CBN cuts interest rate to 27%; what it means for Nigerians and fintechs

The Central Bank of Nigeria (CBN) has reduced the monetary policy rate (interest rate) to 27%. This marked the first time the interest rate had dropped since the COVID-19 era in 2020. Yet, the cut has been anticipated following three consecutive holds at 27.5% in February, May and July 2025. 

At Tuesday’s 302nd Monetary Policy Committee (MPC) meeting, CBN Governor, Olayemi Cardoso, revealed that the MPC decided to cut the interest rate to support the economy. It lowered the lending rate by 50 basis points (bps) as inflation has been easing from very high levels.

“The rate cut was predicated on projections for declining inflation for the rest of the year and the need to support the economy,” Olayemi Cardoso said.

Aside from the hold in interest rate in the past three announcements this year, the interest was protected to either remain the same or drop due to the performance of the inflation rate. Recall that the inflation rate dropped for a fifth consecutive time to 20.12% in August 2025, from 21.88% in July and 22.22% in June.

Notably, the CBN Governor backed the notion that the decision to reduce the interest rate was based on sustained disinflation in five months to support the effort of the economic recovery. Compared to last year when both inflation and interest rates were high, the reverse has been the case this year, especially for the inflation rate. 

In another announcement, the CBN adjusted the asymmetric corridor around the MPR at +250/-250 basis points. It adjusted the Cash Reserve Ratio (CRR) for Deposit Money Banks to 45% from 50.00%, retained the Merchant Banks at 16% and left the Liquidity Ratio unchanged at 30.0%. 

Also, the apex bank has introduced 75% CRR for non-public sector deposits.

The interest rate was last reduced in September 2020, when it was lowered from 12.5% to 11.5% to support the economy during the COVID-19 pandemic.

Also Read: CBN maintains interest rate at 27.5% at 301st MPC amid economic stability efforts.

What does the interest rate mean for Nigerians and fintechs

The drop in interest rate to 27% means that the burden of borrowing has been eased. At 27.5%, an individual who borrows N10,000 from a bank pays N12,750 (interest of N2,750). But with 27%, the repayment fee is cut by N50 to N12,700.

With ease in interest rates, more Nigerians can start a new business on a loan without fear of high returns. In addition, more businesses propel a robust economy and high purchasing power for individuals. 

Here’s the twist. Increased circulation of money fueled by high purchasing power puts pressure on inflation to skyrocket. This means that much money has started to chase fewer goods in the economy.

So what the CBN does at this point is to balance the economy. This results in an increase in interest rate (which discourages borrowing) to slow down the circulation of money (reduce inflation). 

For Fintechs, the drop in interest rate to 27% provides a mixed turn. For loan apps (lenders), it brings about a drop in returns but a payoff in an increased number of customers. Since the interest rate has decreased, people will be eager to borrow. 

Positively, the new rate opens room for fintechs to finance their operation by taking on debts at lower repayments. Since more investments bring greater profitability.

Also, an economy with a low interest rate boosts startups’ valuation and also attracts investors. It, in turn, creates a level playing field for fintechs to raise funds and grow. 

Meanwhile, the flexibility of interest rates makes these outcomes a short-term experience.

Capital requirement 

During Tuesday’s announcement, the CBN governor revealed that about 14 banks have met the regulatory capital requirements.

Recall that the CBN, in March 2024, adjusted the minimum capital requirements for lenders. Effective from April 1, 2024, lenders with an international authorisation were placed on the threshold of N500 billion, national banks require N200 billion, and regional banks require N50 billion for new regulatory approval. 

Since then, banks have been trying to meet this target before the March 2026 deadline.

While Olayemi Cardoso did not divulge the list of lenders who have met the requirement, banks such as Access Bank, Wema Bank, Zenith Bank, GTBank, Stanbic IBTC, Jaiz Bank, Union Bank, and Providus Bank have all met the set capital base. 

Since then, banks have been trying to meet this target before the March 2026 deadline.

While Olayemi Cardoso did not divulge the list of lenders who have met the requirement, banks such as Access Bank, Wema Bank, Zenith Bank, GTBank, Stanbic IBTC, Jaiz Bank, Union Bank, and Providus Bank have all met the set capital base.