The Central Bank of Nigeria (CBN) has reduced its benchmark interest rate by 50 basis points, bringing the Monetary Policy Rate (MPR) down from 27.5 percent to 27 percent. This marks the first policy rate cut by the apex bank in nearly five years.
Announcing the decision at the end of its Monetary Policy Committee (MPC) meeting in Abuja on Tuesday, CBN Governor Olayemi Cardoso said the move was informed by a sustained decline in inflation and the need to stimulate growth in Africa’s largest economy. Nigeria’s headline inflation eased to 20.12 percent in August, down from 21.5 percent in July.
“The Committee considered it appropriate to ease the tight monetary stance given the trajectory of disinflation and the need to provide support for real sector growth,” Cardoso stated.
In addition to lowering the MPR, the MPC reduced the Cash Reserve Ratio (CRR) for commercial banks from 50 percent to 45 percent and adjusted the asymmetric corridor around the policy rate to +250 and –250 basis points. It also introduced a 75 percent CRR on non-TSA public sector deposits as part of measures to tighten fiscal liquidity management.
The cut is expected to ease borrowing costs for businesses and consumers, although analysts warn that transmission may be gradual, given prevailing risks in the economy. Some also caution that a softer rate stance could reduce Nigeria’s appeal to foreign investors and potentially put pressure on the naira.
Nigeria has battled soaring inflation, currency depreciation, and sluggish growth in recent years. The latest decision signals a shift in monetary policy towards supporting economic expansion, even as the CBN pledged to remain vigilant against risks of inflation resurgence.
