By Ademola Bakare
The Central Bank of Nigeria (CBN) concluded its two-days monetary policy committee meeting, MPC, on Tuesday, September 23rd, 2025, (the 4th edition in the year) with some far-reaching decisions. Traditionally, it reviewed developments in both global and domestic economies and arrived at a decision that has generated applause across board.
MPC reduced the Monetary Policy Rate (MPR) by 50 basis points to 27.00 per cent, adjusted the Standing Facilities corridor around the MPR to +250/-250 basis points, altered the CRR for commercial banks to 45 per cent, but retained merchant banks at 16 per cent.
It has been five years the CBN last lowered its monetary policy rate. It did during the COVID-19 pandemic.
The MPC also introduced a novel tool, a 75 per cent CRR on non-TSA public sector deposits, but retained the Liquidity Ratio at 30.00 per cent.
The Chairman of the Committee, and the Governor of the Bank, Olayemi Cardoso, while briefing the press at the end of the meeting said the MPC’s decision to lower the monetary policy rate “was predicated on the sustained disinflation recorded in the past five months, projections of declining inflation for the rest of 2025, and the need to support economic recovery efforts” of the government.
“The MPC also adjusted the Standing Facilities corridor to improve the efficiency of the interbank market and strengthen monetary policy transmission”.
“The Committee further introduced a-75 per cent CRR on non-TSA public sector deposits for enhanced liquidity management”.
The Governor expressed satisfaction on the prevailing macroeconomic stability, evidenced by the improvements in several indicators, which he said include the sustained disinflation, improved output growth, stable exchange rate and robust external reserves. He particularly noted the increased momentum of disinflation in August 2025, being the highest in the past five months. This deceleration, he continued, underpinned by monetary policy tightening, exchange rate stability, increased capital inflows, and surplus current account balance have helped to broadly anchor inflation expectations.
Other factors said to have contributed to the deceleration include the continued moderation in the price of premium motor spirit (PMS) and the notable increase in crude oil production, offered monetary policy the platform to support economic recovery efforts of the government. The consistent accretion of excess liquidity in the banking system, resulting largely from fiscal releases emerging from improved revenues, as well as in stability of the foreign exchange market.
Stability in the Nigeria economy has been largely applauded by notable personalities, including global and domestic financial institutions. Notable is the Director General of the World Trade Organisation, WTO, Dr. Ngozi Okonjo-Iweala, the Bretton Wood Institutions – IMF, and the World Bank, Dr. Muda Yusuf, CEO, Centre for the Promotion of Private Enterprises, and other reputable financial technocrats.
Predating the MPC meeting, experts shared mix opinions about the outcome of the meeting. They predicted between 25-50 basis points cut in the MPR, citing easing inflation and exchange rate stability. Some expect a moderate cut to balance growth support as well as maintaining investor confidence. While some felt the cut is deserving since inflation has moderated for five consecutive months, reaching 20.12 per cent in August. However, some were not comfortable with rate cut. They argued, and cautioned that inflation is still high, and therefore urged the CBN to maintain policy credibility.
While the economy may have stabilized, GDP growth in Dr. Yusuf’s opinion remains fragile. Q2, 2025 figure released by the Nigeria Bureau of Statistics, NBS, year-on-year was 4.23 per cent. He urged the CBN to ease its monetary policy stance to stimulate production and credit growth. He commended the CBN’s decision to cut MPR by 50 basis points, a step he said was in the right direction. He noted that the improvement in inflation rate, signals a gradual return to price stability which he said could pave the way for a looser policy position.
The Director General urged the Central Bank of Nigeria to initiate a ‘broader’ reform to ease the cost of living and support economic growth.
The CBN’s rate cut portends significant implications for the economy as the decision aims to balance growth support with sustaining investor confidence. It is also expected to stimulate economic activities by reducing borrowing costs, particularly for the small and medium scale businesses (SMEs) and some key sectors of the economy like agriculture and the manufacturing. Lower interest may in the short -to -medium term unlock liquidity for businesses and households, which may eventually promote investment and job creation.
However, as accommodative as the CBN position may look in managing inflation, its collaboration with the fiscal authority is crucial, and must be further enhanced to avoid a reversal of the gains recorded. This cautious approach may be the reason for the introduction of 75 per cent CRR for non-Treasury Single Account, TSA, public sector deposits. The novel idea will reduce the amount of funds available for lending. It demonstrates CBN’s commitment to maintaining exchange rate stability, and prevent speculation and arbitrage tendencies.
It will also serve as a potent tool for the CBN to mop-up excess liquidity, thereby strengthening the effectiveness of its monetary policy transmission mechanism.
Overall, financial experts, and bureaucrats agreed that the rate cut measure was a decision well thought out, and taken in the best interest of the economy. Nevertheless, the CBN is urged to institute other measures capable of generating growth and economic activities, particularly measures at achieving single digit inflation figure, as cutting rate cannot on its own generate sor achieve growth.
Ademola Bakare, a financial analyst, writes from Abuja.
