The Central Bank of Nigeria (CBN) has opened a new phase in its monetary policy management, cutting the Monetary Policy Rate (MPR) by 350 basis points from 26.5 per cent to 23 per cent as the pace of inflation slows and conditions in the foreign exchange market improve.
The decision, announced by CBN Governor, Olayemi Cardoso, on Tuesday followed the 307th meeting of the Monetary Policy Committee (MPC) in Abuja and represents the largest single reduction in the benchmark rate in the current policy cycle.
The move marks a departure from the committee’s July position, when it retained the MPR at 26.5 per cent while monitoring the direction of inflation and other macroeconomic indicators.
Cardoso said the committee had reviewed recent economic developments and resolved to reset the MPR to 23 per cent, while also recalibrating the standing facilities around the benchmark rate. Reports from the meeting indicate that the asymmetric corridor was adjusted to +50/-300 basis points.
The rate cut comes against the backdrop of a continued moderation in headline inflation. Data from the National Bureau of Statistics (NBS) showed that inflation eased marginally from 15.43 per cent in July to 15.39 per cent in August 2026.
More significant was the slowdown in the monthly rate of price increases, which fell from 1.57 per cent in July to 0.71 per cent in August. Food inflation also moderated to 19.57 per cent year-on-year from 20.31 per cent in July, while monthly food inflation dropped sharply from 5.56 per cent to 1.02 per cent.
The latest decision therefore places the CBN’s policy rate closer to prevailing inflation, potentially easing pressure on the cost of funds for businesses and consumers, although the transmission of the policy change to actual lending rates will depend on how commercial banks respond.
The CBN’s decision also comes amid what the committee described as improved stability in the foreign exchange market, alongside progress in strengthening the banking sector following the recapitalisation exercise.
The shift is particularly notable because the central bank had maintained a tight monetary stance through the previous policy cycle, with the 26.5 per cent MPR serving as a major benchmark for borrowing costs across the economy.
While the reduction could create greater room for credit expansion, its immediate impact on households and businesses should not be equated with an automatic 3.5 percentage-point reduction in bank lending rates, as commercial lending rates are influenced by banks’ funding costs, risk assessments and other market conditions.
For the CBN, the latest adjustment signals greater confidence in the recent moderation of inflation while retaining room to respond should renewed price or foreign-exchange pressures emerge.
