By Jennete Ugo Anya
In a landmark shift, the Central Bank of Nigeria (CBN) has reduced its Monetary Policy Rate (MPR) by 50 basis points to 27%, the first cut since 2020, signaling confidence in Nigeria’s improving economic outlook.
Announced last Tuesday after a two-day Monetary Policy Committee (MPC) meeting in Abuja, the decision reflects easing inflation and robust macroeconomic gains, with projections of further disinflation through 2025.
Mr. Olayemi Cardoso, the Governor of CBN, attributed the move to five months of sustained disinflation, stable exchange rates, declining petrol prices, and an expected seasonal drop in food prices due to the harvest season. “The MPC’s decision was predicated on projections of declining inflation and the need to support economic recovery,” Mr. Cardoso said, noting that all 12 MPC members unanimously supported the cut.
To balance growth and liquidity control, the MPC lowered the Cash Reserve Requirement (CRR) for commercial banks from 50% to 45%, while maintaining merchant banks’ CRR at 16%.
However, it introduced a 75% CRR on non-Treasury Single Account public sector deposits to curb excess liquidity from fiscal injections. The Standing Facilities Corridor was widened to ±250 basis points around the MPR, with the Liquidity Ratio unchanged at 30%.
Nigeria’s economy grew by 4.23% in Q2 2025, up from 3.13% in Q1, driven by a rebound in oil production and a resilient non-oil sector. Gross external reserves rose to $43.05 billion by September 11, providing 8.28 months of import cover, while the naira stabilized with a $5.28 billion current account surplus in Q2. Additionally, 14 banks have met new capital thresholds, bolstering financial stability.
Mr. Cardoso emphasized the need for sustained policy discipline to maintain these gains, particularly in deepening foreign exchange liquidity and boosting capital inflows. “The continued stability of the foreign exchange market is critical for rapid disinflation,” he said.
Analysts view the CBN’s nuanced approach – easing to spur growth while tightening to manage liquidity – as a strategic pivot to sustain Nigeria’s economic momentum toward its $1 trillion GDP target by 2030.
