Nigeria Cuts Interest Rates for the First Time in Five Years
TLDR
- Nigeria’s central bank cut its benchmark interest rate for the first time in five years, lowering the Monetary Policy Rate by 50 basis points to 27%
- Inflation slowed to 20.12% in August, marking a fifth consecutive monthly decline after reaching multi-decade highs in 2022
- The economy expanded 4.23% in the second quarter of 2025, compared with 3.13% in the first quarter
Nigeria’s central bank cut its benchmark interest rate for the first time in five years, lowering the Monetary Policy Rate by 50 basis points to 27%.
Governor Olayemi Cardoso stated that the decision was based on projections of easing inflation and a stronger naira. Inflation slowed to 20.12% in August, marking a fifth consecutive monthly decline after reaching multi-decade highs in 2022. Economists had expected a deeper 75 basis-point cut.
The economy expanded 4.23% in the second quarter of 2025, compared with 3.13% in the first quarter, supported by growth in agriculture, services, industries, and oil. Manufacturing, trade, ICT, and motor assembly sectors contracted.
The move follows calls from industry groups to ease borrowing costs and support production. The central bank had raised rates six times in 2024 before holding steady earlier this year.
Nigeria’s policy rate remains one of the highest in Africa. Ghana’s stands at 21.5% with inflation at 11.5%, while South Africa’s is 7% with inflation at 3.3%.
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Points clés à retenir
The Central Bank of Nigeria’s rate cut signals the beginning of a potential shift in policy as inflation shows signs of sustained moderation. The move may ease financing pressures for businesses, but borrowing costs remain steep compared to regional peers. High rates have weighed on credit growth and investment, particularly in manufacturing and trade, sectors already under strain. At the same time, Nigeria’s inflation remains among the highest in Africa, reflecting structural challenges linked to food supply, energy costs, and currency volatility. By cutting rates cautiously, policymakers are striking a balance between growth concerns and the risk of renewed price pressures. The decision also highlights Nigeria’s divergence from other major African economies. Ghana has aggressively cut rates this year following rapid disinflation, while South Africa has maintained a low rate environment amid stable prices. Nigeria’s next steps will depend on whether inflation continues to trend downward and the naira sustains recent gains.
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