CBN Cuts Interest Rate to 27% as 14 Banks Meet New Capital Requirement

Nigeria’s Monetary Policy Committee (MPC) has reduced the country’s benchmark interest rate, the Monetary Policy Rate (MPR), from 27.50 percent to 27 percent. The decision, announced on Tuesday, signals a shift from the aggressive tightening stance the Central Bank of Nigeria (CBN) has maintained since 2024.

Presenting the communiqué from the 302nd MPC meeting, CBN Governor Yemi Cardoso said the committee also lowered the Cash Reserve Ratio (CRR) for commercial banks from 50 percent to 45 percent, while retaining it at 16 percent for merchant banks. The Liquidity Ratio was held at 30 percent, while the Asymmetric Corridor was adjusted to +250/-250 basis points, down from +500/-100 basis points around the MPR.

Cardoso explained that the MPC introduced a 75 percent CRR on non-TSA public sector deposits to strengthen liquidity management. He said the rate cut was driven by “the sustained disinflation recorded in the past five months,” along with forecasts of further inflation declines and the need to support Nigeria’s economic recovery.

On the ongoing recapitalisation exercise, the CBN governor confirmed that 14 Nigerian banks have already met the new minimum capital requirement. The recapitalisation framework sets different thresholds depending on licence type, with commercial banks holding international authorisation now required to maintain a minimum capital base of N500 billion. National commercial banks must hold N200 billion, while regional banks have a N50 billion requirement. Merchant banks also have a N50 billion threshold, national non-interest banks require N20 billion, and regional non-interest banks N10 billion.

Cardoso recalled that Nigeria’s last major recapitalisation took place in 2004, when the CBN raised the minimum capital base from N2 billion to N25 billion, triggering sweeping consolidation in the sector and reducing the number of banks from 89 to 25 through mergers and acquisitions.

According to him, the MPC commended the progress made so far, stressing the importance of completing the recapitalisation programme. “They, therefore, urged the CBN to continue the implementation of policies and initiatives that would ensure the successful completion of the ongoing recapitalisation exercise,” he said.

He also noted that the committee recognised the positive impact of ending forbearance measures and waivers on single obligors. These steps, he said, have promoted transparency, strengthened risk management, and enhanced long-term financial stability.

“The MPC reassured the public that the impact of the removal of forbearance is transitory and does not pose any threat to the soundness and stability of the banking system, price, and other domestic developments,” Cardoso added.