The Central Bank of Nigeria (CBN) has begun to loosen its monetary stance after nearly two years of aggressive tightening, trimming its benchmark interest rate as inflation shows sustained signs of moderation.
At the conclusion of its 304th Monetary Policy Committee meeting in Abuja, the CBN reduced the Monetary Policy Rate (MPR) by 50 basis points to 26.5 per cent, down from 27 per cent. The decision, announced by Governor Olayemi Cardoso, marks the second rate cut in five months.
The move follows eleven consecutive months of declining headline inflation, which eased to 15.1 per cent in January 2026, according to data from the National Bureau of Statistics (NBS). The steady moderation in consumer prices has strengthened expectations that policymakers would begin recalibrating borrowing costs after an extended tightening cycle aimed at stabilising the naira and anchoring inflation expectations.
Cardoso said the committee’s decision reflected sustained improvements in key macroeconomic indicators, particularly price stability. Yet the broader policy configuration suggests a central bank wary of moving too quickly.
While lowering the benchmark rate, the MPC retained the Cash Reserve Ratio at 45 per cent for commercial banks and 16 per cent for merchant banks. The Liquidity Ratio remains unchanged at 30 per cent, and the asymmetric corridor around the MPR was held at +50/-450 basis points.Â
The 26.5 per cent benchmark represents the lowest level since May 2024, when rates stood at 26.25 per cent. It also contrasts sharply with the peak of Nigeria’s recent tightening phase, during which the central bank raised borrowing costs repeatedly in response to persistent inflation and currency volatility. Before the current easing cycle, the last rate cut occurred in September 2020, when policymakers reduced the MPR to cushion the economic shock triggered by the COVID-19 pandemic.
For much of the intervening period, monetary policy was firmly restrictive. Successive hikes sought to rein in inflation that had accelerated amid exchange-rate reforms, subsidy removals and structural supply constraints. The result was a sharp increase in funding costs for businesses and households, but also a gradual moderation in price pressures.
Analysts say the latest adjustment signals growing confidence within the MPC that inflation risks are receding sufficiently to create space for growth-supportive measures.
The retention of tight liquidity controls indicates policymakers remain alert to potential volatility. According to analysts, Nigeria’s financial markets remain sensitive to capital flows, and any perception of premature easing could put pressure on the naira or reverse gains in inflation management.
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