Five years after, CBN cuts interest rate to 27%

…Credit easing a timely boost for growth — CPPE

In a historic policy shift, the Central Bank of Nigeria (CBN) on Tuesday reduced its benchmark interest rate the Monetary Policy Rate (MPR) for the first time in five years, lowering it by 50 basis points to 27 per cent.

The apex bank also adjusted key policy levers: the asymmetric corridor around the MPR was set at +250/-250 basis points, the Cash Reserve Ratio (CRR) for Deposit Money Banks was reduced to 45 per cent from 50 per cent, while Merchant Banks’ CRR was retained at 16 per cent. The Liquidity Ratio remained unchanged at 30 per cent. In addition, a 75 per cent CRR was introduced for non-public sector deposits.

Announcing the decision after the two-day Monetary Policy Committee (MPC) meeting in Abuja, CBN Governor Olayemi Cardoso said the easing was informed by five consecutive months of sustained disinflation, creating room to support economic recovery.

The last rate cut was in September 2020, when the MPR was lowered from 12.5 to 11.5 per cent to cushion the economy during the COVID-19 pandemic. Since then, the CBN had maintained an aggressive tightening stance, including a recent hike in September 2024 to 27.25 per cent from 26.25 per cent in May, aimed at curbing inflation and stabilizing the exchange rate.

Reacting to the latest move, Dr. Muda Yusuf, Director/CEO of the Centre for the Promotion of Private Enterprise (CPPE), hailed the policy easing as “a welcome and timely intervention” to stimulate growth and investment.

According to him, “The shift is both logical and timely, as high interest rates in recent quarters have constrained credit, raised funding costs, and stifled business expansion.

”Yusuf noted that the decision will expand banks’ lending capacity, reduce borrowing costs, and unlock financing for businesses — particularly small and medium enterprises (SMEs). He added that lower borrowing costs would encourage new investments, boost output, and create jobs while strengthening banks’ role in financial intermediation.

He, however, stressed the importance of complementary fiscal measures such as sustained fiscal consolidation, investment in critical infrastructure, regulatory reforms, and stronger action against insecurity to maximize the benefits of monetary easing.

“The MPC’s decision represents a strategic pivot from stabilization to growth acceleration. If sustained and supported by fiscal and structural reforms, it will help build a more resilient, inclusive, and growth-oriented Nigerian economy,” Yusuf stated