Expert Reacts As CBN Slashes Interest Rate on Loans, First Time in 5 Years
- The CBN for the first time in 5 years has decided to cuts benchmark interest rate to 27%, after five months of slowing inflation
- The CBN also reduced Cash Reserve Ratio, while a new 75% CRR is imposed on non-public sector deposits
- Muda Yusuf told Legit.ng that the move is a timely intervention and will ease credit conditions, lower borrowing costs
Legit.ng journalist Dave Ibemere has over a decade of experience in business journalism, with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
The Central Bank of Nigeria (CBN) has lowered its the Monetary Policy Rate (MPR) by 50 basis points to 27% .
This is the first time in 5 years that the benchmark interest rate has been reduced.
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Olayemi Cardoso disclosed the decision after a two-day Monetary Policy Committee (MPC) meeting in Abuja on Tuesday, September 23
According to him, the move aimed to support economic recovery following five straight months of disinflation.
The last time the CBN cut the MPR was in September 2020, when rates were lowered to 11.5% to cushion the COVID-19 downturn.
Since then, the bank has pursued aggressive tightening, most recently raising the MPR to 27.25% in September 2024 to rein in soaring inflation and stabilise the naira, BusinessDay reports.
Other decisions by CBN
The apex bank also reduced the Cash Reserve Ratio (CRR) for deposit money banks to 45% from 50%.
It also retained merchant banks’ CRR at 16%, left the liquidity ratio at 30%, and introduced a 75% CRR on non-public sector deposits to curb excess liquidity.
The apex bank also It also adjusted the asymmetric corridor to +250/-250 basis points around the MPR.
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Expert reacts to the changes
Speaking on the new MPR, Muda Yusuf, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE) described the latest decision as a “welcome and timely intervention,.
He noted that the reduction would improve credit conditions, lower borrowing costs, and unlock capital for businesses after years of tight liquidity.
He said:
“The Centre for the Promotion of Private Enterprise (CPPE) commends the Central Bank of Nigeria (CBN) and its Monetary Policy Committee (MPC) for their recent decision to ease credit conditions in the Nigerian economy.
"This marks a significant policy shift toward supporting growth and investment, following an extended period of aggressive monetary tightening to rein in inflation.
He added that lower cost of funds will encourage new investments, support business expansion, and enhance capacity utilisation in the real sector, ultimately stimulating output growth and job creation.
Yusuf noted:
" A more accommodative monetary environment will also enable banks to fulfill their core function of mobilizing savings and channeling them into productive investments, reinforcing financial deepening and economic growth.
"In addition, the decision to impose a 75 percent CRR on non-TSA public sector deposits is a prudent measure to prevent excessive fiscal-driven liquidity injections from destabilizing the financial system."
CPPE however urged fiscal authorities to complement the monetary easing with structural reforms, including infrastructure investment, security improvements, and policies to boost productivity.
He stressed that if sustained, the rate cut could mark a shift from CBN’s stabilisation drive toward a growth-focused monetary stance.
Nigeria's GDP growth
Legit.ng earlier reported that the National Bureau of Statistics announced Nigeria’s GDP growth rate improved year-on-year in the second quarter of 2025.
The new data showed a 110-basis point increase from the 3.13% posted in Q1 2025, and a 75-basis point rise compared to 3.48% in the same quarter of 2024.
Ten sectors were identified as the top contributors to the GDP growth rate.
Source: Legit.ng
