In a calculated step toward easing credit conditions without losing sight of price stability, the Central Bank of Nigeria has lowered its benchmark interest rate to 26.5 percent, signaling a gradual shift from its prolonged tightening cycle.
The decision followed the 304th meeting of the Monetary Policy Committee (MPC) and was announced on Tuesday by the CBN Governor, Olayemi Cardoso.
The reduction of the Monetary Policy Rate (MPR) from 27 percent represents the second rate cut in five months, underscoring growing confidence among policymakers that inflationary pressures are beginning to moderate.
By trimming the rate by 50 basis points, the apex bank is cautiously opening the door to cheaper credit for businesses and households, after months of aggressive hikes aimed at taming soaring prices and stabilising the foreign exchange market.
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According to Cardoso, the MPC reached its decision after weighing risks to the broader economic outlook.
“The Committee’s decision was based on a balanced evaluation of risks to the outlook, which suggests that the ongoing disinflation path will continue,” he stated.
Committee members expressed optimism that earlier policy tightening is yielding results. They pointed to improving exchange rate stability and signs that inflation is gradually decelerating, reinforcing confidence that the current policy direction is working.
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The rate cut, analysts say, reflects a delicate balancing act — easing financial strain while preserving macroeconomic discipline.
Despite the rate reduction, the MPC opted to retain critical liquidity control measures to safeguard the banking system.
The Cash Reserve Requirement (CRR) remains unchanged at 45 percent for commercial banks and 16 percent for merchant banks. This means banks must continue to hold significant reserves with the Central Bank, limiting excess liquidity in the system.
In addition, the Standing Facility Corridor has been adjusted to +50 and -450 basis points around the new 26.5 percent benchmark rate. The corridor defines the range at which banks can lend to or borrow from the CBN, helping to manage short-term liquidity flows.
Cardoso also revealed that 20 banks have met the recapitalisation requirements set by the apex bank, commending the resilience and preparedness of the financial sector.
The development, he noted, reinforces confidence in the stability of Nigeria’s banking system amid ongoing reforms.
With this latest move, policymakers are attempting to strike a balance — preventing runaway inflation while ensuring businesses can access funding to expand operations and generate employment.
The CBN maintained that continued exchange rate stability and improved food supply remain central to sustaining the recovery path, expressing confidence that the economy will remain on a steady course if current trends persist.
