JUST IN: CBN Cuts Interest Rate by 50 Basis Points to 27%, Signals Cautious Monetary Policy Stance

By Emmanuel Kwada

The Central Bank of Nigeria (CBN) has announced a 50 basis point reduction in the Monetary Policy Rate (MPR), lowering it from 27.5% to 27%, as part of its ongoing efforts to balance economic growth and inflation control. The decision, made during the latest Monetary Policy Committee (MPC) meeting, reflects a cautious approach to easing monetary conditions amid persistent economic challenges.

The CBN retained the asymmetric corridor around the MPR at +260 and -250 basis points, maintaining its framework for liquidity management. This structure underscores the bank’s vigilance in addressing market volatility while providing flexibility to financial institutions.

In a significant move, the CBN also reduced the Cash Reserve Requirement (CRR) for commercial banks from 50% to 45%, aiming to free up liquidity for lending and stimulate economic activity. The CRR for merchant banks remains unchanged at 16%. Additionally, the Committee introduced a new 75% CRR on non-Treasury Single Account (TSA) public sector deposits, a measure designed to tighten control over public sector funds and curb excess liquidity in the system.

The MPC remains committed to fostering sustainable growth while addressing inflationary pressures and exchange rate volatility

The liquidity ratio was left unchanged at 30%, signaling the CBN’s intent to maintain stability in the banking sector while implementing these targeted adjustments.

CBN Governor Olayemi Cardoso emphasized that the decisions reflect a delicate balancing act. “The MPC remains committed to fostering sustainable growth while addressing inflationary pressures and exchange rate volatility,” Cardoso said in a statement following the meeting. Analysts view the rate cut as a signal of cautious optimism, with the bank seeking to support businesses and households without destabilizing the naira or fueling inflation.

Market reactions were mixed, with some investors welcoming the increased liquidity, while others expressed concerns about the potential for renewed inflationary pressures. The CBN’s next steps will be closely watched as Nigeria navigates a complex economic landscape marked by global uncertainties and domestic fiscal challenges.