CBN Slashes Interest Rate for First Time in Three Years

The Central Bank of Nigeria (CBN) has reduced its benchmark interest rate from 27.5% to 27%, marking the first rate cut in over a year. The announcement was made by CBN Governor Olayemi Cardoso on Tuesday, following the conclusion of the 302nd Monetary Policy Committee (MPC) meeting held over two days in Abuja.

Cardoso stated that the decision was unanimously supported by MPC members, citing the country’s sustained decline in inflation over the past five months as a key factor.

In addition to the rate cut, the MPC made several other adjustments:

• Cash Reserve Ratio (CRR): Raised to 45% for Deposit Money Banks and 16% for Merchant Banks.

• Asymmetric Corridor: Adjusted to +250/-250 basis points around the Monetary Policy Rate (MPR).

• Liquidity Ratio (LR): Maintained at 30%.

This marks the first time the CBN has lowered the interest rate since May 2023, when it was reduced from 18% to 17.5%. The decision comes amid growing calls from industrial stakeholders and manufacturers for a more accommodative monetary stance to reduce the cost of production and boost economic activity.

Nigeria’s inflation rate eased to 21.12% in August, continuing a five-month downward trend. Meanwhile, the economy expanded by 4.23% in Q2 2025, up from 3.13% in the previous quarter. Key sectors such as agriculture, services, industry, and oil recorded positive growth, while manufacturing, trade, ICT, and motor assembly experienced contractions.

Despite the recent progress, Nigeria still ranks among African nations with the highest interest and inflation rates. In comparison:

• Ghana recently cut its interest rate by 350 basis points to 21.5%, with inflation at 11.5%.

• South Africa maintains an interest rate of 7%, with August inflation at 3.3%.

The CBN’s latest move signals a potential shift toward more growth-friendly policies as inflationary pressures begin to ease, though Nigeria’s rates remain elevated by regional standards.