Nigeria Interest Rate Cut to 27%: CBN’s First Move of 2025 Sparks Hope for Growth

Why the CBN decided to slash the benchmark rate

After a string of months where consumer prices cooled, the Central Bank of Nigeria finally felt comfortable enough to cut its key rate. Governor Olayemi Cardoso announced a 50‑basis‑point reduction, bringing the official rate down to 27 percent. The decision came out of a two‑day Monetary Policy Committee meeting in Abuja, where policymakers agreed that the recent slowdown in inflation gave them room to ease monetary pressure.

Cardoso pointed to five consecutive months of declining inflation as the main driver. With price gains easing, the central bank can afford to lower borrowing costs without immediately risking a rebound in inflation. The move signals a shift from the defensive stance the bank held for most of 2024, when it kept rates high to tame stubborn price rises.

In practical terms, a lower benchmark rate means cheaper loans for businesses and households. It also reduces the cost of capital for banks, which can pass on savings to borrowers. This is why many economists view the cut as the first step toward reviving economic activity that has been hampered by high financing costs.

Liquidity measures and the real‑estate ripple effect

Alongside the rate cut, the CBN lowered the Cash Reserve Requirement (CRR) for commercial banks from 50 % to 45 %. By freeing up a chunk of funds that banks previously had to hold in reserve, the central bank hopes to inject more liquidity into the financial system. More liquidity should translate into more credit being offered to firms needing working capital and to families looking for home loans.

At the same time, the regulator kept a stricter 75 % CRR on non‑TSA public‑sector deposits. This selective tightening shows the bank’s desire to control excess liquidity that could reignite price pressures, while still encouraging lending where it matters most.

The real‑estate market stands to benefit the most. High borrowing costs have long made mortgage rates soar into double‑digit territory, choking demand for both new builds and existing homes. With the benchmark rate now at 27 % and banks holding less cash in reserve, developers can expect lower financing costs for construction projects, and prospective homebuyers may finally see mortgage rates dip into more affordable ranges.

For the average Nigerian looking to buy a house, the prospect of a cheaper loan could mean the difference between renting indefinitely and securing a property. The housing shortage, which has pushed prices up sharply, might ease if developers can access cheaper funds and pass those savings on.

Across the continent, Nigeria is not alone in loosening monetary policy. Several African central banks have started cutting rates as inflation cools, marking a regional shift from the tight‑policy era that dominated the pandemic years. The CBN’s move aligns Nigeria with this broader trend, suggesting that policymakers are collectively confident that price pressures are receding.

While optimism is high, the bank remains cautious. The new Nigeria interest rate cut is only a first step; future adjustments will depend on whether inflation continues to drop and whether the increased credit flow translates into real economic growth without overheating the economy.

In the weeks ahead, market watchers will be looking at loan uptake rates, housing starts, and consumer spending data to gauge the real impact of the policy shift. If credit expands as intended, Nigeria could see a modest boost in activity that helps offset the slowdown caused by past inflationary shocks. The balance the CBN tries to strike—stimulating growth while guarding against new price spikes—will define the country’s economic trajectory for the rest of the year.