Omole Says Rate Cuts Have Not Reached Borrowers
The Central Bank of Nigeria’s recent interest rate cuts have yet to bring down what businesses actually pay to borrow, according to Charles Omole, director-general of the Institute for Police and Security Policy Research.
Omole, in a post on his X handle, argued that much of the public debate around the rate decision had missed the deeper problem: the widening gap between the benchmark rate the bank sets and the far higher rates lenders charge in the market.
His intervention followed the bank’s move on Tuesday, 22 September 2026, when the Monetary Policy Committee cut the Monetary Policy Rate to 23 per cent from 26.5 per cent. Governor Olayemi Cardoso announced the 350 basis point reduction after the committee’s 307th meeting in Abuja, its largest single cut on record. It was the second easing this year, after a 50 basis point cut in February took the rate from 27 to 26.5 per cent, followed by two holds.
By Omole’s calculation, the rate has fallen from 27.5 per cent in 2025 to 23 per cent by September 2026, a cumulative 450 basis points. He said that reduction, while large on paper, has had limited effect on the cost of commercial credit reaching businesses.
He pointed to the bank’s own data to make the case. Omole said that in the second quarter of 2025, when the rate stood at 27.5 per cent, the prime lending rate for top corporate borrowers averaged 18.18 per cent, while the average maximum lending rate was about 29.82 per cent.
The gap widened in 2026, he said. Maximum lending rates stayed close to 35 per cent for several months even after the benchmark had been lowered to 26.5 per cent, before easing to about 33 per cent in July. In some high risk manufacturing segments, he added, interest rates had reached between 50 and 60 per cent.
Omole was careful to note that the problem is neither new nor peculiar to the current leadership of the bank. He said the transmission of monetary policy into commercial lending rates has suffered structural weaknesses for years, and recalled that the Monetary Policy Committee itself acknowledged in 2019 that the benchmark was losing its force as an anchor for market rates.
Cutting the policy rate, he explained, does not automatically produce cheaper loans, because several stages must be completed before monetary easing works its way through to businesses.
He also gave weight to the difficulties lenders face. Omole listed high default risk, the cost of power and infrastructure, liquidity requirements, inflation expectations and the expense of mobilising deposits as genuine pressures on banks. These, he said, help explain why lending rates stay elevated even when the policy rate falls.
Those pressures could not, in his view, permanently justify a situation where the bank’s stated intentions and actual lending rates remain disconnected. The real test, he argued, would be whether commercial rates begin to move more closely with the benchmark in the months ahead.
Omole cited Cardoso’s own comments after the September decision, in which the governor described the reduction as a deliberate effort to re-anchor distorted market rates and restore effective monetary policy transmission. Omole said that acknowledgement mattered, but that recognition of the problem was not the same as solving it.
The context around the cut lends some support to the bank’s timing. Headline inflation eased for a third straight month to 15.39 per cent in August, down from 15.43 per cent in July, according to the National Bureau of Statistics. The economy grew by 4.43 per cent in the second quarter of 2026, and Cardoso said gross external reserves stood at about 55.25 billion dollars.
Alongside the rate cut, the committee recalibrated the standing facilities corridor to plus 50 and minus 300 basis points around the benchmark, placing the transaction corridor between 20 and 22.5 per cent. The cash reserve ratio was retained at 45 per cent for deposit money banks and 16 per cent for merchant banks, with the requirement on non Treasury Single Account public sector deposits kept at 75 per cent.
Cardoso has framed the adjustment as an operational reset rather than a shift towards loosening, describing it as an attempt to restore the benchmark as the main signal for interest rates across the economy. The combination of a sharply lower rate with unchanged reserve requirements suggests the bank is trying to reduce the cost of credit without surrendering its grip on system liquidity.
Whether that translates into cheaper loans remains the open question. For manufacturers said to be paying up to 60 per cent, and for smaller firms priced out of formal credit, the value of any rate cut will be measured not in the announcement but in what the bank charges when they next approach a lender. That evidence will only emerge as banks respond in the weeks ahead.