Victor Ezeja
Ahead of the Central Bank of Nigeria’s Monetary Policy Committee (MPC) meeting next week, calls for the CBN to cut the interest rate have intensified.
In a notice published on its website, the apex bank stated that the 302nd MPC meeting has been scheduled for Monday, September 22, and Tuesday, September 23, 2025, at the CBN headquarters in Abuja.
Join our WhatsApp ChannelThe meeting is usually a time when MPC members deliberate on key macroeconomic indices, including inflation, gross domestic product (GDP), and other monetary policy issues like the Monetary Policy Rate (MPR), also known as the benchmark interest. The MPR, set by the MPC, determines the rate at which commercial banks lend money to businesses.
In its attempt to control liquidity in the financial system and tackle inflation, the CBN has raised the MPR by about 875 basis points in the last one year to 27.5 per cent. The apex bank has maintained the interest rate at 27.5 per cent since November 2024, when it took that decision. It has also maintained the Cash Reserve Ratio (CRR) at 50 per cent for deposit money banks and 16 per cent for merchant banks. The Liquidity Ratio has also been kept at 30 per cent.
With the MPR at 27.5 per cent, interest rates on loans from commercial banks are between 29 per cent and 36 per cent, putting pressure on an already fragile economy.
The recent inflation data released by the National Bureau of Statistics (NBS) show that the headline inflation rate eased to 20.12 per cent in August from 21.88 per cent in July. This is the fifth consecutive month of decline of the headline inflation rate since April 2025 when it dropped to 23.71 per cent. NBS’s Consumer Price Index report released on Monday, September 15, also revealed that both core and food inflation indices moderated by 1.0ppt and 0.87ppt, respectively, to 20.3 per cent year on year (YoY) and 21.9 per cent YoY.
The declining inflation narrative represents a dramatic turnaround from the previous year, when Nigeria grappled with inflation rates reaching a 28-year high, spurred by the economic reforms initiated by President Bola Tinubu’s administration, including the removal of costly fuel subsidies and the devaluation of the naira. The current disinflation process gained additional momentum following the CPI rebase conducted earlier in 2025, which technically contributed to the sharp statistical decline observed in January 2025. However, the consistent month-on-month decline throughout 2025 suggests that the trend reflects genuine economic dynamics beyond mere statistical adjustments.
The sustained decline in inflation has been attributed to CBN’s monetary policy tightening stance, exchange rate stability (the naira has appreciated significantly, now trading below the ₦1,500 per U.S. dollar for the first time since February 2025), improved agricultural output (early harvest season effect), and a surge in external reserves.
With this deceleration trend, economic experts and analysts have called for a reduction of the interest rate, which remains high.
Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said it is imperative that the CBN should consider reducing the high interest rate. According to him, reducing interest rates would help boost production and investment in the country.
Analysts at Comercio Partners stated that the continued moderation in food prices is expected to give the MPC greater confidence to implement a rate cut.
The analysts said they expect the committee to cut the interest rate by 25-basis points to stimulate economic activities in the country.
“We anticipate the Committee will implement a 25-basis-point rate cut for the first time this year, in a bid to stimulate economic activity and strengthen domestic demand. This projection is supported by declining inflation and continued exchange rate stability,” the analysts stated.
United Capital Research earlier urged that if the economy records further inflation decline in August, the CBN should consider reducing the interest rate in the next MPC meeting in September.
“We believe the current inflation trend presents a compelling case for the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to consider easing its tight monetary policy stance,” the Pan-African financial services firm stated in its Inflation Watch for August.
Chief Economist and Partner at SPM Professionals, Dr Paul Alaje, expressed support for calls on the CBN to reduce the interest rate, but warned that it must be done with caution.
Dr Alaje, who appeared on Channels Television’s Sunrise Daily on Tuesday, said the monetary authority needs to apply caution in reducing the interest rate. “I support rate reduction, but we have to do this with a lot of caution,” Alaje stated.
He argued that it is too early to start celebrating reduced inflation, even though it is the fifth consecutive reduction. He contended that the reduction of the inflation rate stemmed from the base year and basket adjustments done earlier this year, which reduced the headline indices by 10 per cent from 34 per cent in December 2024 to 24 per cent in January 2025.
The economist warned that if the rate reduction is sporadic, it might lead to inflation rebound and even rise higher.
READ ALSO: Naira Opens Week Positive As Inflation Further Drops
Alaje pointed out that there are monetary and non-monetary factors driving inflation that need to be managed. On the non-monetary side, he reiterated calls for more efforts to combat insecurity, which is the main driver of headline inflation in Nigeria. He also suggested reduction in imports and support to local manufacturing and boosting power supply.
Cowry Research advised that while the moderation in headline inflation in August could provide room for a potential policy shift, such as rate cut to signal confidence in the disinflation trend, the monetary authority should apply caution given lingering risks from pass-through effects of FX, food supply disruptions, and other issues.
“In our view, the committee is more likely to strike a balanced tone—acknowledging the easing price pressures while keeping its guard up against residual risks to price,” Cowry Research stated.
However, in a commentary on the August inflation report, analysts at CardinalStone Research said they expect the monetary authority to maintain the current interest rates at the September MPC meeting. It however, stated that “the moderating inflation, which could reach 18.0 per cent by year-end, could pave the way for a 50-100bps rate cut in the November meeting.”
Victor Ezeja is a passionate journalist with seven years of experience writing on economy, politics and energy. He holds a Master's degree in Mass Communication.
