The Central Bank of Nigeria through its organ, the Monetary Policy Committee announced Tuesday a reduction in the Monetary Policy Rate from 27.5 to 27per cent at its 302nd meeting held in Abuja.
It is remarkable how seriously the current Committee takes its assignment as evidenced by the consistent attendance of the full complement of its members at its meetings since it came into being.
It goes without saying that this sense of focus has contributed significantly to the emergent success story of the apex bank in the on- going Cardoso dispensation. Even for that alone, the Committee deserves a thumbs up. If this attitude of commitment to given task is replicated across board in all sectors of the economy, the positive impact on productivity, prosperity and national stability will be quite significant.
The key decisions arrived at as announced via it’s communique no.159 are as follows: Reduction of Monetary Policy Rate (MPR) by 50 basis points to 27.00 per cent; Adjustment of the Standing Facilities corridor around the MPR to +250/-250 basis points; Adjustment of the CRR for commercial banks to 45 per cent while retaining that of merchant banks at 16 per cent; Introduction of a 75 per cent CRR on non-TSA public sector deposits.
and keeping the Liquidity Ratio unchanged at 30.00 per cent.
Compared to the recent past meetings, the apex Bank really did some shuffling and juggling.
The reduction of the MPR by 50 basis points is significant as it marks a departure from the recent past when it was retained for several months at 27.5 per cent. It is also indicative of the bank’s openness to responding appropriately to changing dynamics. It must be mentioned though in passing, that there is a school of thought that believes that this reduction is long overdue.
The apex bank justified the reduction with the downward trajectory of the inflation trend over the last few months and an anticipation of further disinflation as well as the need to stimulate economic growth.
According to the communique, “Headline inflation (year-on-year) moderated further to 20.12 per cent in August 2025, from 21.88 per cent in July, driven by the decline in both food and core inflation. On a month-on-month basis, headline Inflation also decreased to 0.74 per cent in August 2025 from 1.99 per cent in the preceding month. Similarly, core inflation (year-on-year) eased to 20.33 per cent in August 2025, from 21.33 per cent in July, due to the slowdown in the cost of services, housing and utilities, as well as transport and logistics. Food inflation (year-on-year) also moderated to 21.87 per cent in August 2025, from 22.74 per cent in July, attributed to the decline in the prices of staples, especially rice, guinea corn, maize and millet.”
The reduction is targeted ultimately at making life better for businesses and citizens generally as the cost of borrowing by banks normally trickles down to the final consumer.
Reacting to the development, Centre for the Promotion of Private Enterprise Chief Executive Officer, Muda Yusuf, said in a statement that having restored a measure of macroeconomic stability and slowed inflationary pressures, the MPC’s pivot towards growth is logical.
“The combination of lower MPR and reduced CRR should expand banks’ capacity to create credit, lowering lending rates and making financing more accessible for businesses, especially SMEs.
“Lower cost of funds will encourage new investments, support business expansion, and enhance capacity utilisation in the real sector. This will ultimately stimulate output, growth and job creation.
Another interesting decision of the Committee is the introduction of 75 per cent CRR on non TSA deposits. Knowing fully well the danger inherent in having excessive liquidity, this is a tool to ensure we do not go back to Egypt.
While there is no doubt that the primary intention of the MPC is to stimulate spending and investment, ultimately driving economic growth, the introduction of the CRR on non- TSA deposit is a kind of checks and balance to ensure that while credit expansion is being stimulated, excess liquidity is not triggered.
One take away from the decision of CBN to cut interest rates is a demostration a strategic and well-timed shift from economic stabilization to growth acceleration
Another is that, the decision reflects a apex bank that ready to adopt flexible monetary policies that will stimulate credit flow into the economy, especially for small and medium enterprises (SMEs) and critical sectors.
In addition, this decision is expected to spur equities market liquidity via
redirecting liquidity from fixed-income securities into stocks, as moderating yields push investors to seek higher returns in risk assets.
However, there is a need to call for collaborative efforts in sustaining and complementing fiscal and structural reforms.
That means so much to unlock significant opportunities for investment, job creation, and inclusive economic expansion.
The fact that we are moving from stability to growth means that the Monetary Policy measures of the CBN over the last two years are yielding positive results and this deserves commendation.