Monetary Easing Begins as CBN Cuts MPR to 27%, Cites GDP Growth, Falling Inflation
Monetary Easing Begins as CBN Cuts MPR to 27%, Cites GDP Growth, Falling Inflation
•Cardoso: Our goal is to achieve single-digit inflation, declares 14 banks have fully met new capital thresholds
James Emejo in Abuja, Nume Ekeghe and Dike Onwuamaeze in Lagos
The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC), yesterday, kick-started monetary easing with a cut in the Monetary Policy Rate (MPR) by 50 basis points to 27 percent, from the 27.50 percent it was previously, citing sustained disinflation and stronger Gross Domestic Product (GDP) growth for the second quarter 2025, released on Monday.
The move the central bank signaled a shift towards supporting economic expansion.
Addressing journalists at the end of the two-day meeting of the MPC in Abuja, CBN Governor, Mr. Olayemi Cardoso, said the “committee’s decision to lower the monetary policy rate was predicated on the sustained disinflation recorded in the past five months.
The Director-General of the Nigeria Employers’ Consultative Association (NECA), Mr. Adewale-Smatt Oyerinde, as well as the Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, commended the CBN and its MPC for their decision to ease credit conditions in the Nigerian economy.
In addition, the MPC also adjusted the standing facilities corridor around the MPR to +250/-250 basis points from +500/-100 basis points to boost interbank market transactions and enhance the stability of the market.
The committee further reviewed the Cash Reserve Requirement (CRR) for commercial banks to 45 per cent from 50 per cent, while retaining that of merchant banks at 16 per cent.
Also, the MPC introduced a 75 per cent CRR on non-TSA public sector deposits, and retained the Liquidity Ratio (LR) at 30 per cent.
The slash in the benchmark interest rate came amid relative stability in foreign exchange (FX) and the sustained disinflation recorded in five consecutive months.
Furthermore, Cardoso said the rate cut was also linked to projections of declining prices for the rest of the year as well as the need to support economic recovery efforts.
He expressed satisfaction with the prevailing macroeconomic stability, evidenced by the improvements in several indicators, including the sustained disinflation, improved output growth, stable exchange rate and robust external reserves.
The CBN Governor, particularly noted the increased momentum of disinflation in August 2025, being the highest in the past five months.
He said the deceleration, underpinned by monetary policy tightening, exchange rate stability, increased capital inflows, and surplus current account balance, had helped to broadly anchor inflation expectations.
Cardoso further pointed out that the continued moderation in the price of Premium Motor Spirit (PMS) and the notable increase in crude oil production also contributed to inflation deceleration.
He said in the view of the committee, the stability in the macroeconomic environment offered some headroom for monetary policy to support economic recovery.
However, Cardoso, who read the committee’s communique, said that, notwithstanding the consistent deceleration in inflation, the committee observed the persistent build-up of excess liquidity in the banking system.
This, he said, resulted largely from fiscal releases emerging from improved revenues.
He said, “Being mindful of the need to preserve the prevailing macroeconomic stability, the MPC noted the risk posed by excess liquidity in the banking system.
“Members noted that effective functioning of the interbank market remains critical to enhanced transmission 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 further acknowledged the continued stability of the foreign exchange market and its critical importance in achieving rapid disinflation, and therefore, called on the CBN to continue the implementation of policies that would further boost capital inflows and deepen foreign exchange liquidity.
On the financial sector, the MPC noted the continued resilience of the banking system, with most of the financial soundness indicators remaining within their respective prudential benchmarks.
The CBN Governor said the committee also acknowledged the significant progress in the ongoing bank recapitalisation exercise, as 14 banks have fully met the new capital requirement.
The committee urged the Bank to continue the implementation of policies and initiatives that would ensure the successful completion of the ongoing recapitalisation exercise.
The MPC further noted the successful termination of forbearance measures and waivers on single obligors, which had helped to promote transparency, risk management and long-term financial stability in the banking system.
The MPC reassured the public that the impact of the removal of forbearance was transitory and does not pose any threat to the soundness and stability of the banking system.
Cardoso said gross external reserves remained robust at $43.05 billion on September 11, 2025, compared with $40.51 billion at end-July 2025 with an import cover of 8.28 months.
Similarly, he disclosed that the Q2 2025 current account balance recorded a significant surplus of $5.28 billion compared with $2.85 billion in Q1 2025.
Reacting to concerns over a potential spike in inflation in a pre-election year, Cardoso said the CBN remained committed to achieving single-digit inflation.
He said, “Yes, we are pleased that we are seeing consecutive disinflation. We are pleased. This is the fifth consecutive month.
“But I want to say something for the avoidance of doubt: our goal is for single-digit inflation. That’s our goal, and that is something that we are very resolute on, and we will not stop until we get there. I want to make that abundantly clear and that is where we are headed too.”
“Let me be clear in saying that one of the major objectives of an MPC is to be proactive. We see data, we analyse data, we see things that many don’t see.”
He added, “We look at risks, not just internal, but also external. We project those risks into the future, and we base our decisions on that. That is why we continue to emphasise that for the MPC, it is critical, and has been critical, to be data-driven.
