The Central Bank of Nigeria has reduced the Monetary Policy Rate (MPR) by 50 basis points to 26.5 per cent from 27 per cent, marking its first rate cut after an extended period of monetary tightening.
The decision was reached at the 304th meeting of the Monetary Policy Committee (MPC), which concluded in Abuja on Tuesday. The outcome was announced by the CBN Governor, Olayemi Cardoso, with 11 committee members in attendance.
The MPR, which serves as the benchmark interest rate, is the apex bank’s primary monetary policy tool for controlling inflation, managing liquidity, and safeguarding macroeconomic stability.
According to the MPC, the decision to reduce the rate was driven by sustained improvements in key macroeconomic indicators, particularly inflation. Headline inflation declined for the eleventh consecutive month to 15.1 per cent in January 2026, reflecting continued moderation in price pressures.
The committee described the easing inflation trend as a positive signal, creating room for a cautious adjustment to the policy rate.
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Despite the reduction in the benchmark rate, the MPC maintained other key policy parameters, reflecting what analysts describe as a measured and gradual approach to easing:
Cash Reserve Ratio (CRR): Retained at 45.0 per cent for commercial banks and 16.0 per cent for merchant banks.
The committee noted that while inflationary pressures are easing, retaining other parameters underscores a cautious stance aimed at preserving financial system stability.
The latest decision represents the lowest benchmark rate since May 2024, when the MPR stood at 26.25 per cent. It also marks the first rate cut following months of aggressive tightening designed to rein in inflation and stabilise the naira.
At its 303rd meeting in November 2025, the MPC had retained the MPR at 27 per cent, opting to maintain a tight monetary stance.
Ahead of the meeting, market analysts were divided over the likely outcome. Some argued that improving macroeconomic fundamentals created room for cautious easing, while others urged restraint, citing the need for more data early in the year.
Asimiyu Damilare, Head of Research at Afrinvest West Africa, had said recent macroeconomic developments strengthened the case for a potential rate cut. However, the Managing Director and Chief Executive Officer of Arthur Steven Asset Management Limited expressed reservations, noting it might be too early in the year to make a significant policy shift.
The split views reflected uncertainty over how quickly the CBN would pivot from its previously tight monetary posture.
With inflation trending downward for eleven consecutive months and liquidity conditions relatively stable, the MPC’s latest decision signals a cautious transition toward monetary easing.
However, by retaining other key policy tools at restrictive levels, the CBN appears determined to balance growth support with vigilance against a resurgence in inflationary pressures.
Market participants will now closely monitor subsequent data releases and future MPC communiqués for further clarity on the pace and direction of monetary policy adjustments in the months ahead.