The Central Bank of Nigeria’s Monetary Policy Committee has cut the Monetary Policy Rate by 350 basis points from 26.5 per cent to 23 per cent, with private sector operators calling on commercial banks to reduce lending rates.
CBN Governor, Olayemi Cardoso, announced the decision on Tuesday after the MPC’s 307th meeting in Abuja.
“The committee decided as follows: reset the monetary policy rate at 23 per cent,” Cardoso said.
The committee also adjusted the standing facilities corridor to +50/-300 basis points around the MPR while retaining the Cash Reserve Requirement at 45 per cent for deposit money banks, 16 per cent for merchant banks and 75 per cent for non-Treasury Single Account public sector deposits.
The latest decision followed two consecutive MPC meetings in May and July at which the committee retained the MPR at 26.5 per cent. It had cut the rate by 50 basis points in February.
Despite the reduction, Cardoso said the move should not be interpreted as monetary easing, describing it as a reset and recalibration of the policy framework.
“We will stay on the course, which has been a restrictive one, for as long as we have to,” he said. “And that’s why I re-emphasise that you should not see this as an easing. This is a reset and a recalibration. That is all it is.”
According to the governor, the widening gap between the MPR and prevailing interbank rates had weakened the transmission of monetary policy, prompting the CBN to realign its benchmark with market conditions.
Cardoso said improving economic conditions also supported the decision, noting that foreign exchange pressures had eased while investor confidence and Nigeria’s external position had strengthened.
“Fundamentals have changed,” he said. “We are at macroeconomic stability.”
According to him, “The tight thing that we have done, in our view, has done its job. It has worked. The policy tools that we have used have worked.”
Nigeria’s gross external reserves stood at $55.25bn as of September 18, 2026, the highest level in 18 years and enough to finance about 11.3 months of imports of goods and services.
The balance of payments surplus rose from $2.38bn in the first quarter to $3.51bn in the second quarter, while the current account surplus increased by 67.92 per cent from $4.49bn to $7.54bn.
Cardoso attributed part of the improvement to increased diaspora remittances, saying monthly inflows had risen from about $200m when the CBN intensified its reforms to almost $1bn in July.
The reforms included expanding access to Bank Verification Numbers for Nigerians abroad, strengthening oversight of International Money Transfer Operators and requiring dedicated settlement accounts.
Meanwhile, headline inflation fell for the third consecutive month, declining from 15.43 per cent in July to 15.39 per cent in August.
Food inflation dropped from 20.31 per cent to 19.57 per cent, while core inflation declined from 14.97 per cent to 13.29 per cent. Month-on-month headline inflation also fell from 1.57 per cent to 0.71 per cent.
The MPC attributed the moderation to previous monetary tightening, exchange rate stability and improved inflation expectations, but warned that geopolitical tensions in the Middle East and election-related spending could create fresh inflationary pressures.
The committee expects inflation to moderate further in the short to medium term, supported by foreign exchange stability, the effects of previous tightening and improved food supply during the harvest season.
The MPC also said real GDP grew by 4.43 per cent in the second quarter of 2026, up from 3.89 per cent in the first quarter.
Non-oil growth increased to 4.31 per cent from 3.94 per cent, while oil sector growth rose to 7.31 per cent from 2.57 per cent. The Composite Purchasing Managers’ Index also increased to 52.7 points in August from 51.1 points in July.
READ ALSO: CBN Slashes MPR To 23% In 350bps Rate Cut
OPS Seeks Lower Lending Rates
Reacting to the rate cut, the President of the Lagos Chamber of Commerce and Industry, Leye Kupoluyi, urged lenders to reduce borrowing costs for businesses.
“Monetary easing must be matched by measures that reduce lending risk and improve businesses’ capacity to borrow and repay,” Kupoluyi said.
He warned that the MPR reduction alone would not resolve the financing challenges confronting Nigerian businesses.
“We urge policymakers not to regard the MPR reduction as sufficient in itself to resolve the financing constraints confronting Nigerian businesses,” Kupoluyi said.
He said insecurity and political uncertainty could also affect banks’ willingness to lend, particularly to small and medium-sized enterprises.
The President of the Association of Small Business Owners of Nigeria, Femi Egbesola, also called on banks to pass the benefit of the rate cut to existing borrowers.
“We hope that the banks will be transparent enough to also cut lending rates of existing loans,” Egbesola said.
He said lower borrowing costs could support business expansion and investor confidence but warned that banks could instead channel available liquidity towards large corporations, government securities and other investments.
“That’s why strategy should come into place. That’s why the government, too, particularly CBN, should now be intentional about ensuring that this is reflective of the real economy, which is the business sector,” Egbesola said.
He also called for action on collateral requirements, loan tenor and additional charges.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, described the rate cut as a timely adjustment that could ease financing pressures on businesses.
He said, “The reduction of the MPR to 23 per cent should therefore be viewed not merely as monetary easing, but as an important realignment of the policy rate with prevailing macroeconomic and financial-market conditions.”
Yusuf said the impact would depend largely on whether commercial banks reduced lending rates.
“Without meaningful transmission to borrowers, the impact of the policy adjustment on investment and economic growth would be limited,” he said.
He also warned of possible portfolio outflows and renewed foreign exchange pressure, while stressing that monetary easing alone could not address structural challenges such as energy costs, insecurity, logistics constraints, infrastructure deficits and regulatory costs.
The Chief Executive Officer of Economic Associates, Ayo Teriba, described the rate cut as overdue, citing improvements in the foreign exchange market, fiscal discipline and bank capitalisation since Cardoso became CBN governor in September 2023.
“So, if the Central Bank of Nigeria now feels it’s time to reset the Monetary Policy Rate, the reset has been long overdue. So this is a welcome development,” Teriba said.
He, however, questioned whether the reduction was enough to close the gap between the MPR and market rates and raised concerns about its timing ahead of the general election.
“Much as I understand the case for easing, I would have waited until after the election,” Teriba said.
The MPC said future monetary policy decisions would remain data-dependent as it continues to assess the impact of the recalibrated framework.
Its next meeting is scheduled for November 23 and 24, 2026.