BY GODWIN OBI
The Central Bank of Nigeria (CBN) has announced a downward adjustment of the Monetary Policy Rate (MPR), cutting it by 50 basis points from 27.5 per cent in July to 27 per cent. The decision was reached at the conclusion of the 302nd meeting of the Monetary Policy Committee (MPC), held on September 22 and 23, 2025.
Explaining the rationale behind the move, CBN Governor Olayemi Cardoso said the Committee was encouraged by the consistent disinflationary trend recorded in the past five months, as well as projections that inflation would continue to moderate in the remaining months of the year. According to him, the policy shift aims not only to consolidate on inflation control but also to stimulate economic recovery and growth in a gradually stabilizing macroeconomic environment.
The MPC also retained the asymmetric corridor around the MPR at +260 and -250 basis points, underscoring its cautious approach to liquidity management and its intent to minimize volatility in the financial system.
In other policy adjustments, the cash reserve requirement (CRR) for commercial banks was reduced to 45 per cent, while that of merchant banks was maintained at 16 per cent. The Committee further introduced a 75 per cent CRR on non-Treasury Single Account (TSA) public sector deposits, a measure designed to tighten liquidity and enhance monetary control. Meanwhile, the liquidity ratio was left unchanged at 30 per cent.
To further strengthen monetary policy transmission and boost the efficiency of the banking sector, the MPC also adjusted the standing facilities corridor, which regulates inter-bank market transactions.
Macroeconomic Considerations
The MPC expressed satisfaction with Nigeria’s current macroeconomic trajectory, citing steady disinflation, improved output growth, relative stability in the exchange rate, and robust external reserves. Of particular note was the sharper pace of disinflation recorded in August 2025—the strongest in five months—driven by policy tightening, exchange rate stability, and increased capital inflows.
According to the Committee, factors such as the moderation in petrol pump prices, higher crude oil output, and an overall surplus in the current account balance have anchored inflation expectations.
“Notwithstanding the consistent deceleration in inflation, the Committee observed persistent excess liquidity in the banking system, largely fueled by fiscal releases from improved government revenues. This trend poses a risk to macroeconomic stability if unchecked,” Governor Cardoso noted.
The MPC stressed that ensuring the effective functioning of the interbank market is critical for monetary policy transmission, hence the decision to adjust the standing facilities corridor to deepen inter-bank activities and sustain market stability.
Growth Outlook
The latest economic data supports the Committee’s cautious optimism. Nigeria’s GDP grew by 4.23 per cent year-on-year in Q2 2025, an improvement over the 3.48 per cent growth recorded in the same period of 2024. Sectoral performance was mixed but broadly positive:
- Agriculture expanded by 2.82 per cent in real terms, up from 2.60 per cent in Q2 2024.
- Industry recorded a remarkable 7.45 per cent growth, compared to 3.72 per cent in the previous year, signaling strong recovery in manufacturing and oil-related activities.
- Services posted a modest rise, with growth at 3.94 per cent, slightly above the 3.83 per cent achieved in Q2 2024.
The share of the industrial sector in GDP climbed to 17.31 per cent, compared to 16.79 per cent in the same period of 2024.
In nominal terms, Nigeria’s GDP stood at ₦100.73 trillion in Q2 2025, up from ₦84.48 trillion in the same quarter of 2024, reflecting a robust nominal year-on-year growth of 19.23 per cent.
Conclusion
Overall, the MPC’s latest decision underscores a delicate balancing act: consolidating gains made in curbing inflation while creating the fiscal and monetary space necessary to support sustained growth. With inflation easing, external reserves strengthening, and GDP showing resilience, the CBN believes the current macroeconomic environment offers sufficient room to cautiously ease monetary policy without jeopardizing stability.
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2025-09-22