The Central Bank of Nigeria (CBN) has reduced its benchmark Monetary Policy Rate (MPR) from 26.5 per cent to 23 per cent, delivering its largest rate cut in recent years as the apex bank seeks to strengthen monetary policy transmission and sustain the country’s disinflation process.
CBN Governor Olayemi Cardoso announced the decision on Tuesday after the conclusion of the 307th meeting of the Monetary Policy Committee (MPC), held on September 21 and 22 in Abuja. The 350-basis-point reduction represents the first MPR cut since February and takes the benchmark to its lowest level since 2024.
The decision comes against the backdrop of a gradual moderation in inflation. Data released by the National Bureau of Statistics showed that Nigeria’s headline inflation rate declined marginally from 15.43 per cent in July to 15.39 per cent in August. The August figure was also substantially below the 23.14 per cent recorded in August 2025.
The CBN said the latest adjustment should not be interpreted as an abandonment of its anti-inflationary stance. Rather, it described the move as an operational reset designed to strengthen the effectiveness of monetary policy and restore the MPR as the principal signal guiding financial-market conditions.
Alongside the MPR reduction, the MPC recalibrated the asymmetric corridor around the benchmark rate to +50 and -300 basis points. The cash reserve ratio was retained at 45 per cent for deposit money banks and 16 per cent for merchant banks, while the CRR on non-Treasury Single Account public-sector deposits remained at 75 per cent.
Cardoso said the divergence between the MPR and prevailing market rates had weakened monetary policy transmission. The CBN’s adoption of the Nigerian Overnight Funding Average as a transaction-based operational benchmark is also intended to make money-market operations more transparent and ensure that policy decisions have a clearer impact on market rates.
The rate cut could have significant implications for businesses and consumers if commercial banks transmit the reduction through lower lending costs. The Centre for the Promotion of Private Enterprise said the decision could provide relief to businesses in sectors such as manufacturing, agriculture, construction and logistics, where expensive credit has constrained investment and working capital.
However, the CBN remains alert to risks that could reverse the recent improvement in inflation. The MPC warned that prolonged geopolitical tensions in the Middle East and increased election-related spending could create renewed price pressures.
The country’s external position has also improved. The CBN said gross external reserves stood at $55.25 billion as of September 18, the highest level in 18 years, providing an estimated 11.3 months of import cover.
The latest policy move therefore represents a balancing act between maintaining the gains recorded in the fight against inflation and creating conditions for cheaper credit, stronger investment and economic growth. Its ultimate impact will depend largely on how quickly changes in the benchmark rate are transmitted through commercial-bank lending rates and the broader economy.
