CBN Cuts MPR to 27% as Inflation Drops to 20.1%
At its 302nd meeting in September 2025, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) announced a reduction of the Monetary Policy Rate (MPR) by 50 basis points, bringing it down to 27%. The Liquidity Ratio was maintained at 30%, while the Cash Reserve Ratio (CRR) for commercial banks was adjusted to 45%. The CRR for merchant banks remained at 16%, and a new 75% CRR was introduced for non-TSA public sector deposits.
According to the Committee, these decisions were influenced by the steady decline in inflation over the past five months and the need to strike a balance between controlling inflation and supporting economic recovery. The MPC also pointed to the relative stability in Premium Motor Spirit (PMS) prices, improved foreign exchange market conditions, and stronger agricultural output as key factors that encouraged a cautious policy shift.
Economic data from the second quarter reinforced the Committee’s optimism. GDP expanded by 4.23% year-on-year, compared to 3.13% in the first quarter, while the oil sector surged by 20.46%. Foreign exchange reserves rose to US$43.05 billion, providing around 8.28 months of import cover, and the current account surplus stood at US$5.28 billion. Together, these indicators reflect improving macroeconomic conditions and a gradual return to stability.
By easing the MPR, the CBN signaled growing confidence in the resilience of the economy and a willingness to relax its previously tight monetary stance, though it remains cautious about excess liquidity in the financial system. To build on these gains, policymakers are encouraged to sustain exchange rate stability, enhance agricultural productivity, accelerate infrastructure development, and finalize the ongoing bank recapitalization drive. Such measures, if effectively implemented, would help ensure that the benefits of monetary easing extend beyond the financial sector to drive inclusive and sustainable economic growth.
