The Central Bank of Nigeria’s Monetary Policy Committee (MPC) has cut the Monetary Policy Rate (MPR) by 350 basis points to 23 per cent, its sharpest reduction since the apex bank began easing its tightening stance, as moderating inflation gives policymakers room to loosen monetary conditions.
The decision was announced at the end of the Committee’s 307th meeting, held on September 21 and 22, 2026, marking the most aggressive rate cut of Governor Olayemi Cardoso’s tenure and a decisive break from the hold the Committee maintained through much of the year.
Other Policy Parameters
Alongside the rate cut, the Committee recalibrated the Standing Facilities Corridor around the MPR to +50/-300 basis points, narrowing the lower band from the +50/-450 basis points set at its previous meeting. The adjustment tightens the band within which banks borrow from or lend to the CBN’s standing facilities, a move that limits how cheaply banks can park excess liquidity with the apex bank even as the benchmark rate falls.
The Committee left the Cash Reserve Requirement (CRR) unchanged, retaining it at 45 per cent for deposit money banks, 16 per cent for merchant banks, and 75 per cent for non-TSA public sector deposits — levels that have stood since September 2025 and that continue to lock up a significant share of bank deposits at the central bank.
Context: A Cooling Inflation Picture
The rate cut follows two consecutive months of easing inflation. Headline inflation slowed to 15.39 per cent in August 2026, from 15.43 per cent in July, according to the National Bureau of Statistics, while food inflation eased to 19.57 per cent — its first decline in six months. Both readings were sharply lower than their year-earlier levels, reinforcing the disinflation trend that had been building since mid-year.
At its July meeting, the MPC held the MPR at 26.5 per cent for a second straight sitting, citing global uncertainty tied to renewed hostilities in the Middle East even as it acknowledged marginal disinflation at home. Analysts had widely expected that hold, but flagged that a wide gap between the policy rate and inflation — then above 11 percentage points — left room for the Committee to ease once subsequent inflation prints confirmed the trend was durable. August’s data appears to have done just that, clearing the way for the Committee’s decisive move.
What It Means
The 350-basis-point cut signals that the CBN now views its tightening cycle — which pushed the MPR as high as 27.5 per cent — as having run its course, and is shifting decisively toward supporting growth as price pressures recede. The narrower Standing Facilities Corridor, however, suggests the Committee wants to keep a tighter handle on short-term liquidity even as it loosens the headline rate, a signal that policymakers remain cautious about reversing gains made against inflation.
The MPC’s next meeting is scheduled for November 23 and 24, 2026, where the Committee will assess whether the disinflation trend has held before deciding on further policy adjustments.
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