Nigeria’s apex bank has lowered its benchmark interest rate in a move expected to reverberate across the country’s financial system, from commercial lending to capital markets. At the conclusion of its 304th Monetary Policy Committee (MPC) meeting held in Abuja on Tuesday, the Central Bank of Nigeria (CBN) announced a 50-basis-point reduction in the Monetary Policy Rate (MPR), bringing it down to 26.50 per cent from 27 per cent.
The decision was formally disclosed by CBN Governor Olayemi Cardoso, who addressed journalists shortly after the committee’s deliberations.
MPC Votes for Rate Adjustment
Cardoso confirmed that the committee reached a consensus to ease the headline rate by half a percentage point, signalling a calibrated shift in Nigeria’s monetary stance.
The Monetary Policy Rate serves as the benchmark cost of borrowing in the Nigerian economy. It influences interest rates charged by deposit money banks, affects credit expansion, shapes inflation expectations, and plays a critical role in exchange rate stability.
By adjusting the MPR downward, the MPC is effectively recalibrating the cost of funds within the financial system, a move that could impact lending behaviour, investment appetite, and consumer borrowing trends.
Key Policy Parameters Retained
While the benchmark rate was adjusted, the MPC opted to maintain other key monetary parameters. According to Cardoso, all 11 members present at the meeting voted to retain the Cash Reserve Ratio (CRR) at:
- 45 per cent for commercial banks
- 16 per cent for merchant banks
The Cash Reserve Ratio determines the portion of customers’ deposits that banks must hold with the central bank, thereby influencing liquidity conditions in the banking sector.
In addition, the committee resolved to keep the Liquidity Ratio unchanged at 30 per cent. This ratio requires banks to maintain a specified proportion of liquid assets relative to their total liabilities, reinforcing financial stability.
The Standing Facilities Corridor was also left unchanged at +50/-450 basis points around the MPR. This corridor framework sets the rates at which banks can borrow from or deposit funds with the central bank, providing guidance for short-term interbank market rates and ensuring orderly financial operations.
Implications for Nigeria’s Financial System
The adjustment of the Monetary Policy Rate, while retaining other liquidity management tools, suggests a targeted intervention rather than a broad-based policy overhaul.
As the baseline interest rate in Nigeria, the MPR directly influences:
- Commercial lending rates
- Treasury bill yields
- Bond market pricing
- Private sector credit conditions
Financial analysts are expected to closely monitor how commercial banks respond to the rate cut, particularly in terms of loan repricing and credit expansion.
The decision comes amid ongoing efforts to manage inflationary pressures, support economic recovery, and stabilise the naira within the broader macroeconomic framework.
304th MPC Meeting in Focus
The 304th session of the Monetary Policy Committee brought together 11 members who deliberated on prevailing domestic and global economic conditions before arriving at the rate decision.
The MPC remains the apex decision-making body on monetary policy in Nigeria, with its resolutions shaping the direction of interest rates, liquidity management, and overall macroeconomic stability.
With the latest adjustment, attention now shifts to how the new 26.50 per cent benchmark rate filters through the economy in the coming weeks.
