The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has reduced the benchmark interest rate by 50 basis points, bringing it down from 27.5 percent to 27 percent.
The decision, announced on Tuesday in Abuja, marks the first interest rate cut since 2020 and comes after years of aggressive tightening aimed at curbing runaway inflation.
CBN Governor Olayemi Cardoso explained that the cut reflects the bank’s confidence in Nigeria’s improving economic outlook, citing the steady decline in inflation and a more stable foreign exchange market.
Headline inflation eased to 20.12 percent in August 2025, the fifth consecutive monthly drop, with food and core inflation also moderating. The naira has shown resilience in recent weeks, supported by improved foreign exchange liquidity and fiscal measures introduced by the federal government.
Analysts say the rate cut is expected to reduce borrowing costs, stimulate private sector activity, and support economic recovery. However, they caution that risks remain, including potential shocks in global oil prices, supply chain bottlenecks in food production, and pressures on the naira that could reignite inflation.
Dr. Bismarck Rewane, an economic analyst, described the move as “a cautious but welcome signal” that monetary policy is now tilting towards growth. “With inflation on a downward trajectory, the CBN has created room for businesses to access cheaper credit, which could help boost investment,” he said.
On his part, Lagos Chamber of Commerce and Industry (LCCI) Director-General, Dr. Chinyere Almona, noted that while the rate cut is positive, its impact on businesses would depend on how commercial banks adjust their lending rates. “We hope the reduction translates into accessible and affordable loans for small and medium enterprises,” she said.
Some experts, however, urged caution. Professor Uche Uwaleke, Nigeria’s first professor of capital markets, warned that premature easing could undermine recent gains in stabilizing prices. “If exchange rate pressures resurface, we may see inflationary spikes that could wipe out the progress made so far,” he said.
The CBN assured that the monetary authority will continue to monitor inflationary trends and exchange rate stability to sustain disinflation while fostering economic growth.
This policy shift is seen as a signal that the apex bank is gradually moving from its single-minded fight against inflation to a more balanced approach of price stability and economic expansion.