The Central Bank of Nigeria (CBN) has announced a reduction in the Monetary Policy Rate (MPR) by 50 basis points, bringing the rate down to 27%.
This decision was made at the conclusion of the CBN’s Monetary Policy Committee (MPC) meeting, where all 12 members of the committee were in attendance.
In addition to the reduction in the MPR, the committee also made several key adjustments aimed at strengthening the country’s financial stability and supporting economic recovery.
The standing facilities corridor around the MPR was adjusted to plus 250 to minus 250 basis points, and the Cash Reserve Requirement (CRR) for commercial banks was raised to 45%, while merchant banks’ CRR was retained at 16%. Furthermore, a new 75% CRR was introduced for non-Treasury Single Account (TSA) public sector deposits to improve liquidity management.
CBN Governor, Mr Yemi Cardoso, explained that the committee’s decision to lower the MPR was largely influenced by the sustained disinflation witnessed over the last five months, alongside expectations of declining inflation for the remainder of 2025. He noted that the move was necessary to support the ongoing economic recovery efforts.
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“The sustained disinflation, particularly the momentum observed in August 2025—the highest in the last five months—coupled with other positive indicators such as improved output growth, stable exchange rates, and healthy external reserves, has provided a conducive environment for the MPC to lower the MPR,” Cardoso said.
The MPC also expressed its satisfaction with the macroeconomic stability, noting several positive developments such as a moderate reduction in inflation, increased capital inflows, and the stabilisation of the exchange rate. Key factors contributing to this positive trajectory include the moderation in the price of Premium Motor Spirit (PMS), an increase in crude oil production, and the Bank’s continued efforts in policy tightening.
However, the MPC acknowledged the build-up of excess liquidity in the banking system, a consequence of fiscal releases stemming from improved government revenues. This liquidity build-up, while reflecting improved economic conditions, could pose risks to financial stability. To manage this, the committee decided to adjust the standing facilities corridor to ensure more effective interbank market transactions and improve the efficiency of monetary policy transmission.
In his address, Cardo highlighted the importance of the foreign exchange market in driving de-inflation and reiterated the Bank’s commitment to policies that would continue to boost capital inflows and deepen foreign exchange liquidity.
On the banking sector, the MPC noted the continued resilience of the Nigerian banking system. The ongoing bank recapitalisation exercise was acknowledged, with 14 banks having fully met the new capital requirements. The committee also highlighted the successful conclusion of forbearance measures and waivers on single obligors, emphasising the positive impact on transparency and long-term financial stability.
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Regarding inflation, Cardo pointed out that headline inflation had moderated to 20.12% year-on-year in August 2025, down from 21.88% in July. This continues the trend of declining inflation, a key signal that the country’s macroeconomic environment is stabilising.
In closing, Cardo reassured the public that while the removal of forbearance measures may cause temporary adjustments, it would not jeopardise the stability of the banking system.
He emphasised the CBN’s commitment to maintaining macroeconomic stability and supporting the country’s recovery from the effects of inflation and other economic challenges.
The decision to lower the MPR and introduce various policy adjustments represents a strategic step by the CBN to create a favourable environment for sustained economic growth, financial stability, and reduced inflation.
Sunday Michael Ogwu is a Nigerian journalist and editor of Pinnacle Daily. He is known for his work in business and economic reporting. He has held editorial roles in prominent Nigerian media outlets, where he has focused on economic policy, financial markets, and developmental issues affecting Nigeria and Africa more broadly.
