Sep 26, 2025, Posted by: Ra'eesa Moosa
CBN’s First Rate Cut Since the Pandemic
After more than three years of tightening, Nigeria’s Central Bank finally trimmed its policy rate by 50 basis points, bringing the benchmark down to Nigeria interest rate cut 27%. The decision, announced on September 23, 2025, marks the first reduction since September 2020, when the bank responded to the COVID‑19 shock with a similar move.
Until now, the Monetary Policy Committee had kept the rate steady at 27.5% through successive meetings in May and July, betting that the inflation surge would subside. Recent data, however, showed headline inflation easing to 20.12% in August, giving policymakers the confidence to pivot toward growth support.
“The disinflation trend we observed in the last quarters is expected to continue for the rest of 2025,” the CBN said in its statement, underscoring a deliberate shift from pure price stability to a more balanced agenda that also nurtures economic recovery.
Implications for SMEs, Households and Liquidity Management
The rate cut is designed to lower borrowing costs for small and medium‑size enterprises (SMEs) and ordinary consumers. With cheaper credit, businesses can finance inventory, expand operations, and hire staff, while households may see reduced mortgage and personal loan repayments.
To complement the easing, the central bank introduced a set of liquidity‑friendly measures:
- A 75% cash reserve ratio (CRR) on public deposits, easing the previous higher requirement and freeing up funds for lending.
- Relaxed reporting standards for banks that increase SME loan portfolios.
- Targeted open‑market operations aimed at stabilising short‑term money market rates.
These tools signal that the CBN is looking to manage the money supply carefully while still encouraging banks to extend credit to the real economy.
Analysts who had been betting on a policy shift welcomed the move. Most pointed to the steady decline in inflation as the key driver, noting that the earlier tightening cycle—where rates were hiked aggressively to counter persistent price pressures—had begun to strain both businesses and consumers.
“The eight‑year‑old cycle of rate hikes was necessary to restore credibility, but now the economy needs breathing room,” said Chinedu Okonkwo, a senior economist at Lagos-based research firm EconPulse. “A 50‑basis‑point cut may look modest, but in a high‑rate environment it can translate into a tangible reduction in loan servicing costs.”
Domestic investors also reacted positively, with the Nigerian Stock Exchange’s All‑Share Index edging higher on the news. The sentiment was that lower financing costs could revive stalled projects in manufacturing, agriculture, and construction—sectors that have been hit hard by expensive credit.
Despite the optimism, some caution remains. Critics warn that inflation, though easing, is still well above the central bank’s target range, and a premature loosening could reignite price pressures. The CBN, however, emphasized that its projection assumes a continued disinflation path, supported by recent improvements in supply‑chain bottlenecks and a modest strengthening of the naira.
Overall, the rate cut caps a period of aggressive tightening that saw the policy rate climb from 13% in early 2022 to a peak of 28% in 2023. By stepping back now, the bank hopes to balance the dual mandate of price stability and growth, giving SMEs and households the fiscal relief they have been clamoring for over the past three years.
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Comments
Avijeet Das
Interesting move, but I wonder how much of this is real relief versus optics. Inflation at 20% is still brutal, and I’ve seen too many central banks declare victory too early. The CBN’s got to prove this isn’t just a temporary dip fueled by seasonal food price drops. Real test will be if SMEs actually get loans at lower rates - not just the big players with connections.
September 27, 2025 AT 03:15
Sachin Kumar
27% interest. In 2025. Congratulations, Nigeria. You’ve achieved the rare feat of making central banking look like a hostage negotiation.
September 27, 2025 AT 15:38
Ramya Dutta
Oh wow, they finally cut rates. After bankrupting half the country with 28%. Maybe next they’ll cut the price of bread too? Or is that too much to ask for?
September 27, 2025 AT 17:21
Ravindra Kumar
This is the beginning of the end. I told everyone this would happen. The CBN didn’t listen. They thought they could outsmart the people. They thought inflation was just a number. But the people? The people are hungry. The people are tired. The people are watching. And now? Now the system cracks. Mark my words - in six months, we’ll be back to 30%. And then? Then the streets will burn. This isn’t policy. This is a funeral march for the naira.
September 28, 2025 AT 03:24
arshdip kaur
One wonders if the CBN’s decision is born of wisdom, or merely exhaustion - the quiet surrender of a system that has spent three years screaming into a hurricane, only to realize the wind was never going to stop. A 50-basis-point cut is not a policy shift; it is a sigh. And sighs, however cathartic, do not rebuild economies.
September 28, 2025 AT 07:39
khaja mohideen
This is the moment Nigeria’s economy could actually turn. No more lip service. No more excuses. SMEs need credit, not speeches. The CBN’s doing the right thing - now banks better step up. If they don’t, they’re not just failing the economy - they’re failing their own customers. Time to act, not just announce.
Author
Ra'eesa Moosa
I am a journalist with a keen interest in covering the intricate details of daily events across Africa. My work focuses on delivering accurate and insightful news reports. Each day, I strive to bring light to the stories that shape our continent's narrative. My passion for digging deeper into issues helps in crafting stories that not only inform but also provoke thought.