After nineteen months of an excruciating monetary tightening stance, the Central Bank of Nigeria {CBN} blinked, and indeed, blinked hugely. A surprising decision no stakeholder expected. The bank at end of its 307th Monetary Policy Committee {MPC} meeting on Tuesday, 22nd, 2026, cut the benchmark Monetary Policy Rate (MPR) by 350 basis points – from 26.5 percent to 23 percent, the lowest since February 2024, and the shrillest in two years.
Stakeholders may have wondered why the bank at this period of the year, {the eve of heightened political activities} chose to relax its stronghold on tightening. Some strategic thinking may have informed that: the disinflation trajectory {though temporarily paused by the US/Iran crisis} returned in the last three months by the unrelenting efforts of the CBN. Headline inflation fell for the third consecutive month to 15.39 percent in August from 15.43 percent in July and 15.91 percent in June. Importantly, month-on-month inflation collapsed to 0.71 percent from 1.57percent.
Dr. Muda Yusuf, Chief Executive Officer, Centre for the Promotion of Private Enterprises {CPPE} believes the 26.5 percent MPR had become disconnected from other key market indicators, with inflation around 15.4 percent, and money market rates around 20 percent. He said retaining it would have continued weakening transmission, and not strengthening it.
The gross foreign reserves, currently at $55.25 billion as of 18th September, 2026, up from $54 billion earlier in the month, with the balance of payments surplus rising to $3.51bn in Q2 2026 from $2.38bn in Q1, and current account surplus up by 67.92 percent to $7.54bn may have also accounted for the rate cut. Noting that the naira has been relatively stable against other foreign currencies, enabling the MPC to ease.
However, the MPC chairman, Olayemi Cardoso, was diplomatic in stating the reasons for the volte-face: “The MPC emphasized that the recalibration of the corridor does not constitute a change in the current monetary policy stance, but rather an operational reset to enhance the effectiveness of monetary policy, and support the transition to an inflation targeting framework”. He said MPC members were of the view that the current macroeconomic environment remains supportive of such a recalibration without undermining the disinflation process.
Continuing the justification for the decision, he said the Committee observed the divergence between the MPR and the prevailing market rates that had weakened the effectiveness of monetary policy transmission. “Members noted that the Bank’s ongoing repair of the monetary policy implementation framework, including the adoption of NOFR as a transaction-based operational benchmark, has improved the transparency of money market operations”. Therefore, the Committee he said considered a reset of the MPR and recalibration of the corridor appropriate to better align the monetary policy implementation framework with market realities.
This, the governor noted, would strengthen policy transmission and restore the MPR as the principal signal of monetary policy. He stressed that the recalibration represents an operational realignment of the framework and should not, in itself, be construed as a change in the underlying policy stance.
The increasing resilience of the Nigerian economy, reflected by the moderating inflation, robust external reserve buffers, improved external sector fundamentals and strengthening investor confidence were contributory reasons for relaxing the rate, the governor emphasized.
The cut to 23 percent Dr. Yusuf expressed wasn’t just easing, but “an important realignment of the policy rate with prevailing macroeconomic and financial-market conditions”. The decision, he continued, could ease financing pressures and revive private investment, as well as reduce cost of capital, improve business cash flows, and stimulate investment especially in manufacturing, agriculture, construction and logistics.
Dr. Ayo Teriba, Chief Executive Officer, Economic Associates,nsaid the cut was long overdue and reflects improvements made by the CBN since 2023. He noted that for the bank to have grown net reserves from under $4bn to over $35bn, stopped Ways and Means, and enforced single obligor limits is commendable. He, however, wasn’t ecstatic about the decision. “If the CBN now feels it’s time to reset the MPR, the reset has been long overdue. So, this is a welcome development.” But he considered 23 percent still too high to close gap with market rates, and the flagged timing, which is four months to general elections.
Chief Blakey Ijezie, a stockbroker, considered the decision very bullish for equities. “We are going to see a surge in volume of transactions and an increase in equity prices. There will be more demand for equities than sellers, so prices will adjust upward. According to him, fixed-income may drop as investors rotate to equities.
Mr. Segun Ajayi-Kadir, Director General, Manufacturers Association of Nigeria {MAN} viewed the development as indicative of CBN’s positive disposition to easing the pressure on the real sector, and responding to the persistent call of businesses, as well as yielding to the dynamism of the business environment. However, he said the elephant in the room remains the interest rate that an average manufacturer will pay when he or she approaches the bank. The real test is not MPR, but the prime lending rate. Even at 23 percent MPR, prime lending will still be 27 to 30 percent, and no manufacturer anywhere in the world can be competitive borrowing at that rate.
Dr. Chinyere Almona, Director General, Lagos Chamber of Commerce and Industry {LCCI}, called it a significant easing and a welcome development for businesses, particularly MSMEs that had been severely constrained by high cost of credit. She is as concerned as MAN that reduction in MPR should not be interpreted as an automatic reduction in the cost or availability of credit to businesses.
Irrespective of concerns raised by stakeholders, the gesture by the CBN is a soothing balm, and a huge relief for businesses if only the banks would transmit the gesture. It is equally good for government borrowing costs, equity positivity, and checking FX outflows. The international posture of the outcome is credible for the country as inflation decelerates for three straight consecutive months, and reserves are at an 18-year high of $55.25bn.
Without meaningful transmission to borrowers, the impact of resetting the economy would be limited. The banks, therefore, should have a handshake with the CBN to progressively reduce lending rates.
Ademola Bakare writes from Abuja
