Nigeria: CBN Cuts Interest Rate to 27%, OPS Pushes for Deeper Credit Relief

The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) has reduced the benchmark interest rate to 27.0%, marking the first cut in 2025 after three consecutive holds and signaling a cautious shift toward supporting economic recovery.

The decision, announced by CBN Governor Olayemi Cardoso after the committee’s 302nd meeting in Abuja, saw all 12 members vote for a 50-basis-point reduction from 27.5%. Cardoso explained that the cut was driven by five months of sustained disinflation, projected moderation in inflation for the rest of the year, and the need to support growth.

“This is the first reduction under my leadership and the first in five years,” Cardoso noted, recalling that Nigeria last lowered rates in September 2020.

Alongside the rate cut, the MPC:

• Adjusted the Standing Facilities Corridor to +250/-250 basis points,

• Raised the Cash Reserve Requirement (CRR) for commercial banks to 45% (retaining 16% for merchant banks),

• Introduced a 75% CRR on non-TSA public sector deposits, and

• Maintained the Liquidity Ratio at 30%.

Economic backdrop

Inflation eased to 20.12% in August, down from 21.88% in July, while food inflation moderated to 21.87% and core inflation to 20.33%. Monthly inflation fell sharply to 0.74% in August, from 1.99% in July.

The economy also recorded stronger growth, with Q2 2025 GDP expanding 4.23%, compared to 3.13% in Q1, driven largely by a 20.46% rebound in the oil sector. Foreign reserves rose to $43.05bn by September 11, 2025, providing 8.28 months of import cover.

Cardoso confirmed that 14 banks had already met the new recapitalisation requirements, stressing the sector’s resilience and soundness.

OPS reaction: “Good step, but not enough”

While the cut was welcomed, the Organised Private Sector (OPS) described it as too marginal to ease the credit squeeze on manufacturers and SMEs.

• Segun Ajayi-Kadir, DG of the Manufacturers Association of Nigeria (MAN), said:
  “This is welcome, but manufacturers need borrowing costs at single-digit rates, ideally no more than 5%, for it to support production. At 27%, credit remains out of reach.”

• Adewale Oyerinde, DG of the Nigeria Employers’ Consultative Association (NECA), added that the high CRR risks neutralising the benefits of lower rates:
  “Affordable credit could spur investment and job creation, but restrictive measures still weigh heavily on businesses.”

• Dr Femi Egbesola, President of the Association of Small Business Owners of Nigeria, called the cut a “good start” but “insignificant,” urging special credit windows at single-digit rates for SMEs.

• Dr Muda Yusuf, Director of the Centre for the Promotion of Private Enterprise, described the cut as “a timely intervention” but stressed that fiscal reforms—such as improved infrastructure and reduced production costs—must complement monetary easing.

Labour and expert views

The Nigeria Labour Congress (NLC) welcomed the reduction but warned that rates remain prohibitively high for businesses and workers. “We hope easier access to loans will enable manufacturers to expand production and create jobs,” said Onyekachi Christopher, NLC Assistant Secretary-General.

Economists also weighed in:

• Prof. Sheriffdeen Tella, former VC of Crescent University, argued that while the cut is positive, borrowing remains unattractive given profit margins versus prevailing rates.

• Marcel Okeke, former Chief Economist at Zenith Bank, said the move signals a gradual loosening of CBN’s tight stance:
  “It shows the CBN is beginning to reverse its restrictive policy. If disinflation persists, further cuts could follow in November.”

Outlook

With inflation easing from nearly 35% in late 2024 to about 20% in August 2025, analysts see room for cautious rate reductions in the months ahead. However, OPS leaders and labour unions insist that deeper cuts, complemented by structural and fiscal reforms, are needed to unlock affordable credit and accelerate real sector growth.

As Yusuf summed up:
“If sustained and complemented by fiscal measures, the new stance could stimulate growth, boost private sector performance, and moderate inflation sustainably in the medium to long term.”