The Central Bank of Nigeria (CBN) has lowered the country’s benchmark interest rate to 27.00 per cent, marking the first reduction in 2025 following three consecutive pauses.
CBN Governor Olayemi Cardoso announced the decision on Tuesday in Abuja after the conclusion of the 302nd Monetary Policy Committee (MPC) meeting, held on September 22 and 23, which saw full attendance from all 12 committee members.
Cardoso explained that the committee reduced the Monetary Policy Rate (MPR) by 50 basis points, adjusted the Standing Facilities corridor to +250/-250 basis points, raised the Cash Reserve Requirement (CRR) for commercial banks to 45 per cent while keeping merchant banks at 16 per cent, and introduced a 75 per cent CRR on non-Treasury Single Account (TSA) public sector deposits. The Liquidity Ratio remained unchanged at 30 per cent.
“The Committee decided as follows: 1. Reduce the Monetary Policy Rate by 50 basis points to 27.00 per cent. 2. Adjust the Standing Facilities corridor around the MPR to +250/-250 basis points. 3. 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. 4. Keep the Liquidity Ratio unchanged at 30.00 per cent,” Cardoso said.
The governor said the rate cut was warranted due to “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.”
Headline inflation fell to 20.12 per cent in August from 21.88 per cent in July, while food inflation dropped to 21.87 per cent from 22.74 per cent. Core inflation eased to 20.33 per cent from 21.33 per cent, and month-on-month inflation slowed sharply to 0.74 per cent in August from 1.99 per cent in July.
This marks the first rate cut under Cardoso’s leadership, following six consecutive hikes in 2024 and three pauses in 2025. The last CBN rate reduction was in September 2020, when the MPR fell from 12.5 per cent to 11.5 per cent.
On the broader economy, the MPC highlighted Nigeria’s Q2 GDP growth of 4.23 per cent, up from 3.13 per cent in Q1, driven largely by a rebound in the oil sector, which expanded by 20.46 per cent compared with 1.87 per cent in the previous quarter. The committee commended the Federal Government’s security efforts in oil-producing regions, noting that sustained production growth would bolster external reserves and support foreign exchange stability.
External reserves rose to $43.05bn as of September 11, up from $40.51bn at the end of July, providing an import cover of 8.28 months. The current account also recorded a surplus of $5.28bn in Q2, compared with $2.85bn in Q1.
The MPC warned of excess liquidity in the banking system from fiscal releases and said the new CRR measures aim to absorb the surplus and strengthen monetary policy transmission. Cardoso added that 14 banks have already met the new recapitalisation requirements, and the banking sector remains resilient with sound financial indicators.
Looking ahead, the MPC expects disinflation to continue, supported by exchange rate stability, falling PMS prices, and the harvest season. The next MPC meeting is set for November 24 and 25, 2025.
The rate cut aligns with a wider trend across Africa as central banks respond to slowing inflation. Last week, Ghana cut its policy rate by 350 basis points to 21.5 per cent, while Kenya trimmed its benchmark rate to 9.5 per cent in mid-August. Nigeria’s 27 per cent rate remains the highest on the continent, reflecting continued inflation pressures.