The Central Bank of Nigeria (CBN) has cut its benchmark interest rate for the first time in 2025, trimming it by 50 basis points to 27% in a cautious shift towards supporting economic growth after months of disinflation.
The decision, announced by Central Bank governor Olayemi Cardoso after the Monetary Policy Committee’s 302nd meeting in Abuja, marks the first rate cut in five years. All 12 MPC members backed the move, citing easing inflation and stronger GDP growth. Headline inflation fell to 20.1% in August from 21.9% in July, while food and core inflation also moderated.
“This reduction is the first under my leadership and the first in five years,” Cardoso said, linking the cut to five straight months of slowing inflation and the need to ease borrowing conditions. The CBN also raised the cash reserve requirement for commercial banks to 45%, introduced a 75% reserve on non-TSA public deposits, and left the liquidity ratio unchanged at 30%.
The move puts Nigeria in line with other African economies: Ghana slashed its rate to 21.5% last week and Kenya cut to 9.5% in August. But Nigeria’s remains one of the highest policy rates on the continent.
While the cut was broadly welcomed, business leaders said it was too modest to ease the credit squeeze stifling manufacturers and small firms. Segun Ajayi-Kadir, head of the Manufacturers Association of Nigeria, said: “This is welcome, but it has not gotten us anywhere near our expectations. Manufacturers need to borrow at no more than 5% for that borrowing to be supportive of production.”
Adewale Oyerinde of the Nigeria Employers’ Consultative Association warned the cut would be undermined by “persistently high” reserve requirements, while small business leader Femi Egbesola called the reduction “insignificant” given the scale of financing pressures.
The Nigeria Labour Congress described the move as a step in the right direction but noted borrowing costs remained “prohibitively high.” Analysts also stressed the need for complementary fiscal measures, warning that monetary easing alone would not deliver broad relief without reforms to infrastructure, security and regulation.
Cardoso insisted the banking sector remained resilient, with 14 banks already meeting recapitalisation requirements, and pointed to rising reserves and a current account surplus as signs of recovery. Analysts expect further easing in November if disinflation continues, though lending rates are unlikely to fall sharply in the short term.
For now, businesses say the cut signals intent but offers little immediate relief. As Ajayi-Kadir put it: “It shows a rethinking by the CBN, but manufacturers still await a time when rates will be significantly lower.”
