CBN Cuts Interest Rate to 27% to Boost Economy

By Oluwakemi Kindness

The Central Bank of Nigeria (CBN) has reduced the benchmark interest rate, the Monetary Policy Rate (MPR), by 50 basis points to 27 per cent to support growth and ease borrowing costs.

The decision was announced on Tuesday by the Governor of the CBN, Olayemi Cardoso, at the end of it 302nd Monetary Policy Committee (MPC) meeting in Abuja, with all 12 members present.

In a bold liquidity move, the MPC introduced a 75 per cent Cash Reserve Ratio (CRR) on non-Treasury Single Account (TSA) public sector deposits.

The CRR for commercial banks was raised to 45 per cent, while that of merchant banks was retained at 16 per cent.

CBN Governor Olayemi Cardoso said the rate cut followed five straight months of slowing inflation and forecasts of further moderation in the months ahead.

Inflation, Growth and Reserves

Cardoso recalled that Headline inflation eased to 20.12 per cent in August, from 21.88 per cent in July, the sharpest slowdown in five months.

Month-on-month inflation also fell to 0.74 per cent from 1.99 per cent.

According to him, Nigeria’s economy expanded by 4.23 per cent in Q2 2025, up from 3.13 per cent in Q1.

The oil sector also surged by 20.46 per cent, boosting foreign exchange inflows and strengthening external reserves.

Reserves rose to $43.05 billion as of September 11, 2025, from $40.51 billion at end-July, giving the country an import cover of over eight months.

Banking Sector Resilience

Cardoso noted that 14 banks have already met the new capital requirement under the ongoing recapitalisation drive.

He said Financial soundness indicators remain strong, while the termination of regulatory forbearance measures has improved transparency and risk management.

Outlook

The MPC expects further disinflation in the coming months, helped by stable exchange rates, declining petrol prices, and increased food supply from the harvest season.