MPC makes first rate reduction after prolonged tightening, retains CRR and liquidity ratio to safeguard stability….
The Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) by 50 basis points to 26.5 percent, marking its first rate cut after an extended period of aggressive monetary tightening.
The decision was taken at the 304th meeting of the Monetary Policy Committee (MPC) held in Abuja on Tuesday, with all 11 members in attendance voting unanimously in favour of the cut.
CBN Governor Olayemi Cardoso announced the outcome at the end of the meeting, stating that the committee resolved to ease the benchmark rate in response to sustained improvements in macroeconomic indicators, particularly inflation.
“The committee decided to reduce the monetary policy rate by 50 basis points to 26.50 percent,” Cardoso said.
The MPR, which serves as the benchmark interest rate, is the apex bank’s primary tool for managing inflation, controlling liquidity and maintaining macroeconomic stability.
Inflation moderation drives decision
The MPC said its decision was influenced by the continued deceleration in headline inflation, which declined for the eleventh consecutive month to 15.1 percent in January 2026.
According to the committee, the disinflation trend has been supported by the lagged effects of previous monetary tightening, improved stability in the foreign exchange market, robust capital inflows and improved food supply conditions.
Cardoso noted that relative stability in petroleum product prices and stronger balance of payments performance also contributed to easing price pressures.
The National Bureau of Statistics had earlier reported that inflation dipped slightly to 15.1 percent in January from 15.15 percent in December, reinforcing expectations that price moderation is gradually taking hold.
Other policy parameters retained
Despite the rate cut, the MPC maintained other key monetary policy parameters, reflecting what it described as a cautious and balanced approach.
The Cash Reserve Ratio (CRR) was retained at 45 percent for commercial banks and 16 percent for merchant banks, while the 75 percent CRR on non-Treasury Single Account public sector deposits was also maintained.
The Liquidity Ratio was left unchanged at 30 percent.
In addition, the Standing Facilities Corridor was adjusted to +50 and -450 basis points around the MPR.
The committee said maintaining these parameters would help safeguard financial system stability while supporting the ongoing disinflation process.
External sector performance
Cardoso highlighted improvements in Nigeria’s external sector, citing higher export earnings and increased remittance inflows as factors strengthening foreign exchange stability and boosting investor confidence.
He also welcomed the recently issued Presidential Executive Order 09, which redirects oil and gas revenues into the federation account, describing it as a measure that could enhance fiscal revenue performance.
Gradual shift toward easing
The latest move represents the lowest benchmark rate since May 2024, when the MPR stood at 26.25 percent.
At its 303rd meeting, the MPC had retained the MPR at 27 percent, underscoring a prolonged tightening cycle aimed at curbing inflation and stabilising the naira.
Analysts say the combination of a rate cut and the retention of other policy levers suggests the CBN is adopting a gradual and carefully calibrated shift toward monetary easing.
With inflation trending downward and liquidity conditions relatively stable, the decision signals growing confidence in the effectiveness of earlier policy tightening while preserving safeguards to sustain macroeconomic stability.
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