For the first time since 2024, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) after a two-day meeting in Abuja voted to reduce the interest rate or Monetary Policy Rate (MPR) by 50basis points to 27per cent from the previous 27.50 per cent.
The decision to reduce interest rate by the committee is on the backdrop of decline in inflation rate and stablity in the foreign exchange market.
Inflation rate in Nigeria eased for the fifth consecutive month, declining sharply by 176basis points to 20.12per cent in August from 21.88 per cent July 2025.
The slowdown was driven by softer price pressures in both food (21.87 per cent vs. July: 22.74 per cent) and core sub-items (20.33 per cent vs. 21.33 per cent).
The committee, however, adjusted the asymmetric corridor around the MPR to +250bps/-250bps (previous: +500bps/-100bps) and reduce the CRR for Deposit Money Banks to 45per cent from the previous 50 per cent.
They also retain the CRR for merchant banks at 16per cent and introduce a 75.0per cent CRR on non-Treasury Single Account (TSA) public sector deposits
In additin, the committee retain liquidity rate at 30per cent.
Analysts at Cordros Research had stated that it expected the MPC to begin reassessing its current policy stance, supported by sustained improvements in key indicators (inflation and the exchange rate) and a more positive outlook.
“The Committee is also likely to consider recent shifts globally to monetary easing, following the US Fed’s rate cut and the prospect of further policy accommodation in near future periods. This should be positive for capital flows into emerging and frontier markets, including Nigeria, adding an additional layer of support to engender continued exchange rate stability.
“That said, we expect the Committee to remain cautious, balancing growth-supportive measures with its core mandate of maintaining price stability. Specifically, we believe any easing will be carefully calibrated in an effort to ensure that interest rates remain competitive enough to continue to attract capital inflows and anchor inflation expectations.
“Accordingly, we project a 50basis points cut in the MPR to 27.00per cent at next week’s meeting, while maintaining other parameters,” they projected.
