The Central Bank of Nigeria (CBN) has reduced its benchmark interest rate, the Monetary Policy Rate (MPR), by 50 basis points to 26.5 percent, marking a cautious shift in monetary policy as inflationary pressures continue to moderate.
The decision was announced on Tuesday at the conclusion of the 304th Monetary Policy Committee (MPC) meeting held at the apex bank’s headquarters in Abuja. CBN Governor Olayemi Cardoso, who presided over the two-day meeting, said the adjustment reflects growing confidence that inflation is on a downward trajectory while economic growth requires measured support.
Cardoso stated that the committee undertook a comprehensive review of domestic and global economic developments before arriving at its decision. He noted that headline inflation has eased consistently in recent months, supported by relative exchange rate stability, improvements in food supply, and the lagged impact of previous monetary tightening measures implemented throughout 2024 and 2025.
According to the governor, the committee agreed that while inflation remains above the bank’s long-term target, the risks to price stability have moderated sufficiently to justify a modest easing of the policy stance. He emphasized that the 50-basis-point reduction represents a balanced approach aimed at sustaining disinflation without undermining investor confidence or destabilizing the financial system.
“The Committee is encouraged by the steady decline in inflationary pressures and believes that a carefully calibrated reduction in the policy rate will help stimulate productive activities while maintaining macroeconomic stability,” Cardoso said during the post-meeting briefing.
Despite the rate cut, the MPC retained other key monetary parameters, including the Cash Reserve Ratio (CRR) for deposit money banks and the Liquidity Ratio, signaling that the central bank remains cautious. Analysts interpret the decision to hold these instruments steady as an indication that the bank intends to closely monitor liquidity conditions and inflation expectations before considering further easing.
Nigeria’s economy has faced sustained headwinds over the past three years, including elevated inflation, currency volatility, high energy costs, and structural supply constraints. Inflation had surged following fuel subsidy reforms and exchange rate adjustments but has gradually declined amid tighter monetary policy and improved foreign exchange management.
The rate reduction also comes within the broader framework of economic reforms introduced under President Bola Tinubu, whose administration has pursued fiscal consolidation, revenue reforms, and measures to attract foreign investment. Economic analysts say coordination between fiscal and monetary authorities will be critical in sustaining macroeconomic gains.
Financial markets responded cautiously to the announcement. The naira experienced slight pressure in the official foreign exchange market shortly after the decision was made public, reflecting investor sensitivity to policy adjustments. Market observers, however, noted that external reserves remain relatively strong, providing a buffer against volatility.
Business leaders and economic stakeholders have welcomed the rate cut, expressing optimism that it could gradually lower borrowing costs for manufacturers, small and medium-scale enterprises, and households. However, economists caution that commercial lending rates may not immediately mirror the reduction in the MPR, as banks adjust based on funding costs and risk assessments.
Some analysts have also pointed out potential risks, including global economic uncertainties, commodity price fluctuations, and domestic fiscal pressures that could affect inflation dynamics in the months ahead. They argue that the CBN will need to maintain vigilance to prevent a resurgence of price instability.
Cardoso reiterated that the MPC remains committed to evidence-based policymaking and will continue to assess economic indicators such as inflation trends, exchange rate movements, capital flows, and output growth before its next meeting. He stressed that future decisions will depend on incoming data and evolving risks.
The next meeting of the Monetary Policy Committee is scheduled for later in the second quarter of 2026, where policymakers are expected to further evaluate whether the current pace of disinflation warrants additional easing or a pause to consolidate gains.
