CBN Slashes MPR to 26.50% as Inflation Continues Descent
ABUJA — The Central Bank of Nigeria (CBN) has reduced its benchmark interest rate by 50 basis points to 26.50 per cent. This pivotal decision emerged following the 304th Monetary Policy Committee (MPC) meeting held in Abuja on Tuesday. CBN Governor Olayemi Cardoso confirmed that all committee members unanimously supported the rate cut from its previous 27 per cent. Consequently, the apex bank aims to balance macroeconomic stability with the need to support domestic economic growth. While it is true that interest rates remain high, this reduction signals a significant shift in policy direction. This move marks a departure from the aggressive tightening cycle that characterized the bank’s response to historic inflation.
The committee’s decision rests on a balanced evaluation of risk and a sustained downward inflation trajectory. Cardoso noted that headline inflation in January 2026 declined for the eleventh consecutive month, reaching 15.10 per cent. Furthermore, the bank attributed this cooling effect to the delayed transmission of previous contractionary monetary policies. In a related development, the CBN maintained the liquidity ratio at 30 per cent to ensure system stability. Indeed, the committee adjusted the standing facilities corridor to +50 and -450 basis points around the MPR. For entrepreneurs and businesses, this technical adjustment could eventually translate into lower borrowing costs.
The apex bank retained the Cash Reserve Ratio (CRR) at 45 per cent for commercial banks. Similarly, merchant banks must continue to maintain a 16 per cent CRR under the current regulatory framework. Granted, the bank is loosening the interest rate, yet it remains cautious about excess liquidity in the system. Notably, the MPC welcomed Presidential Executive Order 09, which redirects oil revenues into the federation account. Above all, higher export earnings and increased remittance inflows have bolstered Nigeria’s external sector performance recently. This combination of fiscal discipline and monetary easing suggests a coordinated effort to stabilize the national economy.
Significantly, the relative stability of petroleum product prices has played a crucial role in anchoring inflation expectations. Subsequently, the CBN believes that improved food supply conditions will further support the ongoing disinflationary trend. Although the global environment remains volatile, the apex bank expressed confidence in the current local capital inflows. Particularly, the bank noted that prior tightening has successfully managed to anchor the expectations of market participants. Therefore, the CBN must monitor the impact of this reduction on the foreign exchange market very closely.
As a result of this cut, the cost of servicing corporate debt should see a marginal decline. Also, the quest for a stable and predictable macroeconomic environment in Nigeria takes a major step forward.