This follows a decline in inflation, which has fallen for 11 consecutive months to 15.1% in January, according to CBN Governor Yemi Cardoso.

The MPR sets the benchmark for borrowing costs in the economy. Lowering it could reduce funding expenses for digital lenders, who rely on borrowed capital rather than customer deposits.

“Digital lenders and members of the Money Lenders Association usually borrow at interest rates linked to MPR, so any change in such MPR will have a significant impact on our cost of lending to customers,” Gbemi Adelekan, president of the Money Lenders Association, said in a report.

Unlike commercial banks, which fund loans largely with customer deposits, most digital lenders depend on wholesale funding, private capital, or institutional borrowing.

This makes them highly sensitive to changes in benchmark rates. High MPR levels over the past year have forced many lenders to either raise loan rates or absorb thinner margins.

Currently, commercial banks charge annual interest rates exceeding 30% in some cases, while digital loan apps charge between 5% and 15% monthly.

Experts caution that borrowers should not expect immediate relief.

“Everyone benchmarks around MPR and their cost of borrowing,” said Babatunde Akin-Moses, co-founder of digital lending app Sycamore. “Rates should come down as the cost of funds becomes cheaper, but it may not happen immediately since some loans are already in effect, and may not have agreed variable rates with customers.”

Adeshina Adewumi, CEO of Trade Lenda, a digital bank for small businesses, also anticipates only modest changes. “I do not envisage any significant impact,” he said.

“However, a lower MPR means lower cost of funds to digital lenders, and we can afford to relax our numbers slightly.” Adelekan expects loan app interest rates to stay largely within the current range for now.

The digital lending sector in Nigeria has grown even as households seek short-term credit to manage living costs and limited access to traditional bank loans.

As of February 2026, the Federal Competition and Consumer Protection Commission had authorised 469 digital lenders. Consumer credit reached ₦3.11 trillion ($2.31 billion) in Q3 2025, with personal loans accounting for more than two-thirds of activity.

High interest rates have prompted lenders to move away from small nano loans, usually under ₦10,000, toward larger loans for customers with verifiable income.

“High MPR rates led to a tightening of credit by our members,” Adelekan said. “Lately, most of our digital lenders are shifting away from high-risk, small-ticket nano loans (under ₦10,000) toward quality and customers with verifiable income to reduce our non-performing loans.”

The sector is now prioritising portfolio quality over rapid user growth, showing a prudent recalibration as borrowing conditions gradually respond to monetary policy easing.

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Olayemi Cardoso, CBN Governor, disclosed this while briefing the media after the 301st Monetary Policy Committee (MPC) meeting held in Abuja on Tuesday.

He stated that the decision was made unanimously to allow for a proper assessment of the impact of earlier monetary tightening measures.

According to Cardoso, the Committee acknowledged the slowing pace of inflation in the country but expressed concern about new risks to macroeconomic stability.

These include the recent decline in crude oil prices, driven by increased output from non-OPEC countries, as well as global uncertainties that could affect government revenue.

The MPC decided to hold the Monetary Policy Rate (MPR), also known as the interest rate, at 27.5%. It also maintained the asymmetric corridor around the MPR at +500/-100 basis points.

The  Cash Reserve Ratio (CRR) for Deposit Money Banks was retained at 50.00%, and for Merchant Banks at 16.00%, while the Liquidity Ratio remained unchanged at 30.00 percent.

Cardoso emphasized that the decision was based on sustaining efforts aimed at curbing inflation and addressing emerging monetary pressures. He disclosed that eight banks have so far met the recapitalization requirement of the CBN, while others are making progress towards compliance.

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Aiming to tackle inflation and stabilise the economy, the decision, announced by Governor Yemi Cardoso at the conclusion of the year’s final Monetary Policy Committee (MPC) meeting in Abuja, is a 25-basis-point increase from the previous 27.25%.  

This adjustment, the sixth such hike in 2024, comes as inflationary pressures keep increasing with Nigeria’s headline inflation climbing to 33.88% in October, as reported by the National Bureau of Statistics (NBS). 

The increase is a 1.18% month-on-month rise and a year-on-year surge of 6.55% compared to October 2023. Factors such as higher food prices and transportation costs have been key contributors to this inflationary trend.  

The MPC also maintained other parameters: the Cash Reserve Ratio (CRR) was held at 50% for Deposit Money Banks and 16% for Merchant Banks, while the Liquidity Ratio (LR) remained at 30%. The Asymmetric Corridor was retained at +500/-100 basis points around the Monetary Policy Rate (MPR).  

Explaining the decision, Cardoso noted that the committee unanimously agreed on the rate hike to address the “renewed inflationary pressures” observed in October. He noted that the measures were necessary to mitigate price instability and preserve economic stability.  

Economists have spoken about the potential impact of consecutive rate hikes on economic growth and loan repayment rates.

While the tighter monetary policy may help contain inflation, analysts argue that without complementary fiscal policies to address structural weaknesses—such as low productivity and inadequate diversification—the inflationary pressures may persist.  

Recent economic indicators further stress the challenges facing policymakers. Nigeria’s Gross Domestic Product (GDP) grew by 3.46% in the third quarter of 2024, driven primarily by the services sector. However, rising costs, a volatile naira, and declining oil production have exacerbated economic vulnerabilities.  

Analysts like Prof. Joseph Nnanna, Chief Economist at the Development Bank of Nigeria, has called for a change in focus from crude oil dependency to leveraging other untapped sectors to enhance productivity. 

Similarly, financial experts caution that the higher CBN interest rate could impact borrowers, leading to an uptick in loan defaults and non-performing loans for banks.  

Cardoso further noted the CBN’s focus on monitoring economic developments and implementing policies to achieve price stability.

The next MPC meeting is scheduled for January 2025, where further adjustments may be considered based on evolving economic conditions.  

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The Monetary Policy Rate (MPR) was increased by 50 basis points, moving it from 26.75% to 27.25%. This decision was made following the Monetary Policy Committee’s (MPC) latest meeting in Abuja, chaired by CBN Governor Olayemi Cardoso.

As part of a goal to tighten monetary policy, the CBN also increased the Cash Reserve Ratio (CRR) for commercial banks, pushing it up by 500 basis points to 50%. 

Merchant banks were similarly affected, though with a smaller adjustment, seeing their CRR rise by 200 basis points to 16%. The liquidity ratio, however, remains unchanged at 30%, while the asymmetric corridor around the MPR was held at +500/-100 basis points.

Governor Cardoso emphasised that these were necessary to maintain pressure on inflation, which remains a huge issue for Nigeria’s economy. Despite some indications of moderating inflation, the MPC opted for further tightening to prevent a resurgence of price instability.

The consistent rise in interest rates, now in its fifth consecutive hike within the year is an issue for Nigerians. The CBN’s approach has been met with both support and caution, as stakeholders continue to assess the long-term impact of sustained high interest rates on economic growth and investment.

In his statement, CBN Governor justified the multiple interest rate hikes, stating that without these measures, inflationary pressures would have worsened, further straining the economy. 

He noted the importance of keeping inflation in check, noting that no economic model could successfully alleviate poverty in an environment where inflation remains unchecked.

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