The Central Bank of Nigeria (CBN) has reduced the country’s benchmark interest rate to 26.5 per cent, as inflation continues to slow and foreign reserves rise.
The decision was taken at the 304th meeting of the Monetary Policy Committee (MPC) held in Abuja on Tuesday. The Governor of the CBN, Olayemi Cardoso, announced the new rate at the end of the meeting.
According to Cardoso, the committee agreed to cut the Monetary Policy Rate (MPR) by 50 basis points from 27 per cent to 26.5 per cent. He said the decision followed a careful review of economic conditions both at home and abroad.
“The Committee decided to reduce the monetary policy rate by 50 basis points to 26.5 per cent,” Cardoso said.
This is the second time the MPC has reduced interest rates under Cardoso’s leadership. In September 2025, the committee also cut the rate by 50 basis points. At its November 2025 meeting, the rate was held steady before this latest reduction.
The Monetary Policy Rate is the benchmark interest rate that guides lending and borrowing across the economy. When the CBN increases the rate, borrowing becomes more expensive, which helps to control inflation. When it reduces the rate, borrowing becomes cheaper, which can support economic growth.
Over the past year, Nigeria has faced high inflation, which led the central bank to tighten monetary policy. However, recent data show that inflation is slowing down.
Cardoso said the committee’s decision was based on what he described as “a balanced evaluation of risks to the outlook.” He explained that the steady decline in inflation gave the MPC confidence to ease rates slightly.
Headline inflation eased to 15.10 per cent in January 2026, down from 15.15 per cent in December 2025. This marks the eleventh consecutive month of year-on-year decline.
Food inflation, which directly affects the cost of living for many Nigerians, also dropped sharply. It fell to 8.89 per cent in January from 10.84 per cent in December. Core inflation, which excludes food and energy prices, declined to 17.72 per cent from 18.63 per cent.
On a month-on-month basis, headline inflation fell to negative 2.88 per cent in January, compared to 0.54 per cent in December. The MPC described this as a sign that price pressures are easing.
The CBN governor said the continued decline in inflation is supported by earlier monetary tightening, improved exchange rate stability, and better food supply across the country.
Apart from cutting the main interest rate, the MPC decided to retain other key policy measures.
The committee kept the Standing Facilities Corridor at +50 and -450 basis points around the MPR. It also retained the Cash Reserve Requirement (CRR) for Deposit Money Banks at 45 per cent and for Merchant Banks at 16 per cent. The CRR for non-Treasury Single Account (non-TSA) public sector deposits remains at 75 per cent.
The Cash Reserve Requirement is the percentage of deposits banks must keep with the CBN. By keeping the CRR unchanged, the central bank signalled that it still wants to maintain discipline in the banking system while gradually easing rates.
Cardoso also highlighted strong improvements in Nigeria’s external sector. He said the country’s gross external reserves rose to 50.45 billion dollars as of February 16, 2026. This is the highest level in 13 years.
According to him, the reserves now provide an import cover of 9.68 months for goods and services. This means Nigeria can pay for imports for nearly 10 months without new foreign earnings.
He said the rise in reserves was supported by higher export earnings and increased remittance inflows from Nigerians abroad. These inflows have helped to stabilise the foreign exchange market and improve investor confidence.
The governor also referred to the newly issued Presidential Executive Order 09, which directs oil and gas revenues into the Federation Account. The MPC welcomed the order and noted that it could improve government revenue and boost external reserves.
On the health of the banking system, Cardoso said most financial soundness indicators remain within regulatory limits. He noted that the ongoing bank recapitalisation programme is making steady progress.
Out of 33 banks that have raised additional capital, 20 have already met the new minimum capital requirement set by the CBN. The recapitalisation exercise is aimed at strengthening banks so they can support economic growth and withstand financial shocks.
The MPC described the recapitalisation as strategically important and urged the central bank to ensure its successful completion. A stronger banking system, the committee said, will improve resilience and support long-term growth.
There are also signs that economic activity is improving. The Purchasing Managers’ Index (PMI) stood at 55.7 points in January 2026. A PMI reading above 50 points shows expansion in business activity.
This suggests that output in the fourth quarter of 2025 likely improved. Analysts say lower inflation and exchange rate stability are helping businesses plan better and manage costs.
Despite the positive signs, Cardoso warned that risks remain. He said increased fiscal spending, including election-related spending, could put pressure on prices in the coming months.
Nigeria has experienced periods in the past when high government spending led to rising inflation. The MPC said it will continue to monitor developments closely and adjust policies when necessary.
Cardoso reaffirmed the committee’s commitment to evidence-based decision-making. He said the CBN remains focused on its core mandate of maintaining price stability while ensuring the strength and stability of the financial system.
The rate cut may lead to slightly lower lending rates over time, making it easier for businesses and individuals to access credit. However, banks may adjust their rates gradually.
For households, the steady fall in food inflation is welcome news, as food prices have been a major concern in recent years. Improved exchange rate stability may also help reduce the cost of imported goods.
The next MPC meeting is scheduled for May 19 and 20, 2026. Many Nigerians, investors, and business owners will watch closely to see whether the central bank continues on its path of gradual rate cuts.
