The Monetary Policy Committee of the Central Bank of Nigeria (CBN) has opted to cut the benchmark interest rate to 27 per cent, a decision that ends three straight pauses and marks the first policy easing of 2025.
Governor Olayemi Cardoso announced the development on Tuesday after the MPC concluded its 302nd meeting in Abuja. He said all 12 committee members were present at the deliberations.
The central bank chief outlined the adjustments: the Monetary Policy Rate was lowered by 50 basis points, the Standing Facilities corridor was revised to +250/-250 basis points, and the Cash Reserve Requirement for commercial banks was raised from 45 per cent. The CRR for merchant banks remains unchanged at 16 per cent. In addition, a new 75 per cent CRR will now apply to non-TSA public sector deposits, while the liquidity ratio stays at 30 per cent.
“The Committee decided as follows: Reduce the Monetary Policy Rate by 50 basis points to 27.00 per cent, adjust the standing facilities corridor around the MPR to +250/-250 basis points, adjust the CRR for commercial banks to 45 per cent while retaining that of merchant banks at 16 per cent. Introduce a 75 per cent CRR on non-TSA public sector deposits, and keep the Liquidity Ratio unchanged at 30.00 per cent,” Cardoso said.
According to him, the policy shift was supported by “sustained disinflation recorded in the past five months, projections of declining inflation for the rest of 2025, and the need to support economic recovery efforts.”
Data considered by the committee showed inflation pressures easing. Headline inflation dropped to 20.12 per cent in August, from 21.88 per cent the previous month. Food inflation also moderated to 21.87 per cent, while core inflation declined to 20.33 per cent. On a month-on-month basis, inflation slowed dramatically to 0.74 per cent in August compared with 1.99 per cent in July.
First time interest rate cut under Cardoso’s leadership
This is the first interest rate cut under Cardoso’s leadership. The CBN had raised the policy rate six times in 2024, then kept it unchanged for three consecutive meetings earlier this year. Nigeria last saw a rate cut in September 2020, when the MPR was reduced from 12.5 to 11.5 per cent.
Beyond inflation, the MPC highlighted Nigeria’s improved growth performance. Second-quarter GDP rose by 4.23 per cent, higher than the 3.13 per cent growth recorded in Q1. The expansion was driven by the oil sector, which surged by 20.46 per cent compared with just 1.87 per cent in the previous quarter.
The committee credited this rebound partly to government efforts to enhance security in oil-producing areas. It said consistent production growth would boost external reserves and support exchange rate stability. Official figures showed reserves rising to $43.05 billion as of September 11, 2025, up from $40.51 billion at the end of July. This level represents more than eight months of import cover.
Nigeria’s external accounts have also strengthened. The country posted a current account surplus of $5.28 billion in Q2, compared with \$2.85 billion in the first quarter.
Still, the MPC flagged excess liquidity in the banking sector as a risk, attributing it to large fiscal injections. The new CRR measures, it explained, were introduced to absorb this liquidity and ensure effective transmission of monetary policy.
Cardoso also revealed that 14 banks have already complied with the new recapitalisation requirements. He stressed that the banking system remains healthy, with financial soundness ratios within prudential limits
The MPC expressed optimism that the disinflation trend would continue, supported by exchange rate stability, falling petrol prices, and the ongoing harvest season. The committee’s next meeting is set for November 24 and 25, 2025.
Nigeria’s rate cut comes as other African central banks also move to loosen monetary policy in response to cooling inflation. Just last week, Ghana slashed its benchmark rate by 350 basis points to 21.5 per cent, while Kenya reduced its policy rate to 9.5 per cent in mid-August.
Why CBN had retain monetary policy rate at 27.5%
In May, Cardoso expressed that the committee members in unionism agreed to retain the policy to better understand near-term developments.
The CBN boss said this after the panel’s 300th meeting in Abuja in May 2025.
The committee maintained the cash reserve ratio (CRR) at 50 per cent and the liquidity ratio at 30 per cent.
“MPC noted the relative improvements in some key macroeconomic indicators expected to support the overall moderation in crisis in the near to medium term.
“These include the progressive narrowing of the gap between the Nigerian foreign exchange market, bureau de change (BDC) windows, the positive balance of payments position and the easy price of PMS.
“The members also noted with satisfaction the progressive moderation in food inflation and, therefore, commended the government for implementing measures to increase food supply, as well as stepping up the fight against insecurity, especially in farming communities.
“The committee thus encouraged security agencies to sustain the momentum while the government provides necessary inputs to farmers to further boost food production,” the CBN governor had said on the monetary policy rate.
