Nigeria’s Monetary Policy Committee (MPC) has reduced the Monetary Policy Rate (MPR) from 26.5 percent to 23 percent, delivering a 350-basis-point cut as inflation continues to moderate.
The decision represents the largest reduction in the benchmark interest rate in the current easing cycle and marks a significant shift in the Central Bank of Nigeria’s monetary policy stance.
The rate cut comes after headline inflation slowed for the third consecutive month, falling to 15.39 percent in August from 15.43 percent in July. The latest figure was also substantially below the 23.14 percent recorded in August 2025.
Food inflation also eased during the month, declining to 19.57 percent. The moderation in food prices marked the first decline in the measure in about six months.
The latest decision follows a period of tight monetary policy aimed at bringing inflation under control. The CBN had previously reduced the MPR by 50 basis points to 26.5 percent in February 2026 and retained the rate at its May and July meetings.
The improvement in inflation, alongside relative stability in the foreign exchange market, created room for the MPC to accelerate monetary easing.
The naira has recorded greater stability in 2026, while Nigeria’s external reserves have also strengthened. These developments have reduced some of the pressures that previously constrained the central bank’s ability to lower borrowing costs.
However, policymakers continue to face risks that could affect the inflation outlook.
Rising global crude oil prices and higher petrol costs could increase transportation and production expenses, potentially putting renewed pressure on consumer prices. Recent increases in global energy prices have already raised concerns about the sustainability of Nigeria’s disinflation trend.
The MPC therefore faces the challenge of balancing the need to support economic activity and reduce borrowing costs with the risk that excessive liquidity could reignite inflationary pressures.
The reduction in the MPR is expected to influence lending rates across the financial system, potentially making credit more accessible to businesses and households.
It could also reduce the cost of government borrowing and support investment, although the speed at which commercial banks pass the reduction through to borrowers will depend on liquidity conditions and other factors within the financial system.
The latest move signals a stronger shift towards monetary easing after the CBN maintained a relatively restrictive policy stance through much of 2025 and the first half of 2026.
With inflation now considerably below the previous policy rate, the latest reduction also narrows the gap between the cost of borrowing and the rate at which prices are increasing.
Nevertheless, the outlook remains subject to domestic and international developments, particularly movements in energy prices, exchange rates, food prices and liquidity conditions.
The CBN’s decision therefore comes at a point when Nigeria’s inflationary pressures have eased significantly, while policymakers continue to monitor whether the improvement can be sustained.
