CBN cuts interest rates to 27%, reduces CRR for DMBs
Omeiza Bilal
The CBN’s Monetary Policy Committee has reduced the interest rate to 27 per cent from 27.5 per cent in July, and at the same time reducing Cash Reserve Ratio (CRR) for deposit money banks (DMBs) by 500 basis points (bps).
It also reduced the cash reserve requirement to 45 per cent for commercial banks and 16 percent for merchant banks.
This is the first time in almost two years that the Apex Bank is cutting rates after several calls for the regulator to cut rates following five months of disinflation.
Announcing the decision of the Monetary Policy Committee (MPC) to cut the Monetary Policy Rate (MPR), CBN Governor, Mr. Olayemi Cardoso, after the end of the Committee meeting in Abuja, the Bank also resolved to adjust the standing facilities corridor around the MPR to plus or minus 250 basis points, raise the Cash Reserve Requirement (CRR) for commercial banks to 45% while retaining that of merchant banks at 16%, introduce a 75% CRR on non-Treasury Single Account (TSA) public sector deposits, and maintain the Liquidity Ratio at 30%.
The CBN Governor explained that the decision to lower the policy rate was driven by sustained disinflation over the past five months, projected further declines in inflation for the remainder of 2025, and the need to strengthen economic recovery. He added that the adjustment of the standing facilities corridor aims to improve interbank market efficiency and enhance monetary policy transmission.
He said, “The MPC expressed satisfaction with the prevailing macroeconomic stability evidenced by the improvements in several indicators. 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. This deceleration, underpinned by monetary policy tightening, exchange rate stability, increased capital inflows, and surplus coin-to-account balance, have helped to broadly anchor inflation expectations. Other factors that contributed to the deceleration include the continued moderation in the price of PMS and the notable increase in crude oil production.”
The Apex bank Governor disclosed that the country’s foreign reserves now stand at $43.05 billion in September 2925. This is compared to over 40 billion in August 2025.
“Gross external reserves remained robust at $43.05 billion on September 11, 2025, compared with $40.51 billion at end-July 2025 with an import cover of 8.28 months. Similarly, the Q2 2025 current account balance recorded a significant surplus of $5.28 billion compared with $2.85 billion in Q1 2025,” he said
Cardoso further disclosed that about 14 banks have met the recapitalisation requirement that is scheduled to come into effect 2026. In reviewing the new capital requirement, International Banks’were required to raise N500bn, National Banks capital N200 billion while regional banks new capital was reviewed upward to N50 billion.
“On the financial sector, the MPC noted the continued resilience of the banking system, with most of the financial soundness indicators remaining within their respective prudential benchmarks. Members also acknowledged the significant progress in the ongoing bank recapitalization exercise, as 14 banks have fully met the new capital requirement. They therefore urged the Bank to continue the implementation of policies and initiatives that would ensure the successful completion of the ongoing recapitalization exercise.
