CBN Reduces Monetary Policy Rate by 350 Basis Points to 23%
The Central Bank of Nigeria (CBN) has reduced its Monetary Policy Rate (MPR) by 350 basis points, from 26.5% to 23%, following the 307th meeting of the Monetary Policy Committee (MPC) held in Abuja. Announced by CBN Governor Olayemi Cardoso, the adjustment represents the second rate reduction in 2026 and the largest single cut since December 2006.
The decision comes amid easing inflationary pressures and improving economic indicators. Nigeria’s inflation rate declined to 15.39% in August 2026, while real GDP grew by 4.43% in the second quarter. The Purchasing Managers’ Index (PMI) also stood at 52.7, indicating continued expansion in business activity.
Alongside the MPR reduction, the MPC retained the Cash Reserve Ratio (CRR) at 45% for commercial banks and 16% for merchant banks, while maintaining the 75% CRR on non-Treasury Single Account (TSA) public-sector deposits. The committee also adjusted the interest rate corridor around the MPR to +50 and -300 basis points.
The CBN described the adjustment as an operational recalibration intended to improve monetary policy transmission and support its transition towards an inflation-targeting framework. The move also reflects efforts to align the policy rate more closely with prevailing money-market conditions.
For financial institutions, the rate reduction could influence lending rates, deposit pricing, investment yields, liquidity conditions and overall profitability. However, the extent to which borrowing costs decline will depend on how quickly banks adjust their rates and how market conditions respond.
