The Central Bank of Nigeria (CBN) has reduced its benchmark interest rate by 350 basis points, cutting the Monetary Policy Rate (MPR) from 26.5 per cent to 23 per cent in its largest single rate reduction on record.
The decision was announced by CBN Governor Olayemi Cardoso following the 307th meeting of the Monetary Policy Committee (MPC), held on September 21 and 22, 2026.
The adjustment comes after Nigeria’s headline inflation slowed for a third consecutive month to 15.39 per cent in August from 15.43 per cent in July. Food inflation also eased to 19.57 per cent, marking its first decline in about six months.
CBN says rate reset reflects market conditions
The central bank said the move was driven partly by the gap that had developed between the MPR and actual money-market rates.
According to the CBN, Treasury bills, Open Market Operations (OMO) and interbank rates had already moved below the previous 26.5 per cent benchmark, reducing the effectiveness of the MPR as a signal for monetary policy.
Cardoso described the adjustment as an operational reset rather than a broad shift towards cheaper money.
“The committee decided as follows: reset the monetary policy rate at 23 per cent,” Cardoso said.
He said the recalibration was intended to strengthen the transmission of monetary policy and support the transition towards an inflation-targeting framework.
Policy corridor also adjusted
Alongside the MPR reduction, the CBN changed the asymmetric corridor around the benchmark rate to +50 basis points and -300 basis points, compared with the previous +50/-450 basis points.
The Standing Deposit Facility was reduced to 20 per cent, while the Standing Lending Facility was set at 23.5 per cent.
The Cash Reserve Requirement remained unchanged at 45 per cent for deposit money banks, 16 per cent for merchant banks and 75 per cent for non-Treasury Single Account public-sector deposits.
Economists surprised by size of cut
The size of the reduction caught financial-market participants off guard. Analysts had largely expected the CBN to either maintain the MPR or make a smaller adjustment.
Razia Khan, Managing Director and Chief Economist for Africa and the Middle East at Standard Chartered Bank, said the decision was unexpected.
“Against expectations, the Central Bank of Nigeria cut its policy rate by 350bps, to 23.0 percent, from 26.5 percent. Changes were also made to the asymmetric corridor around the policy rate, to +50bps/-300 bps, from a previous +50bps/-450bps,” Khan said.
The large reduction brings the official benchmark closer to rates already prevailing across parts of the money market.
Inflation and exchange-rate stability support decision
The MPC’s decision also comes against the backdrop of moderating inflation and improved exchange-rate conditions.
Nigeria’s headline inflation has declined from previous highs, while the naira has recorded greater stability in the foreign-exchange market. The CBN said these developments, alongside improved inflation expectations, contributed to the decision.
“Members observed that the moderation in inflation indicated the effectiveness of previous policy tightening measures, sustained exchange rate stability and improved inflation expectations,” Cardoso said.
The central bank will now monitor how the new benchmark interacts with lending rates, market liquidity, inflation and credit conditions across the economy.
For businesses and consumers, one of the key questions will be whether the lower policy rate eventually translates into cheaper borrowing costs as commercial banks adjust their lending and deposit rates.
