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Economic growth

Central Bank of Nigeria Cuts Benchmark Interest Rate to 27 Percent, Stimulating Economic Growth

Strategic Insights

— 2 min read

The Central Bank of Nigeria (CBN) has taken a significant step towards stimulating economic growth by cutting its benchmark interest rate, the Monetary Policy Rate (MPR), to 27 percent, representing a 50-basis-point reduction. This decision, announced at the 302nd Monetary Policy Committee (MPC) meeting held on September 22-23, 2025, reflects the bank's cautious but deliberate pivot from a prolonged period of monetary tightening towards a more growth-oriented policy stance. The move aligns Nigeria with the global trend of monetary easing, coming on the heels of five straight months of disinflation, stronger external reserves, and a rebounding oil sector that helped push economic growth to its fastest pace in over two years.

Key Takeaways:

  • The CBN's 50-basis-point reduction in the MPR will lower borrowing costs, stimulate credit expansion, and boost consumer and business confidence, particularly among small and medium enterprises (SMEs).
  • The move reflects a balanced approach between price stability and growth, as stated in the MPC's communique: "The stability in the macroeconomic environment has offered headroom for monetary policy to support economic recovery."
  • Analysts, including Mr. Bismarck Rewane of Financial Derivatives Company Limited and Dr. Muda Yusuf of the Centre for the Promotion of Private Enterprise, have welcomed the decision, viewing it as a much-needed relief for Nigeria's struggling private sector.
  • The CBN has introduced complementary measures to balance growth with financial stability, including maintaining the Cash Reserve Ratio (CRR) at 45 percent and introducing a new 75 percent CRR on non-TSA public sector deposits.
  • The liquidity ratio was held at 30 percent, maintaining stability in banks' short-term funding positions.
  • Mr. Rewane cautioned that while the Nigerian economy is aligning with global monetary easing, underlying risks remain, highlighting the need for structural reforms.
  • Dr. Yusuf urged fiscal authorities to complement the monetary easing with targeted interventions such as tax reliefs, infrastructure investment, and production incentives.
  • Nigeria's improving external position, with foreign reserves rising to $43.05 billion and a current account surplus of $5.28 billion, has given the country room to support growth without immediately risking macroeconomic instability.

Statistics:

  • The MPR was cut to 27 percent, representing a 50-basis-point reduction.
  • Headline inflation slowed to 20.12 percent in August 2025, down from 21.88 percent in July.
  • Gross Domestic Product (GDP) expanded by 4.23 percent in the second quarter of 2025, driven by a 20.46 percent rebound in oil output and resilient performance in the non-oil sectors.
  • The CBN's foreign reserves stood at $43.05 billion, covering 8.28 months of imports.
  • The current account surplus widened to $5.28 billion, offering a buffer against external shocks.

Sources:

  • "Central Bank of Nigeria cuts interest rate to 27% in bid to boost economy" - CNBC Africa, September 23, 2025
  • "Nigeria's Central Bank Cuts Interest Rate to Boost Growth" - Bloomberg, September 23, 2025
  • "CBN cuts MPR to 27% to boost growth" - The Punch, September 23, 2025

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