CBN Cuts Interest Rate To 27% In First Policy Shift Since 2020

Abuja, Nigeria- The Central Bank of Nigeria (CBN) has reduced the benchmark interest rate to 27.00 per cent, marking the first cut since 2020 and the first policy shift of 2025 after three consecutive pauses.

Governor Olayemi Cardoso announced the decision on Tuesday in Abuja after the conclusion of the 302nd meeting of the Monetary Policy Committee (MPC), which took place on September 22 and 23, with all 12 members in attendance.

According to Cardoso, the committee voted to reduce the Monetary Policy Rate (MPR) by 50 basis points. It also adjusted the Standing Facilities corridor to +250/-250 basis points, raised the Cash Reserve Requirement (CRR) for commercial banks to 45 per cent while retaining that of merchant banks at 16 per cent, and introduced a 75 per cent CRR on non-TSA public sector deposits. The Liquidity Ratio was left unchanged at 30 per cent.

Explaining the rationale behind the decision, Cardoso said the rate cut was aimed at balancing inflationary pressures with the need to stimulate growth in the economy.

“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.

According to him, the rate cut was justified 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.”

The committee noted that headline inflation eased to 20.12 per cent in August, down from 21.88 per cent in July, while food inflation declined to 21.87 per cent from 22.74 per cent.

Core inflation also moderated, falling to 20.33 per cent from 21.33 per cent over the same period. On a month-on-month basis, inflation slowed sharply to 0.74 per cent in August, compared with 1.99 per cent in July.

This adjustment marks the first rate cut under Governor Olayemi Cardoso, following six consecutive hikes in 2024 and three straight pauses in 2025. The last time the CBN lowered its benchmark interest rate was in September 2020, when the Monetary Policy Rate was reduced from 12.5 per cent to 11.5 per cent.

On broader economic performance, the MPC highlighted that Nigeria’s Q2 GDP grew by 4.23 per cent, up from 3.13 per cent in Q1, largely due to a rebound in the oil sector, which expanded by 20.46 per cent, compared with just 1.87 per cent in the previous quarter.

The committee commended the Federal Government’s efforts to strengthen security in oil-producing regions, stressing that sustained production growth would help support external reserves and foreign exchange stability.

As of September 11, 2025, reserves stood at $43.05bn, up from $40.51bn at the end of July, providing 8.28 months of import cover. The current account balance also recorded a surplus of $5.28bn in Q2, compared with $2.85bn in Q1.

However, the committee cautioned about excess liquidity in the banking system resulting from fiscal releases. It explained that the new Cash Reserve Ratio (CRR) measures were introduced to absorb the surplus and enhance monetary policy transmission.

Cardoso further disclosed that 14 banks have already met the new recapitalisation requirements, adding that the sector remains resilient, with financial soundness indicators staying within prudential benchmarks.