CBN cuts interest rate to 27%, eyes $1bn monthly inflows

CBN cuts interest rate to 27%, eyes $1bn monthly inflows

The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) has reduced the Monetary Policy Rate (MPR) by 50 basis points to 27%, citing sustained disinflation and improving economic conditions. CBN Governor Olayemi Cardoso explained that inflation has declined for five consecutive months, with headline inflation dropping to 20.12% in August 2025 from 21.88% in July, while food and core inflation also eased. The moderation is attributed to earlier monetary tightening, stable exchange rates, increased capital inflows, lower petrol prices, and stronger crude oil production.

In addition, the MPC introduced new measures to tighten liquidity: a 75% Cash Reserve Requirement (CRR) on non-TSA public sector deposits, raised CRR for commercial banks to 45%, while retaining 16% for merchant banks. The liquidity ratio remains unchanged at 30%. Adjustments to the Standing Facilities Corridor were also made to improve monetary policy transmission and interbank efficiency.

On the banking sector, the CBN confirmed that 14 banks have already met the new recapitalisation requirements. It also ended forbearance measures and waivers on single obligor limits, saying this will strengthen transparency and risk management.

Economic indicators were generally positive: GDP growth accelerated to 4.23% in Q2 2025, supported by a sharp rebound in the oil sector (20.46% growth), higher external reserves of $43.05 billion (10.28 months of import cover), and a widening current account surplus of $5.28 billion. Cardoso projected stronger foreign exchange inflows, targeting at least $1 billion monthly, and highlighted initiatives such as the non-resident Naira-settled FX market that have already boosted inflows.

While optimistic about growth and inflation trends, the MPC warned about risks from excess liquidity due to government fiscal spending. Globally, it noted positive growth prospects but cautioned that geopolitical tensions and trade uncertainties could disrupt stability. Overall, the MPC pledged to remain data-driven, balancing price stability with growth.