CBN Cuts MPR to 26.5% Sparking Hope for Cheaper Agric Loans

News in Brief

-The CBN has reduced Nigeria's MPR to 26.5 per cent amid easing inflation at 15.10 per cent.

-Past reductions have modestly eased agric lending over time, offering hope for smallholder farmers and agribusinesses 

The Central Bank of Nigeria (CBN) has announced a reduction of the Monetary Policy Rate (MPR) from 27.0% to 26.5%, lowering the benchmark interest rate for the second time in five months.

This new rate was announced by the CBN Governor, Olayemi Cardoso, during a press briefing following the 304th Monetary Policy Committee meeting on Tuesday.

Governor Cardoso explained that the decision was unanimously agreed upon by all members of the MPC, driven by sustained improvements in key macroeconomic indicators, particularly inflation. 

New MPR and Other Key Decisions

MPR is the benchmark interest rate that sets the rates commercial banks charge for loans and pay for savings.

This new moderation, which is the second reduction in a row after years of tightening, has strengthened expectations that the CBN may begin to gradually ease the monetary policy as inflation rates ease.

While the MPR was reduced, the committee retained the Cash Reserve Ratio (CRR) at 45 per cent for commercial banks and 16 per cent for merchant banks, while maintaining the 75 per cent CRR on non-TSA public sector deposits.

Nigeria’s headline inflation rate eased to 15.10% in January 2026, down slightly from 15.15% in December 2025, according to the latest Consumer Price Index (CPI) report released by the National Bureau of Statistics (NBS).

This new rate also sparks a glimmer of hope for stakeholders in Nigeria's agriculture sector who anticipate urgent relief amid persistent funding challenges.

Current Lending Rates Burden the Food Sector

Commercial banks continue to impose steep lending rates on agriculture and related sectors, despite the MPR adjustment, with maximum rates reaching as high as 60% in recent CBN data covering January 2 to February 6, 2026.

Stanbic IBTC topped the list at 60% for agriculture, forestry, fishing, manufacturing, and other production areas, while FCMB charged up to 46.10% across agriculture and manufacturing, and Polaris Bank hit 47.31% in manufacturing. Ecobank Nigeria applied 48% to administrative and support services tied to production.

These elevated rates reflect tightening credit conditions amid rising energy costs, naira volatility, and subdued consumer demand, making working capital scarce for farmers and processors.

Deposit rates, by contrast, hovered around 8.10% on average, with First Bank of Nigeria at 8.25% and Globus Bank at 8.18%. Prime lending rates for top borrowers lingered in the mid-20s, such as Zenith Bank's 24.23% and Access Bank's 25.50%. Institutions like Nova Bank raised ceilings to 33.56%, underscoring a wide policy-to-lending rate gap that hampers real sector growth.

For Nigerian agribusinesses, these dynamics translate to shorter production cycles and scaled-back operations, as high costs deter input purchases and inventory holding. Only well-capitalised players, such as exporters or those backed by development finance, can sustain expansion, while small and medium enterprises pivot to survival mode.

Implications for Farmers and Agribusiness Loans

This MPR cut to 26.5% signals potential relief for farmers and agribusinesses, drawing from patterns observed in past reductions that gradually filtered through to lower commercial rates.

Historical trends show that when the CBN eased from peaks like 27.25% in 2024 to subsequent cuts, lending rates for agriculture dipped modestly within quarters, enabling schemes like the Anchor Borrowers' Programme to disburse at subsidised 9% intervention rates. Repayment ratios under such programs hovered around 52% previously, but the easier policy spurred uptake among smallholders.

Operators anticipate that sustained easing could compress the lending spread, making loans more viable for planting seasons and value-chain investments.

However, full transmission lags due to banks' risk aversion in a sector prone to weather shocks and market fluctuations. For Nigeria's 40 million smallholder farmers, this could mean expanded access to credit for staples such as rice, maize, and cassava, stabilising food output amid inflation concerns. Agribusinesses, facing 40-60 per cent rates now, may see processing margins improve, boosting rural employment and supply chains.

Yet challenges persist: without parallel fiscal measures like input subsidies or insurance via NIRSAL, the impact remains limited. Experts note that past MPR drops have been followed by 2-5 per cent lending rate reductions over six months, but agriculture's high-risk profile often delays benefits. Stakeholders urge the CBN to pair monetary easing with targeted interventions to de-risk lending and amplify growth.