The Central Bank of Nigeria has cut its benchmark interest rate to 23 per cent from 26.5 per cent, its sharpest move in more than two years, as the apex bank shifts towards loosening monetary policy on the back of steadily falling inflation.
The Governor of the CBN, Olayemi Cardoso, announced the decision on Tuesday at the close of the 307th meeting of the Monetary Policy Committee in Abuja. “The Committee decided as follows: reset the monetary policy rate to 23 per cent,” he told reporters. The reduction of 350 basis points is the largest single cut since Cardoso took charge of the bank’s tightening cycle.
Alongside the headline decision, Cardoso said the committee recalibrated the Standing Facilities Corridor to plus 50 and minus 300 basis points around the new rate. The Cash Reserve Requirement was left unchanged at 45 per cent for deposit money banks and 16 per cent for merchant banks, with the 75 per cent requirement on non Treasury Single Account public sector deposits also retained.
The move follows two consecutive holds at 26.5 per cent, at the July and May meetings, and a 50 basis point cut in February that took the rate down from 27 per cent. With Tuesday’s decision, the benchmark now sits 4 percentage points below where it stood at the start of the year, and back at a level last seen in early 2024.
The cut was widely anticipated after a run of softer price data. According to the National Bureau of Statistics, headline inflation eased to 15.39 per cent in August, from 15.43 per cent in July and well below the 23.14 per cent recorded in August 2025. The August reading was the third straight monthly decline, following a stretch of three consecutive increases earlier in the year.
The month on month figure showed a more decisive slowdown. The bureau reported that prices rose by 0.71 per cent in August, down from 1.57 per cent in July, which it attributed to lower prices for items including palm oil, onions, pepper, beef, yam flour and frozen chicken. Core inflation, which strips out farm produce and energy, fell to 13.29 per cent year on year.
Cardoso had pointed to similar conditions in February, when he said the committee’s earlier easing was premised on sustained disinflation, relative exchange rate stability, improved capital inflows and better food supply. The naira has held broadly steady in recent weeks, trading around N1,320 to N1,329 to the dollar at the official Nigerian Foreign Exchange Market window through September, according to CBN data, though the parallel market has quoted rates closer to N1,410.
For businesses and households, the significance lies in the cost of credit. The monetary policy rate is the reference point around which commercial banks price loans, so a lower rate can, over time, reduce borrowing costs. Lending rates are shaped by several other factors, however, and banks do not always pass on cuts in full or immediately.
Analysts have cautioned that the easing should not be read as prices falling. Godwin Oyedokun, a financial analyst and lecturer at Lead City University, said in comments to Daily Post that the moderation in August meant prices were still rising, only at a slower pace, and that meaningful household relief would depend on improved food supply, stronger purchasing power and access to affordable credit.
There are also external pressures the committee had to weigh. Even as domestic inflation cooled, global conditions tightened, with major central banks moving in the opposite direction and Brent crude trading above 100 dollars a barrel in recent weeks, which raises the cost of an aggressive cut by narrowing the gap that keeps foreign capital in naira assets.
At 15.39 per cent, inflation remains well above the bank’s long term target, meaning real interest rates stay firmly positive even after the cut. Direct comparisons with rates before 2025 should be treated with care, because the bureau rebased its Consumer Price Index early that year, which affects the way older and newer figures line up.
The full communiqué setting out the committee’s reasoning, its assessment of the growth outlook and the voting pattern of members was expected to follow the announcement. The next MPC meeting will show whether Tuesday’s decision marks the start of a sustained easing cycle or a one off adjustment, and much will depend on the September inflation print and the direction of the exchange rate.