The Central Bank of Nigeria (CBN) has reduced the country’s benchmark interest rate to 27.00 percent, marking the first policy rate cut in five years and the first adjustment under Governor Olayemi Cardoso’s leadership.
The decision was announced by Cardoso on Tuesday during a press briefing in Abuja, following the conclusion of the 302nd Monetary Policy Committee (MPC) meeting held on September 22 and 23, with all 12 members of the committee in attendance.
Cardoso disclosed that the MPC opted to lower the Monetary Policy Rate (MPR) by 50 basis points to 27.00 percent, revise the Standing Facilities corridor to +250/-250 basis points, and increase the Cash Reserve Requirement (CRR) for commercial banks to 45 percent while leaving that of merchant banks at 16 percent. Additionally, the MPC introduced a 75 percent CRR on non-TSA public sector deposits, while the Liquidity Ratio remained unchanged at 30 percent.
“The Committee decided as follows: 1. Reduce the MPR by 50 basis points to 27.00 percent. 2. Adjust the Standing Facilities corridor around the MPR to +250/-250 basis points. 3. Raise the CRR for commercial banks to 45 percent while maintaining that of merchant banks at 16 percent and introduce a 75 percent CRR on non-TSA public sector deposits. 4. Retain the Liquidity Ratio at 30 percent,” Cardoso announced.
Reasons Behind the Rate Cut
The Governor explained that the reduction was driven by sustained disinflation over the past five months, projections of further moderation in inflation for the rest of 2025, and the need to provide stimulus for economic growth.
Nigeria’s inflation eased notably in August, with headline inflation dropping to 20.12 percent from 21.88 percent in July. Food inflation declined to 21.87 percent from 22.74 percent, while core inflation slowed to 20.33 percent from 21.33 percent. On a month-on-month basis, inflation fell significantly to 0.74 percent in August compared with 1.99 percent in July.
This marks a turnaround from six consecutive rate hikes in 2024 and three successive pauses earlier in 2025. The last time Nigeria witnessed a rate cut was in September 2020, when the CBN reduced the MPR from 12.5 percent to 11.5 percent.
Economic Outlook and Growth Trends
The MPC also highlighted Nigeria’s improved economic performance, noting that GDP expanded by 4.23 percent in Q2 2025, up from 3.13 percent in Q1. The growth was largely supported by a resurgence in the oil sector, which recorded a massive 20.46 percent growth compared with just 1.87 percent in the previous quarter.
The committee praised the Federal Government’s ongoing security measures in oil-producing regions, emphasizing that improved crude output would help strengthen external reserves and stabilize the exchange rate.
Nigeria’s reserves rose to $43.05 billion as of September 11, 2025, up from $40.51 billion at the end of July, translating into 8.28 months of import cover. Meanwhile, the current account balance posted a surplus of $5.28 billion in Q2, up from $2.85 billion in Q1.
Banking Sector Stability
The CBN also highlighted progress in the banking sector, confirming that 14 commercial banks had already met the recapitalization requirements. Cardoso stressed that the industry remains resilient, with key financial soundness indicators within prudential thresholds.
However, the MPC warned about excess liquidity in the banking system resulting from fiscal injections and noted that the new CRR policies were designed to absorb surplus funds and enhance monetary policy effectiveness.
Global Context
Nigeria’s decision comes amid a wave of monetary easing across Africa. Ghana recently slashed its policy rate by 350 basis points to 21.5 percent, while Kenya lowered its benchmark to 9.5 percent in August.
Despite the cut, Nigeria’s policy rate remains the highest in Africa, reflecting the country’s persistent inflationary pressures. The MPC expressed optimism that disinflation would continue, driven by exchange rate stability, declining fuel prices, and the harvest season. The next MPC meeting is scheduled for November 24 and 25, 2025.
