The Central Bank of Nigeria (CBN) has officially reduced its benchmark interest rate from 27.5% to 27%, marking the first rate cut since the tightening cycle began in 2020. This decision was made during the 302nd Monetary Policy Committee (MPC) meeting held on September 22-23, 2025, signaling a shift towards supporting economic growth amid improving macroeconomic conditions.
CBN Governor Dr. Olayemi Cardoso explained that the rate cut was informed by a sustained decline in inflation over the past five months. Headline inflation dropped to 20.12% in August 2025, reflecting consistent easing of inflationary pressures. Additionally, the naira’s stability in the foreign exchange (FX) market, supported by reforms in the FX regime and improvements in external reserves, gave policymakers confidence to ease monetary policy.
The MPC also introduced a new 75% cash reserve ratio (CRR) on non-Treasury Single Account (TSA) public sector deposits as part of liquidity management measures. The cash reserve ratio for commercial banks was adjusted, but the liquidity ratio remained unchanged at 30%.
Governor Cardoso emphasized that the rate cut aims to stimulate economic recovery by lowering borrowing costs for businesses and consumers while maintaining price stability. The Nigerian economy has shown promising growth, with GDP expanding at 4.23% in Q2 2025, supported by gains in oil production and expanding services sectors.
Market analysts welcome the CBN’s move, anticipating greater liquidity in the banking system, increased access to credit for Micro, Small, and Medium Enterprises (MSMEs), and potential capital market growth. The MPC cautioned that it would continue monitoring economic indicators to ensure a balanced approach to monetary policy and inflation control.
This carefully calibrated policy shift reflects Nigeria’s improving macroeconomic environment and the Federal Government’s commitment to sustaining growth while safeguarding financial stability.
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