CBN Cuts Interest Rate to 27% as OPS Seeks Real Credit Relief for Businesses

The Central Bank of Nigeria (CBN) has lowered its benchmark interest rate to 27 per cent, marking its first cut of 2025 and signaling a shift from monetary tightening to supporting economic recovery. Announcing the decision after the Monetary Policy Committee’s (MPC) 302nd meeting in Abuja, CBN Governor Olayemi Cardoso said all 12 committee members voted for a 50-basis-point cut from 27.5 per cent. He explained that the move was driven by “sustained disinflation over the past five months” and forecasts of further inflation decline for the remainder of the year.

The rate cut comes as key economic indicators show improvement. Nigeria’s headline inflation slowed to 20.12 per cent in August from 21.88 per cent in July, while food and core inflation also eased. Gross Domestic Product growth accelerated to 4.23 per cent in the second quarter, boosted by a 20.46 per cent expansion in the oil sector. Foreign reserves rose to $43.05 billion, providing over eight months of import cover, and the current account surplus more than doubled to $5.28 billion, reflecting stronger external balances.

In addition to the MPR cut, the MPC adjusted the Standing Facilities corridor to +250/-250 basis points, raised the Cash Reserve Requirement for commercial banks to 45 per cent, and introduced a 75 per cent CRR on non-TSA public sector deposits, while retaining the liquidity ratio at 30 per cent. Cardoso noted that 14 banks had already met new recapitalization targets, and the sector remained resilient with key financial soundness indicators within regulatory limits.

While the cut has been widely welcomed, the Organised Private Sector (OPS) says the move remains “too marginal” to ease the credit squeeze facing manufacturers and small businesses. The Director-General of the Manufacturers Association of Nigeria, Segun Ajayi-Kadir, stressed that industries need loans at single-digit rates to sustain production, while NECA’s Adewale Oyerinde warned that high cash reserve ratios and liquidity restrictions could undermine the cut’s impact. Small business leaders echoed these concerns, calling for special credit windows and structural reforms to complement monetary easing.

Analysts agree the CBN’s decision marks the beginning of a cautious monetary easing cycle that could support growth if inflation continues to moderate. Former Zenith Bank Chief Economist Marcel Okeke described the cut as “symbolic but meaningful,” noting that further reductions could follow at the November MPC meeting. However, business leaders and labour groups emphasize that borrowing costs remain among the highest in Africa, urging the government to combine lower interest rates with improved infrastructure, security, and fiscal reforms to make credit truly affordable for Nigeria’s productive sectors.

source: punch