The monetary policy committee (MPC) of the Central Bank of
Nigeria (CBN) has reduced the country’s monetary policy rate (MPR) from 27.5
percent to 27 percent.
Olayemi Cardoso, CBN’s governor, announced the rate
adjustment at a news conference on Tuesday during the committee’s 302nd meeting
in Abuja.
The MPR is the baseline interest rate in an economy, other
interest rates used within the economy are built on it.
The MPC’s decision comes after Nigeria’s inflation rate
dropped to 20.33 percent in August 2025.
It represents the first interest rate reduction since 2020,
when it was cut to 11.5 percent, and also marks the first rate cut since the
current CBN administration began.
Speaking at the media briefing, Cardoso said the committee
members unanimously voted to reduce the rate by 50 basis points from 27.5
percent to 27 percent.
He said the committee adjusted the cash reserve ratio (CRR)
to 45 percent, and retained the liquidity ratio at 30 percent.
“All 12 members of the committee were in decisions of the
MPC. The committee decided to reduce the monetary policy rate (MPR) by 50 basis
points to 27 percent,” the CBN governor said.
“Change the asymmetric corridor to +250/-250 around the MPR,
reduce the CRR of commercial banks from 50% to 45%.
“The CRR of Merchant banks remains at 16 percent and also to
introduce a 75 percent CRR on non-TSA public sector departments and keep the
liquidity ratio unchanged at 30 percent.”
The CBN governor also said the committee’s decision to lower
the MPR was predicated on the sustained disinflation recorded in the past five
months, projections of declining inflation for the rest of 2025, and the need
to support economic recovery efforts.
“The MPC expressed satisfaction with the prevailing
macroeconomic stability, evidenced by the improvements in several indicators,”
he said.
“These include the sustained disinflation, improved output
growth, stable exchange rate and robust external reserves.
“It particularly noted the increased momentum of
disinflation in August 2025 being the highest in the past five months.”
“This deceleration underpinned by monetary policy
tightening, exchange rate stability, increased capital inflows and surplus
current account balance have helped to broadly anchor inflation expectations.”
Other factors that contributed to the deceleration, according
to Cardoso, include the continued moderation in the price of petrol and the
notable increase in crude oil production.
Citing the submissions of the committee, the CBN governor
said the stability in the macroeconomic environment offered some headroom for
monetary policy to support economic growth and recovery.
‘EXCESS LIQUIDITY BUILDING UP IN THE BANKING SYSTEM’
“Notwithstanding the consistent deceleration in inflation,
the committee observed the persistent build up of excess liquidity in the
banking system, resulting largely from fiscal releases emerging from improved
revenues,” he said.
“Be mindful of the need to preserve the prevailing
macroeconomic stability. The MPC noted the risk posed by the excess liquidity
in the banking system. Members noted that effective vomiting of the interbank
market remains critical to enhance translation of monetary policy.
“This, therefore, informed the decision to adjust the width
of the standing facilities corridor to boost interbank market transactions and
enhance the stability of the market.
“The committee acknowledged the continued stability of the
foreign exchange market and its critical importance in achieving rapid
disinflation, and therefore called on the bank to continue the implementation
of policies that would further boost capital inflows and deepen foreign
exchange liquidity in the financial sector.”
The CBN governor also said the committee will remain
proactive through a data-driven policy response for the continued stability of
the macroeconomic environment.
He announced that the next meeting of the committee is
scheduled for November 24 and November 25, 2025.
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Economies do not thrive on artificial rebasing of economic indices but on real factors but here is a CBN committee only championing artificial re-basement thus dragging Nigerians to believe that all is well. We can only but shoot ourselves on the foot.
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