CBN’s First Rate Cut Since 2020 Hailed as ‘Well-Timed Policy Shift’

The Centre for the Promotion of Private Enterprise (CPPE) has commended the Central Bank of Nigeria (CBN) for its decision to cut its benchmark interest rate on Tuesday “to ease credit conditions” in the Nigerian economy.

At its latest two-day meeting, the Monetary Policy Committee (MPC) announced a 50-basis-point reduction in the monetary policy rate (MPR) from 27.5 percent to 27 percent. It also adjusted the asymmetric corridor to +250/-250 basis points around the MPR. In addition, the MPC cut the Cash Reserve Ratio (CRR) of commercial banks by 500 basis points, from 50 percent to 45 percent, while retaining the CRR for merchant banks at 16 percent and maintaining the liquidity ratio at 30 percent.

“This marks a significant policy shift toward supporting growth and investment, following an extended period of aggressive monetary tightening to rein in inflation,” Muda Yusuf, CEO of CPPE, said in a statement. “The MPC’s decision represents a strategic and well-timed policy shift from a phase of stabilisation to a phase of growth accelerator.”

He pointed that the introduction of a 75 percent CRR on non-Treasury Single Account public sector deposits is aimed at containing excess liquidity risks that could arise from fiscal operations. “This action is designed to prevent volatility in money supply growth that could undermine recent progress in price stability,” he said.

He noted that the Nigerian economy has recorded five consecutive months of declining inflation, “signaling that previous tightening measures are yielding results”.

“High interest rates in recent quarters have significantly constrained private sector credit, increased the cost of funds, and weighed on business expansion. By lowering the MPR and CRR, the CBN is deliberately working to improve liquidity conditions, reduce borrowing costs, and unlock capital for productive sectors of the economy,” Yusuf said.