THE borrowing costs for businesses by financial lending institutions will lessen slightly as the monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) has reduced the country’s monetary policy rate (MPR) from 27.5 per cent to 27 per cent.
The CBN’s governor announced the rate adjustment at a news conference on Tuesday, September 23, during the committee’s 302nd meeting in Abuja.
Cardoso attributed the interest rate reduction decision to the decline in inflation figures to 20.33 per cent in August, foreign exchange gains and stability of Nigeria’s currency.
The ICIR reports that MPR is the baseline interest rate in an economy, which is the foundation upon which interest rates in an economy are built. Banks, equity markets, stock markets, industry and key economic decisions are taken in reference as a baseline guide.
Cardoso said the committee adjusted the cash reserve ratio (CRR) to 45 per cent, and retained the liquidity ratio at 30 per cent.
“All 12 members of the committee were in decisions of the MPC. The committee decided to reduce the monetary policy rate (MPR) by 50 basis points to 27 per cent,” the CBN governor said.
“Change the asymmetric corridor to +250/-250 around the MPR, reduce the CRR of commercial banks from 50 per cent to 45 per cent.
He disclosed that the CRR of Merchant banks remains at 16 per cent, and it would also introduce a 75 per cent CRR on non-Treasury Single Account (TSA) public sector departments and keep the liquidity ratio unchanged at 30 per cent.
Cardoso noted that the committee’s decision to lower the MPR 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.
“The MPC expressed satisfaction with the prevailing macroeconomic stability, evidenced by the improvements in several indicators,” he said.
“These include the sustained disinflation, improved output growth, stable exchange rate and robust external reserves.
“It particularly noted the increased momentum of disinflation in August 2025, being the highest in the past five months,” he added.
This deceleration, he said, underpinned by monetary policy tightening, exchange rate stability, increased capital inflows and surplus current account balance, had helped to broadly anchor inflation expectations.
Other factors that contributed to the deceleration, according to Cardoso, include the continued moderation in the price of petrol and the notable increase in crude oil production.
Citing the submissions of the committee, the CBN governor said the stability in the macroeconomic environment offered some headroom for monetary policy to support economic growth and recovery.
“Notwithstanding the consistent deceleration in inflation, the committee observed the persistent build-up of excess liquidity in the banking system, resulting largely from fiscal releases emerging from improved revenues,” he said.
“Be mindful of the need to preserve the prevailing macroeconomic stability. The MPC noted the risk posed by the excess liquidity in the banking system. Members noted that effective vomiting of the interbank market remains critical to enhance the translation of monetary policy.
“This, therefore, informed the decision to adjust the width of the standing facilities corridor to boost interbank market transactions and enhance the stability of the market,” he added.
He further disclosed that the committee acknowledged the continued stability of the foreign exchange market and its critical importance in achieving rapid disinflation, and also called on the bank to continue the implementation of policies that would further boost capital inflows and deepen foreign exchange liquidity in the financial sector.
He announced that the committee’s next meeting was scheduled for November 24 and November 25, 2025.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.