Central Bank of Nigeria Lowers Benchmark Rate to 23%

On September 22, the Central Bank of Nigeria, led by Governor Olayemi Cardoso, announced a reduction of its benchmark interest rate from 26.5% to 23%. This decision is framed as a recalibration of monetary policy rather than a complete shift from a restrictive stance.

While this reduction may encourage businesses to seek cheaper credit, it does not guarantee a corresponding decrease in commercial lending rates. Even if banks pass on the full 3.5-percentage-point reduction, businesses must manage their borrowing effectively to realize savings.

Suppliers often incur costs for materials, transport, and labor before receiving payment, and if they borrow funds to cover these expenses, the waiting period for customer payments can lead to additional interest costs. The British Business Bank identifies late payments and inventory funding as significant pressures on working capital, which can diminish the benefits of lower borrowing costs.