The Central Bank of Nigeria (CBN) has cut its benchmark interest rate by 350 basis points from 26.5 percent to 23 percent, citing easing inflation, improved foreign exchange conditions, and stronger external reserves.
CBN Governor Olayemi Cardoso announced the decision on Tuesday after the Monetary Policy Committee’s 307th meeting in Abuja.
The cut is the largest adjustment in the current monetary policy cycle and followed two consecutive decisions to retain the rate at 26.5 percent in May and July. The MPC had earlier reduced the rate by 50 basis points to 26.5 percent in February.
The committee also adjusted the standing facilities corridor to +50/-300 basis points around the Monetary Policy Rate, while retaining the Cash Reserve Requirement at 45 percent for deposit money banks, 16 percent for merchant banks, and 75 percent for non-Treasury Single Account public-sector deposits.
Cardoso said the reduction should not be interpreted as a shift from the CBN’s restrictive monetary policy stance.
“This is a reset and a recalibration. That is all it is.”
he said, explaining that the adjustment was aimed at improving the transmission of monetary policy after a widening gap between the MPR and prevailing interbank rates.
The CBN said the adoption of the Nigerian Overnight Financial Average (Nigerian Overnight Financial Average) as its transaction-based operating benchmark had improved transparency in money-market operations.
Inflation, reserves improve
The rate cut comes as inflation continues to moderate. Headline inflation fell to 15.39 percent in August from 15.43 percent in July, marking a third consecutive monthly decline.
Food inflation dropped from 20.31 percent to 19.57 percent, while month-on-month headline inflation fell sharply from 1.57 percent to 0.71 percent.
The CBN also pointed to stronger external buffers. Nigeria’s gross external reserves stood at $55.25bn as of September 18, according to figures presented around the MPC meeting.
Cardoso said foreign exchange pressures had eased considerably, while investor confidence and external balances had improved. He also attributed part of the stronger external position to increased diaspora remittances.
CBN prepares for election spending
Despite the improved outlook, the MPC warned that election-related spending could create fresh inflationary pressure.
The committee said prolonged geopolitical tensions in the Middle East and increased election spending were among the risks that could disrupt the current disinflation trend.
Cardoso said the CBN had studied liquidity patterns from previous election cycles and was prepared to respond to any excessive liquidity entering the financial system.
“We will proactively deploy any tools and instruments to mop up any excess liquidity,” he said.
He added that the CBN would monitor currency in circulation, banking-system liquidity, monetary aggregates, and foreign exchange demand ahead of the election cycle.
Economy records stronger growth
The MPC also noted improved economic activity, with real Gross Domestic Product growing by 4.43 percent in the second quarter of 2026, compared with 3.89 percent in the first quarter.
The committee said the outlook for inflation remained favorable in the short to medium term, supported by exchange-rate stability, the delayed effects of previous monetary tightening, and improved food supply during the harvest season.
However, the CBN said future monetary policy decisions would remain data-dependent.
The next MPC meeting is scheduled for November 23 and 24, 2026.
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