By Anthony Otaru, Abuja
The Central Bank of Nigeria (CBN) on Tuesday slashed its benchmark interest rate to 26.50 per cent, as declining inflation and improving macroeconomic indicators strengthened the case for easing monetary policy after months of aggressive tightening.
CBN Governor, Olayemi Cardoso, announced the decision at the end of the Monetary Policy Committee’s (MPC) 304th meeting in Abuja, saying all 11 members unanimously agreed to cut the Monetary Policy Rate (MPR) by 50 basis points from 27 per cent.
“The committee decided to reduce the monetary policy rate by 50 basis points to 26.50 per cent,” Cardoso said.
He explained that the decision was driven largely by sustained moderation in inflation, which has declined consistently over the past 11 months, reflecting the impact of the apex bank’s earlier policy tightening.
“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,” he said.
According to him, the decline was supported by multiple factors, including improved foreign-exchange stability, stronger external earnings, and better food-supply conditions.
“This downward trajectory in inflation was driven mainly by the continued effects of contractionary monetary policy, stability in the foreign exchange market, robust capital inflows and improvements in the balance of payments,” Cardoso said.
He added that relative stability in petroleum product prices and improved availability of staple foods also helped to reinforce the disinflation trend and stabilise consumer prices.
“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,” he added.
The CBN Governor said the MPC also took into account the strengthening of Nigeria’s external reserves position, supported by increased export receipts and remittance inflows.
“This has contributed to greater stability in the foreign exchange market and bolstered investor confidence,” Cardoso said.
He added that the committee welcomed recent fiscal measures, including the Presidential Executive Order 09, which redirects oil and gas revenues into the federation account, noting that it could further improve government revenue and external reserves.
“The committee acknowledged the potential impact of this order in improving fiscal revenue and accretion to reserves,” he said.
Cardoso stressed that the rate cut reflects the apex bank’s cautious confidence that inflation is moderating sustainably, while maintaining safeguards to preserve financial stability.
He said, “Given these improved macroeconomic conditions, the committee believed that a moderate easing was consistent with the prevailing inflation dynamics.”
Despite the reduction in the benchmark rate, the MPC retained the Cash Reserve Ratio at 45 per cent for commercial banks and 16 per cent for merchant banks, while the liquidity ratio was held at 30 per cent.
The standing facilities corridor was also maintained at +50 and -450 basis points around the MPR to guide market interest rates and control liquidity conditions.
The Monetary Policy Rate serves as Nigeria’s key benchmark interest rate, influencing borrowing costs, credit expansion, investment decisions and overall economic activity.
The latest move signals the CBN’s cautious shift toward easing, as inflation pressures weaken and macroeconomic stability improves, while maintaining vigilance against potential risks.
