Nigeria’s Central Bank has reduced its key monetary policy rate by 50 basis points to 26.50%, the first cut in more than a year as inflationary pressures show tentative signs of easing. The decision was announced following the Monetary Policy Committee’s 304th meeting in Abuja on Tuesday.
The Monetary Policy Committee (MPC) voted unanimously to lower the benchmark rate, known as the Monetary Policy Rate (MPR), from 27.00% to 26.50%. Central Bank Governor Olayemi Cardoso confirmed the consensus, stating the adjustment aims to support macroeconomic stability while responding to recent economic indicators. Alongside the rate cut, the committee maintained the Cash Reserve Ratio (CRR) for commercial banks at 45% and for merchant banks at 16%. The CRR requirement for non-TSA public sector deposits also remained at 75%. Additionally, the liquidity ratio was held steady at 30%, while the standing facilities corridor—the range for deposit and lending rates—was adjusted to +50 to -450 basis points around the MPR.
The MPR serves as the primary tool for the Central Bank of Nigeria (CBN) to manage inflation, control liquidity, and foster economic stability. High interest rates have been a cornerstone of the CBN’s inflation-fighting strategy since 2022, with the rate held at 27.00% since November 2023. The last reduction occurred in September 2023, when the rate was lowered from 27.50% to 27.00%. This latest move signals a gradual shift in policy stance, coinciding with a modest decline in price pressures. Separate data from the National Bureau of Statistics indicated the country’s average interest rate fell to 15.10% in January from 15.15% the previous month, reflecting broader market trends.
The decision underscores the CBN’s cautious approach to balancing growth and price stability. While inflation remains elevated, the drop from recent peaks has allowed for a modest policy easing. Analysts suggest future rate adjustments will remain data-dependent, closely monitoring inflation trajectories, foreign exchange market stability, and fiscal conditions. The cut may provide relief to borrowers and stimulate credit expansion, though the apex bank emphasized its commitment to preventing a premature loosening of policy.
For now, the reduction to 26.50% represents a measured step in Nigeria’s monetary policy cycle, with the CBN indicating that further actions will hinge on sustained improvements in macroeconomic fundamentals.
