‎By Onu Okorie
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‎Central Bank of Nigeria (CBN) has cut its benchmark Monetary Policy Rate (MPR) by 350 basis points, from 26.5 per cent to 23 per cent, in a major recalibration of monetary policy as inflation continues to moderate and the foreign exchange market records relative stability.
‎CBN Governor, Olayemi Cardoso, announced the decision yesterday at the end of the 307th meeting of the Monetary Policy Committee (MPC), held on September 21 and 22, 2026, in Abuja.
‎The decision represents the second MPR reduction by the apex bank this year, following the 50-basis-point cut in February from 27 per cent to 26.5 per cent. The MPC subsequently retained the rate at its May and July meetings.
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‎The 350-basis-point reduction was larger than the adjustment anticipated by some analysts before the meeting. For instance, Prof. Uche Uwaleke, Director of the Institute of Capital Market Studies and President of Capital Market Academics of Nigeria, had projected a 50-basis-point reduction, citing moderating inflation, exchange-rate stability, improved foreign-exchange liquidity and stronger external reserves.
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‎The latest decision comes as headline inflation has declined for three consecutive months. Inflation stood at 15.39 per cent in August, compared with 15.43 per cent in July, 15.91 per cent in June and 15.93 per cent in May.
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‎Alongside the MPR reduction, the MPC recalibrated the asymmetric standing facilities corridor around the policy rate to +50/-300 basis points. The adjustment represents a substantial narrowing of the corridor’s lower bound compared with the previous +50/-450 basis-point setting.
‎Speaking on the outcome of the MPC a financial analyst Mr Samuel Uzor said that the move is intended to strengthen monetary-policy transmission and reinforce the MPR as the principal signal of monetary conditions.
‎”The CBN’s position is that the corridor adjustment should be viewed as an operational realignment rather than a separate change in the direction of monetary policy.” He said.
‎The committee also retained the Cash Reserve Ratio CRR for deposit money banks at 45 per cent, merchant banks at 16 per cent, and non-Treasury Single Account public-sector deposits at 75 per cent.
‎The combination of a sharply lower MPR and unchanged reserve requirements means the CBN is easing its principal interest-rate signal while retaining substantial liquidity-management requirements on banks.
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‎The rate cut is expected to put pressure on money-market rates and, over time, influence the pricing of credit, although the speed and extent of transmission will depend on liquidity conditions and individual banks’ lending decisions.
‎For businesses, particularly firms dependent on bank credit, the key question will be whether the reduction in the policy rate translates into lower lending rates.
‎Households with variable-rate loans could also benefit if banks transmit the reduction through their pricing structures.
‎The fixed-income market is equally expected to respond as investors reassess the relative attractiveness of government securities and other interest-bearing assets.
‎However, the impact on yields may not be immediate or uniform because market liquidity, inflation expectations, government borrowing requirements and investor demand will continue to influence securities pricing.
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‎The size of the rate reduction comes despite concerns that inflationary pressures could re-emerge.
‎Before the MPC meeting, United Capital Research had cautioned that a rate cut could be premature because of rising crude oil and Premium Motor Spirit (PMS) prices.
‎The research firm acknowledged that the recent moderation in inflation had been supported by factors including naira appreciation, seasonal food-price declines and higher crude prices, but warned that rising energy costs could cloud the inflation outlook.
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‎Other pre-meeting analysis also identified possible risks from global oil prices, exchange-rate movements and election-related liquidity pressures.
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‎The MPC’s decision therefore places greater emphasis on the recent disinflation trend while retaining the CRR tools available to manage liquidity and financial-system risks.
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‎The latest decision also marks an important development in the CBN’s monetary-policy framework, particularly its stated intention to strengthen the role of the MPR and improve transmission towards an inflation-targeting framework.
‎The policy reset comes after a prolonged period of tight monetary conditions during which the CBN maintained elevated interest rates to contain inflationary pressures and support macroeconomic and exchange-rate stability.
‎With the MPR now at 23 per cent, attention will shift to whether the easing cycle can support economic activity without reversing recent gains in inflation moderation.
‎The decision is also expected to be closely monitored by businesses, banks, portfolio investors and the government for its implications for credit costs, fixed-income yields, investment flows and economic growth.
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‎What the decision means
‎Policy instrument
‎New position
‎MPR
‎23%
‎Previous MPR
‎26.5%
‎Reduction
‎350 basis points
‎Standing Facilities Corridor
‎+50/-300 bps
‎DMB CRR
‎45%
‎Merchant Bank CRR
‎16%
‎Non-TSA Public-Sector CRR
‎75%
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‎The 23 per cent MPR is the lowest policy rate since February 2024, according to reports on the decision.
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‎The immediate market test will now be whether the substantial reduction in the benchmark rate translates into lower funding costs and stronger private-sector credit while inflation remains on its downward trajectory.
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‎For the CBN, the challenge will be to balance the support for economic activity and credit expansion with the need to preserve the progress made on inflation and exchange-rate stability.