By Aisha Muhammad Magaji
The Central Bank of Nigeria (CBN) has reduced its Monetary Policy Rate (MPR) by 50 basis points to 27%, marking the first interest rate cut in five years. The decision comes amid a steady decline in inflation, which fell to 20.1% in August from 21.9% in July, and is aimed at stimulating economic growth and increasing liquidity in the financial system.
In addition to the rate cut, the CBN adjusted several monetary policy parameters:
- Cash Reserve Ratio (CRR) for commercial banks was reduced from 50% to 45%.
- A 75% CRR was introduced on non-Treasury Single Account (TSA) public sector deposits.
- The Standing Facilities corridor around the MPR was narrowed from +500/-100 basis points to +250/-250 basis points.
These measures are designed to ease borrowing costs, improve credit availability, and encourage private sector investment. Analysts note that the rate cut signals a shift from the previous hawkish stance under former Governor Godwin Emefiele.
The Organised Private Sector (OPS), represented by the Nigeria Employers’ Consultative Association (NECA) and the Centre for the Promotion of Private Enterprise (CPPE), welcomed the move but emphasized the need for tangible relief. NECA Director-General Adewale-Smatt Oyerinde stated, “The rate cut must translate into lower lending rates and improved access to credit for businesses and households.”
CPPE CEO Muda Yusuf added that high interest rates had previously constrained private sector credit and business expansion, noting that the CBN’s action is a timely intervention to stimulate economic activity.
While the interest rate reduction is a positive step, stakeholders warn that its impact depends on commercial banks passing on the benefits to borrowers. Increased credit flow to businesses is critical for sustaining economic recovery and ensuring that households and enterprises feel the effects of the policy change.
The CBN has committed to monitoring economic indicators closely and may consider further monetary adjustments to support growth and financial stability in Nigeria.
