CBN Cuts Interest Rate to 27% in First Reduction Since 2020

CBN Cuts Interest Rate to 27% in First Reduction Since 2020

The Central Bank of Nigeria (CBN) on Tuesday initiated a gradual monetary easing by reducing its benchmark interest rate, the Monetary Policy Rate (MPR), for the first time in five years.

The MPR was cut by 50 basis points to 27 percent in an effort to boost economic growth amid slowing inflation.

Alongside the rate cut, the CBN adjusted the asymmetric corridor around the MPR to +250/-250 basis points. It also lowered the Cash Reserve Ratio (CRR) for Deposit Money Banks from 50 percent to 45 percent, maintained the CRR for Merchant Banks at 16 percent, and kept the Liquidity Ratio steady at 30 percent. Additionally, the central bank introduced a 75 percent CRR on non-public sector deposits.

The decision was announced by CBN Governor Olayemi Cardoso following the conclusion of the two-day Monetary Policy Committee (MPC) meeting in Abuja. He explained that the move was driven by sustained disinflation over five months and is aimed at supporting economic recovery efforts.

The last time the CBN cut the MPR was in September 2020, when it was lowered from 12.5 percent to 11.5 percent to help Greece’s economy during the COVID-19 pandemic.

Since then, the central bank mostly adopted a tightening policy, raising rates to address high inflation. Most recently, in September 2024, the MPR was increased to 27.25 percent from 26.25 percent in May to control inflation and stabilize the exchange rate.

This latest adjustment marks a cautious shift in policy as inflationary pressures begin to ease while the CBN balances fostering growth with maintaining price stability.

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