The Central Bank of Nigeria (CBN) has reduced its benchmark interest rate—also known as the Monetary Policy Rate (MPR)—to 27.00 percent, marking the first time the rate has been lowered since 2020 and the first such move under Governor Olayemi Cardoso’s tenure.
The announcement—delivered by Governor Cardoso during a press conference in Abuja—followed the 302nd meeting of the Monetary Policy Committee (MPC) on September 22–23, with all 12 members present. The MPC decision includes several key changes in Nigeria’s monetary framework.
What Changed?
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The MPR was cut by 50 basis points, moving from 27.50 percent to 27.00 percent.
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The corridor for the standing facilities (the interest band above and below the MPR) was reset to +250 / –250 basis points.
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The Cash Reserve Requirement (CRR) for commercial banks was raised to 45 percent, while merchant banks remain at 16 percent.
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A 75 percent CRR was introduced for non-TSA (Treasury Single Account) public sector deposits.
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The Liquidity Ratio was held steady at 30 percent.
Governor Cardoso emphasized that these adjustments aim to balance efforts to stimulate economic growth with the necessity of managing inflation and system liquidity.
What Led to the Decision?
The MPC attributed the rate cut to recent disinflation trends and expectations of further easing in inflation through the rest of 2025. Nigeria’s headline inflation dipped to 20.12 percent in August, down from 21.88 percent in July. Food inflation declined to 21.87 percent (from 22.74 percent), and core inflation eased to 20.33 percent (from 21.33 percent). On a month-to-month basis, inflation slowed to 0.74 percent in August versus 1.99 percent in July.
This rate cut reverses the course taken in 2024, when the central bank raised rates six times, and follows three pauses earlier in 2025. The last time Nigeria experienced a rate reduction was in September 2020, when the MPR was lowered from 12.5 percent to 11.5 percent.
Economic Scene & Outlook
The MPC pointed to positive economic indicators, including a 4.23 percent GDP growth in Q2 2025, up from 3.13 percent in Q1. That rebound was largely driven by a 20.46 percent jump in oil sector output, aided by renewed crude production in previously troubled regions.
Nigeria’s foreign reserves stood at US$43.05 billion as of September 11, 2025—up from US$40.51 billion in July—offering about 8.28 months of import cover. The current account also showed improvement, with a US$5.28 billion surplus in Q2 (versus US$2.85 billion in Q1).
In the banking sector, the CBN confirmed that 14 commercial banks have met recapitalization benchmarks. Key financial health metrics remain within regulatory norms, signaling institutional resilience.
That said, the MPC expressed concern over excess liquidity in the system. The new CRR adjustments are partly intended to mop up surplus funds and enhance the potency of monetary actions.
Global Comparisons & Challenges
Across the African continent, Nigeria’s move aligns with a broader easing cycle. Ghana, for example, cut its policy rate by 350 basis points to 21.5 percent, and Kenya trimmed its benchmark to 9.5 percent in August.
Despite this cut, Nigeria’s policy rate remains among the highest in Africa—a reflection of persistent inflationary pressures. The MPC remains cautiously optimistic, forecasting continued disinflation driven by stable exchange rates, lower fuel costs, and improved food supply from the harvest season.
The next MPC meeting is slated for November 24–25, 2025.
