CBN Slashes Monetary Policy Rate to 26.50 Percent
The Central Bank of Nigeria has implemented a significant reduction in its benchmark interest rate, cutting the Monetary Policy Rate by 50 basis points to settle at 26.50 percent. This decisive move represents a strategic shift from the previous rate of 27 percent that had been maintained since November.
Unanimous Decision at 304th MPC Meeting
Governor Olayemi Cardoso announced the monetary policy adjustment following the conclusion of the bank's 304th Monetary Policy Committee gathering in Abuja on Tuesday, February 24. The decision received unanimous support from all committee members, reflecting a coordinated approach to economic management.
"The committee decided to reduce the monetary policy rate by 50 basis points to 26.50 percent," Cardoso declared during the official announcement. He further clarified that while the monetary policy rate was adjusted downward, the liquidity ratio remained unchanged at 30 percent.
Supporting Policy Parameters Maintained
The Central Bank maintained several key policy parameters alongside the rate reduction. The standing facilities corridor was adjusted to +50 and -450 basis points around the Monetary Policy Rate. Additionally, the Cash Reserve Ratio for commercial banks stayed at 45 percent, while merchant banks continued with a 16 percent requirement.
Notably, the 75 percent Cash Reserve Ratio on non-TSA public sector deposits remained unchanged, indicating a targeted approach to monetary management. These decisions collectively represent a nuanced monetary policy stance aimed at balancing multiple economic objectives.
Inflation Decline Drives Policy Shift
Governor Cardoso explained that the rate reduction followed a comprehensive assessment of economic risks, with particular emphasis on the sustained downward trajectory of inflation. According to official data, year-on-year headline inflation decelerated in January 2026 for the eleventh consecutive month.
"The Committee's decision was premised on a balanced evaluation of risk to the outlook which suggests that the ongoing disinflation trajectory would continue largely supported by the lag transmission of previous monetary tightening, sustained exchange rate stability and enhanced food supply," Cardoso elaborated.
Multiple Factors Supporting Economic Stability
The Central Bank Governor attributed the favorable inflation trends to several interconnected factors. These include the delayed effects of earlier contractionary policies, remarkable stability in the foreign exchange market, robust capital inflows, and significant improvements in the balance of payments position.
Cardoso specifically highlighted relatively stable petroleum prices and improved domestic food supply, particularly for staple commodities, as contributing elements to the positive economic developments. These factors have collectively created an environment conducive to monetary policy easing.
External Sector Performance and Fiscal Measures
The governor pointed to what he described as strong performance in Nigeria's external sector, noting higher export earnings and increased remittance inflows. "This has contributed to greater stability in the foreign exchange market and bolstered investor confidence," he emphasized.
Cardoso also welcomed Presidential Executive Order 09, which redirects oil and gas revenues into the federation account, stating that this fiscal measure would play a crucial role in improving government revenue collection and overall fiscal stability.
Historical Context and Economic Indicators
The Monetary Policy Rate serves as the primary benchmark rate utilized by the Central Bank to manage inflation, liquidity conditions, and broader macroeconomic stability. The committee had previously maintained the rate at 27 percent during its November meeting, with the last rate reduction occurring in September of the previous year.
According to data released by the National Bureau of Statistics, Nigeria's inflation rate experienced a slight decline in January, falling to 15.10 percent from 15.15 percent. This gradual but consistent improvement in price stability provided the foundation for the monetary policy adjustment announced by the Central Bank.
