The Central Bank of Nigeria (CBN) has made a decisive move in its monetary stance by trimming its Monetary Policy Rate (MPR) by 50 basis points, lowering it from 27 to 26.5%. The move, announced after the Monetary Policy Committee (MPC) meeting on February 23–24, 2026, marks the first policy rate cut in months. It reflects growing confidence that the wave of inflation which has gripped Africa’s largest economy is finally easing.
The Committee’s decision was based on a balanced evaluation of risks to the outlook, which suggests that the ongoing disinflation path will continue. The move follows a 50-basis-point cut implemented in September 2025 and a hold at the previous MPC briefing in November 2025.
CBN Governor Olayemi Cardoso explained that the MPC’s decision was underpinned by 11 consecutive months of disinflation. Nigeria’s inflation rate, which peaked above 30% in 2024, has been steadily moderating, reaching 15.1% in January 2026. This slowdown reflects both structural adjustments—such as the rebasing of the Consumer Price Index—and the impact of earlier monetary tightening.
Cardoso told reporters that easing the MPR was necessary to support credit growth and ease financing burdens on households and businesses. He emphasized that the bank remained committed to price stability but recognized the need to balance growth with disinflation.
This cautious tone is important. Some analysts had predicted a larger cut of 75 basis points, but the MPC settled on 50. According to analysts, the committee wanted to avoid the impression of aggressive easing that could unsettle investors or undermine confidence in Nigeria’s inflation-fighting credentials.
" The Committee’s decision was premised on a balanced evaluation of risk to the outlook which suggests that the ongoing disinflation trajectory would continue largely supported by the lad transmission of previous monetary tightening, sustained exchange rate stability and enhanced food supply. In reaching this policy decision, the committee took into account, the sustained deceleration in year-on-year headline inflation in January 2026, marking the 11th consecutive month of decline." Cardoso said.
This downward trajectory in inflation was driven mainly by the continued effect of the contractionary monetary policy, stability in the foreign exchange market, robust capital inflows and improvements in the balance of payments.
"The momentum was further reinforced by relative stability in the prices of petroleum products and improved food supply conditions, especially staples. These outcomes have indicated that prior tightening has continued to anchor expectations,” said the Governor.
While the headline interest rate was reduced, the Central Bank decided to keep other safety measures the same to ensure the banking system remains solid. The Cash Reserve Requirement (CRR)—which is the amount of money banks must keep with the Central Bank—was held at 45 percent for regular commercial banks and 16 percent for merchant banks.
The committee also adjusted the “Standing Facility Corridor,” which is the range of interest rates at which banks can borrow from or lend to the Central Bank. This range has now been set at +50 to -450 basis points around the new 26.5 percent rate.
Cardoso also disclosed that 20 banks have met the recapitalisation requirements set by the apex bank to this end, he commended the resilience of the banking sector.
By making these changes, the government aims to find a balance where prices of goods do not rise too quickly, but businesses can still get the loans they need to grow and create jobs.
For Nigeria’s private sector, the rate cut is a welcome relief, but many believe it is only a first step. Business groups told Julisha.co.ke/subscriptions that real impact would depend on whether commercial banks ease lending rates and expand credit to struggling small and medium-sized enterprises. Several industry associations also called for complementary fiscal measures, arguing that monetary easing alone cannot offset structural constraints such as poor infrastructure and energy costs.
Nigeria’s move mirrors similar decisions in other emerging markets where inflation has cooled. In Kenya, the central bank trimmed its benchmark rate earlier this month after inflation stabilized, extending a 10-month streak of cuts. By cutting rates only modestly, the CBN is signaling that Nigeria remains an attractive carry-trade destination.
Key Risks Ahead
Despite optimism following the decision, several risks remain:
Inflationary shocks: Food and energy prices remain volatile. Any supply chain disruption or subsidy reversal could drive inflation upward again.
Fiscal policy slippage: Nigeria’s large budget deficit means government borrowing could offset the liquidity impact of lower rates.
Weak credit transmission: If banks remain risk-averse or constrained by high CRR, lower rates may not translate into real lending growth.
External shocks: Oil price swings, geopolitical tensions, or global rate hikes could pressure Nigeria’s currency and reserves.
The Committee’s Decision
The Monetary Policy Rate was reduced by 50 basis points to 26.5 per cent.
The Cash Reserve Ratio was retained at 45.0 per cent for commercial banks and 16.0 per cent for merchant banks.
The Liquidity Ratio was maintained at 30.0 per cent.
The Standing Facilities Corridor was fixed at +50/-450 basis points around the MPR.
The committee noted that although inflationary pressures are easing, maintaining other policy parameters reflects a cautious stance aimed at safeguarding financial system stability. This rate cut represents the lowest benchmark rate since May 2024, when the interest rate stood at 26.25 per cent.
