he Central Bank of Nigeria (CBN) has reduced its Monetary Policy Rate (MPR) by 50 basis points, bringing it down from 27.5% to 27%, in a strategic move to support Nigeria’s sustained economic recovery and disinflation trajectory.
This decision was announced following the conclusion of the 302nd meeting of the Monetary Policy Committee (MPC) held on September 22 and 23, 2025. All 12 members of the committee voted in favor of the rate cut.
Key Highlights of the MPC Decision:
- MPR reduced to 27% (from 27.5%)
- Cash Reserve Requirement (CRR) for commercial banks cut to 45%
- CRR for merchant banks retained at 16%
- 75% CRR introduced on non-TSA public sector deposits
- Liquidity ratio maintained at 30%
- Asymmetric corridor retained at +260/-250 basis points
Rationale for the Rate Cut
CBN Governor Olayemi Cardoso, while addressing journalists, explained that the MPC’s decision to lower the benchmark interest rate was influenced by:
- Five consecutive months of disinflation
- Positive inflation forecasts for the remainder of 2025
- The need to stimulate economic growth without compromising price stability
“The Committee observed increased macroeconomic stability marked by improved output growth, stable exchange rates, and robust external reserves,” said Cardoso.
Inflation in Nigeria Shows Sustained Decline
According to the MPC, August 2025 recorded the strongest pace of disinflation in the last five months, driven by a mix of:
- Tight monetary policy
- Exchange rate stability
- Rising capital inflows and current account surplus
- Stabilizing fuel prices (PMS)
- Notable increases in crude oil production in Nigeria
These trends have anchored inflation expectations, giving the central bank room to adopt a more supportive monetary policy stance.
Liquidity Management and Banking Sector Reform
In a bid to address excess liquidity in the banking system and strengthen monetary policy transmission, the MPC adjusted the standing lending and deposit facility corridor and highlighted the critical importance of the interbank market in facilitating monetary policy effectiveness
“Despite inflation deceleration, the Committee noted persistent liquidity surpluses due to improved fiscal revenue. Therefore, the new cash reserve measures and corridor adjustments are aimed at enhancing liquidity management and ensuring financial system stability,” the MPC stated.
Outlook for the Nigerian Economy in 2025
The Central Bank remains optimistic about Nigeria’s economic outlook for the rest of 2025, citing continued moderation in inflation, stable foreign exchange markets, increasing oil production and strengthening capital inflows
The MPC reiterated its commitment to price stability, economic growth, and sound financial system management, noting that any future policy decisions will remain data-driven and responsive to evolving macroeconomic indicators.
