CBN Cuts MPR to 27% After Five Years as Inflation Eases, Banks Meet New Capital Targets

The Central Bank of Nigeria (CBN) has cut its benchmark Monetary Policy Rate (MPR) to 27 percent, the first time it has eased interest rates since 2020. The decision, announced after the Monetary Policy Committee (MPC) meeting in Abuja, signals a cautious shift towards supporting economic growth as inflation begins to cool. All 12 MPC members voted in favour of the cut, underscoring a unified stance at the apex bank.

Alongside the rate cut, the CBN unveiled a mix of liquidity measures to balance growth and price stability. The Cash Reserve Requirement (CRR) for commercial banks was reduced from 50 percent to 45 percent to stimulate lending, while a tighter 75 percent CRR was imposed on non-Treasury Single Account (TSA) public deposits to absorb excess liquidity. Governor Olayemi Cardoso said the easing was driven by five straight months of disinflation, a stable naira and projections of lower inflation through the end of 2025.

According to CBN staff projections, inflation is expected to decline further in the coming months due to lower petrol prices, improved crude oil production, and a seasonal drop in food costs as the harvest season gathers pace. Cardoso emphasised that these factors, combined with rising capital inflows, are helping to ease inflationary pressures while anchoring market expectations. The Liquidity Ratio was maintained at 30 percent, and the Standing Facilities Corridor widened to ±250 basis points to improve monetary transmission.

The rate cut comes on the back of stronger macroeconomic data. Nigeria’s economy expanded 4.23 percent year-on-year in the second quarter of 2025, up from 3.13 percent in Q1, buoyed by a rebound in the oil sector. External reserves climbed to $43.05 billion by mid-September, providing over eight months of import cover, while the naira has stabilised thanks to a $5.28 billion current account surplus and stronger capital inflows.

The CBN also highlighted progress in bank recapitalisation, with 14 banks now meeting new capital thresholds. However, Cardoso cautioned that maintaining macroeconomic stability requires sustained fiscal discipline and continued market reforms. The MPC called for ongoing efforts to deepen foreign exchange liquidity and boost investor confidence to ensure the benefits of the policy easing translate into real economic growth.

source: Business day