The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has cut the benchmark Monetary Policy Rate (MPR) by 350 basis points, from 26.5 per cent to 23 per cent, citing easing inflation, improved foreign exchange conditions and stronger external reserves.
CBN Governor, Olayemi Cardoso, announced the decision on Tuesday at the end of the committee’s 307th meeting in Abuja.
“The Committee decided as follows: reset the monetary policy rate at 23 per cent,” Cardoso said.
The latest decision represents the biggest adjustment to the benchmark rate in the current monetary policy cycle, following two consecutive rate holds at 26.5 per cent in May and July. The MPC had previously reduced the rate by 50 basis points in February.
Despite the size of the reduction, Cardoso stressed that the decision should not be interpreted as a shift towards monetary easing.
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“We will stay on the course, which has been a restrictive one, for as long as we have to,” he said.
“And that’s why I re-emphasise that you should not see this as an easing. This is a reset and a recalibration. That is all it is.”
CBN recalibrates policy framework
The MPC also recalibrated the Standing Facilities Corridor to +50/-300 basis points around the MPR.
It retained the Cash Reserve Requirement (CRR) at 45 per cent for deposit money banks, 16 per cent for merchant banks and 75 per cent for non-Treasury Single Account public sector deposits.
Cardoso explained that the adjustment was necessary because the widening gap between the MPR and prevailing interbank rates had weakened the transmission of monetary policy.
He said the adoption of the Nigerian Overnight Financial Average (NORA) as a transaction-based operational benchmark had improved transparency in money market operations, while the latest recalibration would restore the MPR as the principal signal of monetary policy.
“Fundamentals have changed,” Cardoso said. “We are at macroeconomic stability.”
He added that the monetary tightening implemented by the CBN had achieved its intended effects.
“The tight thing that we have done, in our view, has done its job. It has worked. The policy tools that we have used have worked,” he said.
External reserves rise to $55.25bn
The CBN governor said foreign exchange pressures had eased significantly, while investor confidence and Nigeria’s external position had strengthened.
Nigeria’s gross external reserves stood at $55.25 billion as of September 18, 2026, the highest level in 18 years and enough to finance approximately 11.3 months of imports of goods and services.
The country’s balance of payments surplus increased to $3.51 billion in the second quarter of 2026, from $2.38 billion in the first quarter, while the current account surplus rose by 67.92 per cent to $7.54 billion from $4.49 billion.
Cardoso attributed part of the improvement in Nigeria’s external buffers to increased diaspora remittances.
According to him, monthly remittances rose from about $200 million when the CBN intensified its reforms to nearly $1 billion by July 2026.
He said measures implemented included expanding access to Bank Verification Numbers for Nigerians living abroad, strengthening oversight of International Money Transfer Operators and requiring dedicated settlement accounts.
Inflation continues to moderate
The rate decision also came against the backdrop of continued moderation in inflation.
Headline inflation fell marginally to 15.39 per cent in August 2026, from 15.43 per cent in July, marking the third consecutive monthly decline.
Food inflation dropped to 19.57 per cent, from 20.31 per cent, while core inflation moderated to 13.29 per cent from 14.97 per cent.
Month-on-month headline inflation also declined significantly to 0.71 per cent, compared with 1.57 per cent in July.
The MPC attributed the disinflation trend to previous monetary tightening, exchange-rate stability and improved inflation expectations.
However, the committee warned that geopolitical tensions in the Middle East and election-related spending could create fresh inflationary pressures.
It expects inflation to moderate further in the short to medium term, supported by foreign exchange stability, the lagged impact of previous monetary tightening and improved food supply during the harvest season.
CBN prepares for election-related liquidity risks
Cardoso said the apex bank was prepared to manage potential excess liquidity as Nigeria approaches another election cycle.
“We are ready,” he said, adding that the CBN had studied previous election cycles and developed various scenarios to guide its response.
The bank will monitor currency in circulation, banking-system liquidity, monetary aggregates and foreign exchange demand.
“We will proactively deploy any tools and instruments to mop up any excess liquidity,” Cardoso said. “We will not allow ourselves to be caught unaware in any form.”
He added that adequate currency would remain available but warned against currency abuse, noting that the CBN would intensify collaboration with law enforcement agencies.
Cardoso also encouraged Nigerians to embrace electronic payments, saying digital transactions improve transparency and create an audit trail.
Nigerian economy records stronger growth
The MPC said Nigeria’s real Gross Domestic Product (GDP) expanded by 4.43 per cent in the second quarter of 2026, compared with 3.89 per cent in the first quarter.
Non-oil growth accelerated to 4.31 per cent from 3.94 per cent, while the oil sector expanded by 7.31 per cent, compared with 2.57 per cent previously.
The Composite Purchasing Managers’ Index also increased to 52.7 points in August, from 51.1 points in July.
Reflecting on his tenure as CBN governor, Cardoso said the administration inherited an economy characterised by declining confidence, currency depreciation, elevated inflation and a dysfunctional foreign exchange market.
He identified the CBN’s return to its core price and financial stability mandate, exchange-rate unification, banking recapitalisation and rebuilding of external reserves among the major changes implemented under his leadership.
Cardoso also pointed to the previous use of Ways and Means financing and more than ₦10 trillion in intervention programmes, which he said had injected substantial liquidity into the economy.
CBN, Finance Ministry strengthen fiscal-monetary coordination
The governor also highlighted the recently signed fiscal-monetary coordination agreement between the CBN and the Federal Ministry of Finance as important to Nigeria’s planned transition towards inflation targeting.
“I think the difference here is that we’ve decided to institutionalise this,” Cardoso said, arguing that coordination should not depend on individual officeholders.
“You can’t do it with monetary policy alone,” he added, stressing the importance of fiscal coordination in maintaining low and stable inflation.
Cardoso also described Nigeria’s return to major global investment indices as a “vote of confidence” that could attract foreign investment, deepen the capital market and improve foreign exchange liquidity.
The MPC said it would continue to assess the effectiveness of the recalibrated monetary policy framework, with future decisions remaining data-dependent.
The committee’s next meeting is scheduled for November 23 and 24, 2026.
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