Central Bank of Nigeria cuts interest rate for the first time since 2020

Nigeria’s central bank has lowered its benchmark lending rate for the first time in five years, citing easing inflation and a stronger naira.

The Monetary Policy Committee (MPC) on Tuesday voted unanimously to cut the Monetary Policy Rate (MPR) by 50 basis points to 27 percent, Governor Olayemi Cardoso announced in Abuja. It is the first rate reduction since 2020, after six increases last year and three “holds” earlier in 2025.

“The MPC’s decision to lower the monetary policy rate was predicated on the sustained disinflation recorded in the past five months, projections of declining inflation for the rest of 2025, and the need to support economic recovery efforts,” Cardoso said.

Headline inflation slowed for the fifth month in a row to 20.12 percent in August, down from record highs triggered last year by subsidy removals and a currency devaluation. The naira has since firmed by about 3 percent this month, supported by capital inflows and a current account surplus. The central bank said it ultimately wants inflation back to single digits.

The committee paired the cut with a mix of other policy moves designed to keep liquidity in check. The cash reserve requirement (CRR) for commercial banks was reduced to 45 percent from 50 percent to spur lending, while a tighter 75 percent CRR was imposed on non-Treasury Single Account public sector deposits to mop up excess liquidity.

The CRR for merchant banks was kept at 16 percent, and the liquidity ratio unchanged at 30 percent. The Standing Facilities Corridor was widened to ±250 basis points around the MPR.

Aggressive easing

Cardoso highlighted several factors supporting the shift: lower petrol prices, improved crude production, stronger external reserves of $43.05 billion as of September 11, and the onset of the harvest season expected to cool food prices. He added that Nigeria’s economy grew 4.23 percent in the second quarter, the fastest pace in nearly four years, driven by a rebound in oil.

All 12 MPC members backed the decision. Analysts said the move could mark the start of a broader cycle. “We expect an aggressive easing cycle ahead, with a further 700 basis points of cuts by the end of next year,” wrote David Omojomolo of Capital Economics.

With the cut, Nigeria became the last of Africa’s four largest economies — after South Africa, Egypt, and Algeria — to pivot toward monetary easing in the past year.