“We are not oblivious to potential shocks. We are ready. We are building resilience. We are building the buffers. We are looking at the situation, and we are reacting where we have to react and at the time we need to do so.
“So, please rest assured that as the Central Bank of Nigeria, we will not disappoint in taking the action that needs to be taken to ensure that the hard-earned stability in the system continues, as we have seen it. That is key to economic growth.”
The CBN governor also expressed concerns over the negative impact of monthly FAAC allocations to monetary stability.
He said, “We are a bit concerned about excess liquidity and, in particular, the negative effects of FAAC releases at certain times of the month or the year, and it is something that we are watching very closely and will continue to deploy tools that are required to ensure that the stability we have attained stays with us into the future.”
Meanwhile, the Director-General of NECA, Mr. Adewale-Smatt Oyerinde, commended the decision of the Central Bank of Nigeria’s Monetary Policy Committee (MPC) at its 302nd meeting to reduce the Monetary Policy Rate (MPR) by 50 basis points to 27.00 percent.
Oyerinde noted that the decision followed a steady decline in inflation, with headline inflation moderating to 20.12 percent in August 2025, from 21.88 percent in July, according to the National Bureau of Statistics.
He said that “for over five months, inflationary pressures have eased. This provides critical space for policymakers to balance the pursuit of price stability with the urgent need to stimulate growth.”
According to him, the modest reduction in the MPR, is commendable but its benefits would depend on effective transmission into the real economy.
He said: “If credit costs are lowered, businesses can access affordable financing, expand investments, and create jobs.
“However, the persistently high CRR and other liquidity restrictions risk limiting these intended outcomes,” he cautioned.
Oyerinde, also pointed out that food inflation has remained high at 21.87 per cent, placing enormous strain on households and eroding disposable incomes.
“Macroeconomic stability will only have meaning when Nigerians experience tangible relief through lower food and living costs,” he stressed.
He explained that high operating costs driven by raw materials, energy, and logistics would continue to threaten sustainability.
“Without affordable credit and structural reforms, enterprises will struggle to expand,” he said.
The director general called on government to complement the MPC’s decision with broader interventions, including stabilizing the exchange rate to curb imported inflation, improving security in farming communities, expanding mechanisation to drive agricultural productivity, and tackling bottlenecks in energy, transport, and regulation.
Equally, the CPPE commended the CBN and its MPC for their decision to ease credit conditions in the Nigerian economy.
CEO of CPPE, Dr. Muda Yusuf, said the move marked a significant policy shift towards supporting growth and investment, following an extended period of aggressive monetary tightening to rein in inflation.
Yusuf added: “The MPC’s decision represents a strategic and well-timed policy shift from a phase of stabilisation to a phase of growth accelerator.
“If sustained and complemented by appropriate fiscal and structural reforms, these measures will stimulate economic growth and job creation; improve private sector performance and output; boost government revenues through an expanded tax base, and moderate inflation sustainably in the medium to long term.
“The CPPE regards this as a step in the right direction toward building a more resilient, inclusive, and growth-oriented Nigerian economy.”
“The policy easing comes at a time when the Nigerian economy has recorded five consecutive months of declining inflation, signaling that previous tightening measures are yielding results.
“Having restored a measure of macroeconomic stability and slowed inflationary pressures, the MPC’s pivot toward growth is both logical and timely.”
He noted that high interest rates in recent quarters have significantly constrained private sector credit, increased the cost of funds, and weighed on business expansion.
“By lowering the MPR and CRR, the CBN is deliberately working to improve liquidity conditions, reduce borrowing costs, and unlock capital for productive sectors of the economy,” he said.
Yusuf described the introduction of a 75 percent CRR on non-TSA public sector deposits in order to contain excess liquidity risks that could arise from fiscal operations as a notable new measure.
According to him, “this action is designed to prevent volatility in money supply growth that could undermine recent progress in price stability.”
He said that the Implications of the latest MPC’s decisions included improved credit condition and strengthened financial intermediatiin.
“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 Small and Medium Enterprises (SMEs),” he said, adding that “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.”
According to him, a more accommodative monetary environment “will enable banks to fulfill their core function of mobilizing savings and channeling them into productive investments, reinforcing financial deepening and economic growth.”
Yusuf also described the decision to impose a 75 percent CRR on non-TSA public sector deposits as a prudent measure to prevent excessive fiscal-driven liquidity injections from destabilising the financial system.
The CPPE, however , emphasised that fiscal policy must play a complementary role to fully unlock growth potential.
It advised the fiscal authorities to sustain fiscal consolidation to ensure macroeconomic stability and maintain investor confidence.
It said the government should prioritise critical infrastructure investment to reduce production and logistics costs, improve competitiveness, and enhance productivity while strengthening the regulatory and institutional framework to foster a more business-friendly environment that attracts domestic and foreign investment.
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•Cardoso: Our goal is to achieve single-digit inflation, declares 14 banks have fully met new capital thresholds James Emejo in Abuja, Nume Ekeghe and Dike Onwuamaeze in Lagos The Central
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