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The Central Bank of Nigeria has reduced the country’s benchmark interest rate to 27 per cent, marking the first cut in 2025 after three consecutive pauses. The move signals a policy shift towards supporting economic recovery, but members of the Organised Private Sector have warned that the reduction is too small to ease the high cost of borrowing facing manufacturers and small businesses.
The decision was announced by CBN Governor, Olayemi Cardoso, after the Monetary Policy Committee’s 302nd meeting held in Abuja on Tuesday. Cardoso said all 12 members of the committee voted in favour of a 50-basis point cut from 27.5 per cent.
He explained that the cut was supported by sustained disinflation over the past five months, projections of further moderation for the rest of 2025, and the need to stimulate economic growth. Nigeria’s headline inflation fell to 20.12 per cent in August from 21.88 per cent in July, while food inflation dropped to 21.87 per cent and core inflation eased to 20.33 per cent.
Cardoso described the reduction as historic. “This is the first cut under my leadership and the first in five years,” he said. The last time Nigeria lowered its policy rate was in September 2020, when it dropped from 12.5 per cent to 11.5 per cent.
Other decisions taken by the MPC included adjusting the Standing Facilities corridor to +250/-250 basis points, raising the Cash Reserve Requirement for commercial banks to 45 per cent while retaining 16 per cent for merchant banks, and introducing a 75 per cent CRR on non-TSA public sector deposits. The Liquidity Ratio was kept unchanged at 30 per cent.
The committee also cited improvements in macroeconomic indicators. Nigeria’s GDP grew by 4.23 per cent in the second quarter of 2025, compared with 3.13 per cent in the first quarter. The oil sector rebounded strongly, expanding by 20.46 per cent against just 1.87 per cent in the previous quarter. The CBN also reported rising foreign reserves at $43.05 billion as of September 11, up from $40.51 billion at the end of July, with an import cover of 8.28 months.
Across Africa, other countries are also lowering their rates. Ghana recently cut its policy rate by 350 basis points to 21.5 per cent, while Kenya reduced its benchmark to 9.5 per cent in August. Nigeria’s rate, however, remains one of the highest on the continent.
Reactions from the business community showed mixed feelings. Director-General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, said the cut was welcome but inadequate. “Manufacturers need loans at not more than five per cent for borrowing to support production. No bank will lend below the MPR. This remains far from our expectations,” he said.
The Director-General of the Nigeria Employers’ Consultative Association (NECA), Adewale Oyerinde, argued that the positive effect of the cut could be cancelled out by other restrictive measures. “The persistently high Cash Reserve Requirement means banks have less to lend. This limits the impact of the lower MPR,” he said.
Dr Femi Egbesola, President of the Association of Small Business Owners of Nigeria, described the cut as a “good start” but “insignificant.” He noted that access to finance remains the biggest challenge for small businesses, stressing that single-digit credit windows are necessary to support the sector.
Director of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, called the rate cut a timely intervention. He said combining the lower MPR with a reduced CRR would expand banks’ capacity to lend, create jobs, and support growth. However, he warned that fiscal reforms and better infrastructure are also needed to ease production costs and sustain macroeconomic stability.
The Nigeria Labour Congress also welcomed the cut but said the 27 per cent rate is still too high. Assistant Secretary-General, Onyekachi Christopher, said cheaper credit would allow manufacturers to expand, hire more workers, and boost the economy.
Economists also gave their views. Professor Sheriffdeen Tella of Crescent University said although the reduction is a good signal, interest rates remain high compared to business returns, making loans unattractive. Former Zenith Bank Chief Economist, Marcel Okeke, added that the cut indicates the beginning of a loosening stance by the CBN, showing banks that they may also ease their lending rates.
Observers believe the CBN’s move marks an important step away from tight monetary policy. However, the consensus is that the cut is too small to bring immediate relief. For now, businesses and workers are waiting to see whether further reductions will follow to unlock growth in Nigeria’s real sector.
