Last month, the Monetary Policy Committee (MPC) held its fourth meeting of the year to review key developments in the global and domestic economy and to determine Nigeria’s monetary policy direction. The Monetary Policy Committee is the group within the Central Bank of Nigeria (CBN) responsible for formulating monetary and credit policy.
So far this year, the committee’s decisions have remained the same. At all previous meetings this year, the committee voted to retain the benchmark rate used to guide lending and borrowing rates in the economy (Monetary Policy Rate) at 27.50%.
They also decided to maintain the share of customer deposits that banks must set aside with the CBN (Cash Reserve Ratio) at 50% for Deposit Money Banks and 16% for Merchant Banks; and retain the amount of liquid assets a bank must keep to cover withdrawals (Liquidity Ratio) at 30%.
This time, however, at the end of the meeting, the apex bank announced a significant policy shift: for the first time in five years, the MPC decided to reduce the Monetary Policy Rate (MPR), cutting it down from 27.5% to 27%.
The MPR isn’t the only decision from the last committee meeting. The MPC also reduced the share of customer deposits that banks must keep with the CBN — known as the Cash Reserve Ratio (CRR) — to 45% for commercial banks, while keeping it at 16% for merchant banks. The Liquidity Ratio, which is the amount of liquid assets a bank must hold to cover withdrawals, remained unchanged at 30%.
What do these changes mean for Nigerians?
At first glance, a 0.5% point cut in the MPR may not seem like much. However, by lowering its benchmark rate, the CBN is nudging banks to reduce their own lending rates. The goal is to make it cheaper for businesses to finance their expansion and for individuals to borrow.
On the flip side, however, because the minimum return on savings is tied to the MPR, the benchmark for deposit rates will also decrease slightly from 8.25% to 8.10%. This means savers will earn slightly lower interest on their deposits than before.
What Is Inflation? An Overview Of The Rising Inflation Rate In Nigeria
However, there is so much you can do right now (and fast!) to take advantage of the economic stability.
Why does the rate cut matter?
Since May 2025, Nigeria’s official inflation rate has been declining steadily. In August, the inflation rate dropped to 20.12% from 21.88% in July. This, along with a combination of policy discipline (reducing government spending and adhering to the budget), structural improvements (foreign exchange reforms, refinery operations), key sectors like banking and tech performing well, and favourable supply factors (harvest season, higher oil production) has created positive momentum and a perfect opportunity for the MPC to cut rates without the fear of fuelling inflation.
With over $43 billion in foreign reserves and the economy showing signs of recovery, the CBN finally has the stability to be flexible with its policies and the confidence to make borrowing more affordable.
This rate cut signals one thing: The Central Bank is shifting its focus to boosting economic growth after a period of intense focus on fighting inflation.
Piggyvest New Interest Rates: Earn Up To 22% On Your Savings!
Separating facts from myths
Myth 1: The rate cut means that all my savings and investments will perform poorly.
Reality: Not quite. While savings rates may drop slightly, rate cuts are actually a sign that the Central Bank believes the economy is strong enough to encourage spending and investments, which will help stimulate long-term stability and growth. So, instead of panicking or selling off your investments, focus on maintaining a well-diversified portfolio by balancing safe options, such as savings, with growth assets like equities and bonds, to position yourself for long-term gains.
Myth 2: The rate cuts only matter if I want to borrow money from the bank.
What Is Subsidy Removal? Tips For Thriving Financially Without It
Reality: Not true. Lower rates affect everyone, whether you borrow or not. Yes, they make borrowing cheaper, but they also mean slightly lower returns on individual savings and fixed-income investments. Most importantly, however, the rate cut signals cheaper capital for businesses, encouraging them to expand, create jobs, and boost profitability (especially in manufacturing and other real sectors).
Lower rates also typically make the stock market more attractive, which can increase the value of investment portfolios and stimulate more money flowing through the economy.
Myth 3: I should wait first to see what happens next.
Reality: Patience can be good, but in declining interest rate environments, action pays. History shows that those who position themselves early often benefit the most.
How can you take advantage of the rate cut?
- Lock in today’s rates: With interest rates on savings likely to fall further in line with market realities, consider using long-term savings and investment products like Safelock and Investify to secure today’s higher interest rates. Doing this today helps you protect your return on capital from the imminent decline in market rates.
- Diversify into new growth opportunities: As borrowing becomes cheaper, businesses will begin to expand again. That could fuel growth opportunities in the stock market.
- Hedge against currency volatility: Investing in dollar-denominated assets is an excellent way to protect your wealth from potential currency volatility. Products like Flex Dollar and the soon-to-launch USD Safelock can help you achieve this.
What’s next?
Even at 27%, the new MPR is still significantly higher than the inflation rate of 20.12%. This wide gap means the CBN has plenty of room to make further cuts in the future to support the economy.
The bottom line, however, is that the rate cut is a sign of stability for the country and a chance for you to act early by protecting your savings and positioning yourself for growth.
