The Central Bank of Nigeria (CBN) has reduced its Monetary Policy Rate (MPR) by 350 basis points from 26.5 percent to 23 percent, marking the largest single rate cut in at least 20 years. This move positions Nigeria as the continent's third-highest policy-rate economy, below Malawi's 24 percent and Zimbabwe's 30 percent. The rate cut was announced after the CBN's 307th Monetary Policy Committee meeting.
The 350bps reduction exceeded analysts' forecasts, with Bank of America projecting a 100-basis-point cut. The CBN's decision signals a significant shift from a prolonged restrictive monetary policy regime, according to Muda Yusuf, founder and CEO of Centre for the Promotion of Private Enterprise (CPPE). The rate cut aims to support growth, investment, and economic recovery while preserving price and financial-system stability.
The CBN also retained the Cash Reserve Ratio at 45 percent for deposit money banks and 16 percent for merchant banks. The liquidity ratio was maintained at 30 percent, and the Standing Facilities Corridor was recalibrated to +50/-300 basis points around the new MPR. The decision comes amid moderating inflation and improved foreign-exchange conditions, with headline inflation easing to 15.39 percent in August.
Nigeria's inflation rate has substantially decreased from 23.1 percent recorded a year earlier, giving the CBN room to reduce monetary restriction. The naira has remained relatively stable, reducing a major risk that previously constrained the central bank's ability to ease monetary policy. The CBN had previously pointed to moderating inflation, exchange-rate stability, and improving inflation expectations as factors supporting a gradual normalization of monetary policy.
The 350bps reduction is the largest single cut since 2006, surpassing the previous record of 200 basis points. It ranks as the second-largest single policy-rate cut among African central banks in 2026, after Zimbabwe's 500 basis points reduction. The move is considerably larger than cuts delivered by other central banks, such as Ghana's 250 basis points reduction in January.
Despite the record cut, Nigeria remains among Africa's highest-rate economies. The CBN's decision signals that the Monetary Policy Committee now sees sufficient room to unwind part of the tightening as price pressures moderate. The review of the asymmetric corridor around the MPR further reinforces the recalibration of the monetary policy architecture.
The CBN characterized the decision as a recalibration or reset of the monetary policy framework. The reduction should be viewed not merely as monetary easing but as an important realignment of the policy rate with prevailing macroeconomic and financial-market conditions. The move is expected to support economic recovery and growth.
Key points
- Nigeria's central bank cuts interest rate to 23% from 26.5% in a record 350bps reduction.
- The rate cut positions Nigeria as Africa's third-highest policy-rate economy.
- The move is the largest single rate cut in at least 20 years and the second-largest in Africa in 2026.
