CBN Cuts Interest Rate to 27% – Nigeria Economy News
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Nigeria’s Central Bank Cuts Interest Rates for the First Time As 2020
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has reduced the benchmark interest rate for the first time since the onset of the COVID-19 pandemic in 2020, signaling a potential shift away from its previously aggressive monetary policy. This decision reflects improving macroeconomic conditions and a cautious optimism regarding Nigeria’s economic trajectory.
Key policy Changes Announced in September 2025
At its September 2025 meeting, the MPC reduced the Monetary Policy Rate (MPR) to 27% from 27.5%. Alongside this, the Cash Reserve Ratio (CRR) for deposit money banks was adjusted downwards to 45% from 50%, freeing up more funds for lending. The asymmetric corridor around the MPR was also narrowed to +250/-250 basis points. Though, the Liquidity Ratio remained unchanged at 30%, and the CRR for merchant banks stayed at 16%
| Policy Rate | Previous Rate | New Rate |
|---|---|---|
| Monetary Policy rate (MPR) | 27.5% | 27% |
| Cash Reserve Ratio (CRR) – Deposit Money Banks | 50% | 45% |
| asymmetric Corridor | +300/-300 basis points | +250/-250 basis points |
| Liquidity Ratio | 30% | 30% |
| CRR – Merchant Banks | 16% | 16% |
Macroeconomic Factors Driving the Decision
Analysts characterize the rate cut as a “modest but symbolic step” driven by improving macroeconomic indicators. Nigeria has experienced a sustained decrease in inflation,reaching 20.1% in August 2025, marking the fifth consecutive month of decline, according to data from the National Bureau of Statistics. The Nigerian Naira has also strengthened, appreciating by 2.8% against the US dollar since July 2025, trading at N1,488.26/$1.00 as of September 2025.
Furthermore, oil production increased to 1.68 million barrels per day (bpd) in the second quarter of 2025, up from 1.62 million bpd in the first quarter, as reported by the Nigerian Petroleum Corporation. This increase in production, coupled with a strengthening global oil market, contributed to a GDP growth rate of 4.2% year-on-year in the second quarter of 2025.
Expert Analysis and Market Reaction
Afrinvest analysts noted that the 50 basis point reduction