Naira slips to N1,359/$ after CBN’s 304th MPC cuts interest rate to 26.5%

The naira depreciated to N1,359 per dollar on Tuesday following the conclusion of the 304th Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN).

The local currency weakened from N1,353.5/$ recorded on Monday, reflecting mild pressure in the official foreign exchange market as investors digested the apex bank’s latest monetary policy decision.

Foreign exchange data showed a slight weakening of the naira shortly after the MPC announced a 50 basis points reduction in the Monetary Policy Rate (MPR), cutting it from 27 per cent to 26.5 per cent.

The development signals cautious market sentiment despite recent improvements in key macroeconomic indicators, including inflation and external reserves.

While the MPC opted for a rate cut — marking a shift toward monetary easing after a prolonged tightening cycle — other key policy parameters were left unchanged, underscoring the bank’s measured approach.

The committee retained the Cash Reserve Ratio (CRR) at 45.0 per cent for commercial banks and 16.0 per cent for merchant banks, maintained the Liquidity Ratio at 30.0 per cent, and kept the Standing Facilities Corridor at +50/-450 basis points around the MPR.

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Headline inflation declined for the eleventh consecutive month to 15.1 per cent in January 2026, strengthening the case for easing monetary conditions.

CBN Governor Olayemi Cardoso disclosed at the end of the meeting that Nigeria’s gross external reserves rose to $50.45 billion as of February 16, 2026 — the highest level recorded in 13 years.

According to Cardoso, the MPC noted the “remarkable performance of Nigeria’s external sector,” which has contributed to relative stability in the foreign exchange market and improved investor confidence.

“Without market confidence, no matter what you do, you will significantly suboptimise,” Cardoso said, stressing that confidence remains central to the foreign exchange framework.

The naira’s reaction to the 304th MPC decision contrasts with movements observed after previous meetings, reflecting shifting supply-demand dynamics and evolving investor expectations.

After the 303rd MPC meeting, the currency appreciated to N1,441/$. Ahead of that November meeting, it strengthened to N1,452/$ from N1,458/$.

In contrast, following the 302nd MPC meeting, the naira weakened to N1,493.2/$ from N1,491.49/$ before the decision.

The varied outcomes underscore how foreign exchange movements are influenced not only by interest rate decisions but also by broader liquidity conditions, capital flows and overall market sentiment.

The MPC’s decision to cut rates signals a gradual pivot toward easing, supported by moderating inflation and stronger external buffers. However, the retention of other policy parameters indicates continued caution as the CBN seeks to balance price stability with exchange rate management.

Ahead of the 304th MPC meeting, the naira had closed at N1,353.5/$ in the official market, highlighting the currency’s sensitivity to policy signals from the apex bank.

Market watchers say future movements will depend largely on sustained reserve growth, capital inflows and the credibility of ongoing reforms aimed at stabilizing the foreign exchange market.