Olushola Omogbehin
The Monetary Policy Committee of the Central Bank of Nigeria has cut down the country’s benchmark interest rate from 27.5 to 27 per cent for the first time since 2020, coming after three pauses in 2025 that signaled a shift in policy towards supporting economic recovery.
This decision was taken at the 302nd Monetary Policy Committee (MPC) meeting in Abuja between 22-23 September which marks a shift towards easing monetary policy after months of disinflation.
While announcing the decision at a press briefing on Tuesday in Abuja after the committee’s 302nd meeting, CBN Governor Olayemi Cardoso said all 12 members voted in favour of a 50-basis point cut from 27.5 per cent.
The MPR is the benchmark rate guiding borrowing and lending costs in Nigeria’s financial system. Commercial banks set their lending rates in line with it, affecting businesses and consumers across the economy.
This adjustment follows five consecutive months of slowing inflation, with headline inflation at 20.12% in August, down from 21.88% in July, according to the National Bureau of Statistics. Stable exchange rates, foreign reserves above $40 billion, and 4.23% GDP growth in the second quarter of 2025 also influenced the committee’s stance.
Cardoso told reporters after the meeting that the rate cut was intended to encourage growth while maintaining control over inflation. He noted that similar moves by other central banks, including the U.S. Federal Reserve’s cut on 17 September, helped create room for easing without exposing Nigeria to capital outflows.
The Monetary Policy Committee also adjusted other monetary tools. The Cash Reserve Ratio (CRR) was set at 45 per cent for commercial banks, maintained at 16 per cent for merchant banks, and fixed at 75 per cent for non-Treasury Single Account (TSA) public sector deposits. The Liquidity Ratio (LR) remained at 30%. The corridor around the MPR was changed to a symmetric +250/-250 basis points, compared with the previous +260/-250.
The implication of the cut is that it reduces the cost of borrowing for businesses, particularly in sectors such as agriculture and manufacturing where financing costs have been high. Small and medium enterprises may also gain improved access to credit. For households, lower loan rates may provide some relief, though inflation at 20.12% continues to weigh on purchasing power.
Analysts observe that while inflation remains elevated, the trend of disinflation gives room for cautious easing to support recovery. Observers on the other hand agree that the CBN’s decision marks a significant shift in monetary policy, moving from stabilisation towards growth acceleration.
For small businesses, manufacturers and employers, the cut is a signal of intent but falls short of delivering immediate relief.
