The Central Bank of Nigeria (CBN) has reduced its benchmark interest rate, known as the Monetary Policy Rate (MPR), by 350 basis points to 23 per cent. This decision was made during the 307th Monetary Policy Committee (MPC) meeting held on September 22, 2026. The rate cut marks the second reduction in 2026, indicating a shift towards a more accommodative monetary policy stance. The CBN's move aims to stimulate economic growth while maintaining control over inflationary pressures.
The MPC unanimously approved the reduction in the MPR, while retaining other major monetary policy parameters. The Cash Reserve Ratio (CRR) remains at 45 per cent for Deposit Money Banks (DMBs) and 16 per cent for merchant banks. Additionally, the Committee kept the 75 per cent CRR requirement on non-Treasury Single Account (TSA) public-sector deposits and the Liquidity Ratio at 30 per cent. The asymmetric corridor was also retained at +50/-300 basis points around the MPR.
The rate cut comes as headline inflation has declined for five consecutive months, supported by relative stability in the foreign exchange market. However, the MPC acknowledged that inflationary pressures remain a concern, particularly with renewed increases in food and core inflation components in August. The Committee also identified growing external risks to Nigeria's inflation outlook, including escalating global tariffs and geopolitical tensions in the Middle East.
The 350-basis-point reduction represents a substantial easing of monetary conditions, which could have implications for borrowing costs, investment decisions, bank lending, and economic activity. By reducing the benchmark rate while retaining relatively tight reserve requirements, the CBN aims to signal an easing in the direction of monetary policy while maintaining control over banking-system liquidity and inflationary risks.
For businesses, lower policy rates could eventually translate into reduced financing costs if the rate cut is effectively transmitted through the banking system. This could support investment and working-capital financing as economic activity expands. However, the extent of the impact will depend on banks' funding costs, liquidity conditions, credit risks, and broader inflation expectations.
The CBN's latest decision places greater emphasis on sustaining the downward trend in inflation while using lower interest rates to support economic growth. With the MPR now at 23 per cent, the September MPC decision marks a notable change in the direction of Nigeria's monetary policy. Food inflation, core inflation, and external shocks remain key risks to the emerging disinflationary trend.
The reduction in the MPR is expected to have a positive impact on the economy, particularly in terms of stimulating growth and reducing borrowing costs. However, the CBN will need to closely monitor inflationary pressures and adjust its monetary policy stance accordingly. The bank's decision will also be influenced by global economic trends and their potential impact on Nigeria's economy.
Key points
- The CBN reduced its benchmark interest rate by 350 basis points to 23 per cent.
- The rate cut aims to stimulate economic growth while maintaining control over inflationary pressures.
- The CBN retained other major monetary policy parameters, including the Cash Reserve Ratio and Liquidity Ratio.
