The Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) by 50 basis points, bringing it down from 27.5% to 27%, in response to ongoing disinflation and improved macroeconomic indicators.
The decision was taken during the 302nd Monetary Policy Committee (MPC) meeting, held on September 22 and 23, where all 12 members voted in favor of the cut.
CBN Governor Olayemi Cardoso said the committee’s decision was driven by Five consecutive months of disinflation, a positive outlook for inflation for the remainder of 2025 and the need to sustain economic recovery efforts.
“The MPC believes the current macroeconomic environment allows for a slight loosening to support growth, without compromising the gains made on price stability,” Cardoso told journalists after the meeting.
The Monetary Policy Rate (MPR) was reduced to 27% (from 27.5%) while the Cash Reserve Ratio (CRR) was cut to 45% for commercial banks and maintained at 16% for merchant banks.
The Liquidity Ratio was held steady at 30% and the standing facilities corridor was adjusted to improve interbank liquidity.
Additionally, a 75% CRR was imposed on non-TSA public sector deposits to manage excess liquidity.
The asymmetric corridor around the MPR was maintained at +260/-250 basis points, underscoring the CBN’s cautious stance on market volatility.
According to the MPC, August 2025 recorded the highest disinflation momentum seen in five months, a trend attributed to tight monetary policy, stable exchange rate, stronger crude oil production, declining petrol (PMS) prices and increased capital inflows.
The Committee said these factors helped anchor inflation expectations, creating room for modest policy easing to stimulate economic activity.
Despite the positive inflation trend, the MPC flagged excess liquidity in the banking system, driven by rising government revenues and fiscal disbursements, as a potential threat to macroeconomic stability.
To address this, the CBN introduced a 75% CRR on non-TSA public sector deposits, aiming to strengthen liquidity management while maintaining financial system stability.
“The stability of the interbank market is critical to effective monetary policy transmission,” the Committee noted, justifying adjustments to the standing facilities corridor.
The rate cut follows encouraging growth figures released by the National Bureau of Statistics (NBS):
- Q2 2025 GDP: 4.23% year-on-year, up from 3.48% in Q2 2024
- Agriculture: Grew by 2.82% (up from 2.60%)
- Industry: Jumped by 7.45% (up from 3.72%)
- Services: Increased to 3.94% (from 3.83%)
The industry sector’s share of GDP rose to 17.31%, compared to 16.79% in the same period last year.
In nominal terms, aggregate GDP reached ₦100.73 trillion in Q2 2025, a 19.23% year-on-year increase from ₦84.48 trillion in Q2 2024, reflecting sustained recovery and improved business activity.
