the following strategic, market-oriented actions:
- Sustain market-driven reforms that promote price stability by stimulating production and investment in the real economy.
- Strengthen development finance interventions through concessional funding to high-impact sectors like manufacturing, agriculture, renewable energy, and power.
- Development finance institutions such as the Development Bank of Nigeria, Bank of Agriculture, NEXIM Bank, and the Bank of Industry should be better resourced and aligned with industrial growth priorities.
- Enhance transparency in lending practices to ensure that borrowing costs are fair and that banks do not impose excessive margins over the MPR.
- Stabilize the foreign exchange market by closing arbitrage windows, improving liquidity, and rebuilding investor confidence—critical steps toward curbing imported inflation and supporting long-term economic stability.
In preparation for a new tax system coming with new rates and administration, we advise that the fight against inflation is sustained at this time with managed rate cuts before the end of the year.
Dr. Chinyere Almona, FCA
Director-General
Lagos Chamber of Commerce and Industry
Tuesday 22nd July 2025
