Nigeria’s central bank has lowered its benchmark lending rate for the first time in five years, reducing it by half a percentage point to 27 per cent. The move comes amid falling inflation and continued stability of the local naira currency.
Central Bank Governor Olayemi Cardoso announced the decision at a press conference in Abuja, explaining that the 12-member Monetary Policy Committee acted in response to sustained disinflation and the need to support Nigeria’s still-struggling economy.
Headline annual inflation slowed to 20.1 per cent in August, down from 21.9 per cent in July, marking the fifth consecutive month of declining prices. “The easing of the rate reflects confidence in the stability of the foreign exchange market and sustained disinflation,” Cardoso said.
Razia Khan, head of research for Africa and the Middle East at Standard Chartered, said the decision indicated the possibility of further rate cuts. “The central bank sees disinflation continuing in the months ahead, hinting at more easing to come,” she added.
In addition to the rate cut, the CBN reduced the cash reserve ratio for commercial banks from 50 per cent to 45 per cent, a move aimed at increasing liquidity in the financial system.
The naira has remained stable for over a year following two devaluations by President Bola Tinubu as part of broad economic reforms, including the removal of fuel subsidies. The currency has appreciated by 2.5 per cent against the US dollar this month, while foreign reserves reached $41.4 billion at the end of last week.
This rate cut is expected to ease borrowing costs for businesses, which have long complained about high lending rates in Africa’s most populous country. The last cut was implemented during the Covid-19 pandemic under former CBN governor Godwin Emefiele, who is currently facing trial over alleged financial misconduct.
Since assuming office in 2023, Cardoso has promised to restore credibility to the central bank and embrace sound economic policies to support growth and stability.
