The Central Bank of Nigeria (CBN) has reduced its Monetary Policy Rate (MPR) to 23%, down from 26.5%, in a move aimed at maintaining stability in the country's financial system. This decision was made during the 307th meeting of the Monetary Policy Committee (MPC), which took place on September 22, 2026. The CBN's MPR serves as the benchmark interest rate for the economy, influencing lending rates, savings returns, and investment decisions.
The MPC also adjusted the Standing Facilities Corridor to +50 and -300 basis points around the MPR. This change affects the applicable rates for the CBN's standing lending and deposit facilities. The committee, however, chose to retain the existing Cash Reserve Requirement (CRR) for Deposit Money Banks at 45%, while Merchant Banks will continue with a CRR of 16%.
A significantly higher 75% CRR on non-Treasury Single Account (TSA) public-sector deposits was also maintained. This means that the amount of deposits banks are required to hold as reserves with the CBN remains unchanged, leaving a substantial portion of bank funds unavailable for conventional lending. The CRR is a major tool for the CBN to manage liquidity in the banking system.
According to the CBN, a higher reserve requirement generally leaves banks with less money available to create credit, while a lower requirement can increase the funds available for lending. The MPR influences the broader cost of borrowing in the economy, affecting lending rates, savings returns, investment decisions, and consumer spending through the monetary-policy transmission mechanism.
The CBN identifies the interest-rate and credit channels as mechanisms through which monetary policy affects the economy. By adjusting the MPR and other policy parameters, the CBN aims to maintain stability in the financial system and promote economic growth. The latest decision is expected to have a positive impact on the economy, particularly in terms of reducing borrowing costs.
The MPC's decision to retain the CRR for Deposit Money Banks at 45% and for Merchant Banks at 16% is seen as a move to ensure that banks maintain a stable liquidity position. This, in turn, will help to prevent any potential risks to the financial system. The CBN's decision to maintain a higher CRR on non-TSA public-sector deposits is also aimed at managing liquidity in the banking system.
The reduction in the MPR is a welcome development for borrowers, as it is expected to lead to lower lending rates. This, in turn, will make borrowing more affordable, which could stimulate economic growth. The CBN's move is also seen as a positive step towards promoting fiscal and monetary policy coordination, as emphasized in a recent MoU signed between the Federal Government and the CBN.
Key points
- The CBN reduced its Monetary Policy Rate (MPR) to 23% from 26.5% to maintain financial stability.
- The Cash Reserve Requirement (CRR) for Deposit Money Banks was retained at 45%, while Merchant Banks will continue with a CRR of 16%.
- The reduction in the MPR is expected to lead to lower lending rates, making borrowing more affordable and potentially stimulating economic growth.
