The Central Bank of Nigeria (CBN) has reduced its Monetary Policy Rate (MPR) to 23 percent, marking the first interest rate cut in 2026 and bringing the benchmark rate to its lowest level since February 2024. CBN Governor Olayemi Cardoso announced the decision on Tuesday after the Monetary Policy Committee (MPC) concluded its 307th meeting in Abuja.

The rate cut comes as Nigeria continues to record easing inflationary pressure. Data from the National Bureau of Statistics (NBS) showed that headline inflation declined slightly to 15.39 percent in August 2026, from 15.43 percent in July. The improvement in inflation provided room for the MPC to adjust its policy rate while maintaining its focus on keeping price pressures under control.

Alongside the MPR reduction, the MPC adjusted the asymmetric corridor around the policy rate to +50/-300 basis points. However, the committee retained the Cash Reserve Ratio (CRR) at 45 percent for deposit money banks and 16 percent for merchant banks, while the CRR on non-Treasury Single Account public-sector deposits remained at 75 percent.

Cardoso explained that the adjustment was designed to strengthen monetary policy transmission and restore the MPR as the main signal of the CBN’s monetary policy direction. He noted that the gap between the MPR and prevailing market rates had weakened the effectiveness of monetary policy, making an operational reset necessary to better align the framework with market conditions.

The CBN governor stressed that the move should not be interpreted as a shift in the underlying monetary policy stance. Instead, the MPC described it as an operational recalibration aimed at improving the effectiveness and transparency of monetary policy as Nigeria transitions toward an inflation-targeting framework. The CBN also pointed to the adoption of the Nigerian Overnight Funding Average (NOFA) as a transaction-based benchmark as part of ongoing efforts to improve money-market operations.

source: The cable