The Central Bank of Nigeria (CBN) has reduced its Monetary Policy Rate (MPR) from 26.5% to 23%, a 350 basis point cut, at the September 2026 Monetary Policy Committee (MPC) meeting. This significant change in the CBN's monetary policy stance comes after the MPR was retained at 26.5% at the MPC's July meeting. The decision was made amid continued moderation in Nigeria's inflation rate and relative stability in the foreign exchange market.
The latest inflation figures released by the National Bureau of Statistics (NBS) showed that headline inflation eased marginally in August. Nigeria's headline inflation fell from 33.03% is incorrect - actually from 15.43% in July to 15.39% in August 2026. The August figure represents a 0.04 percentage-point decline from the previous month and is substantially lower than the 23.14% recorded in August 2025.
The NBS also reported a significant slowdown in the monthly pace of price increases. Headline inflation on a month-on-month basis dropped to 0.71% in August from 1.57% in July. The Consumer Price Index rose from 145.3 points in July to 146.3 points in August, indicating that the general price level continued to increase during the month, albeit at a slower pace.
The moderation in inflation was also reflected in urban and rural inflation rates. The year-on-year urban inflation rate declined from 16.12% in July to 15.88% in August, while urban month-on-month inflation dropped sharply from 1.90% to 0.28%. Rural inflation, however, recorded a different movement during the month, with the year-on-year rural inflation rate rising to 14.23% in August.
Food inflation also recorded a notable slowdown in August, falling to 19.57% year-on-year, compared with 25.30% in August 2025. On a month-on-month basis, food inflation dropped sharply from 5.56% in July to 1.02% in August. The NBS attributed movements in food prices to changes in the costs of various commodities.
The CBN's decision to cut the interest rate was influenced by the latest inflation figures, which showed that price pressures are easing. The MPC also recalibrated the Standing Facilities Corridor to +50 and -300 basis points around the new MPR of 23%. However, the committee retained the Cash Reserve Requirement (CRR) at 45% for Deposit Money Banks, 16% for Merchant Banks, and 75% for non-TSA public sector deposits.
The MPR serves as the CBN's benchmark policy rate and influences borrowing and lending conditions within the financial system. The reduction in the interest rate is expected to have a positive impact on the economy, stimulating economic growth and reducing the cost of borrowing for businesses and individuals.
Key points
- The Central Bank of Nigeria has reduced its Monetary Policy Rate (MPR) from 26.5% to 23%.
- Nigeria's headline inflation fell from 15.43% in July to 15.39% in August 2026.
- The CBN's decision to cut the interest rate was influenced by the latest inflation figures, which showed that price pressures are easing.
