The Central Bank of Nigeria, CBN, has cut its Monetary Policy Rate, MPR, from 26.5 per cent to 23 per cent as part of measures to strengthen monetary policy transmission.
The CBN Governor, Olayemi Cardoso, announced the decision on Tuesday in Abuja while presenting the communiqué of the 307th meeting of the Monetary Policy Committee, MPC.
The committee also recalibrated the Standing Facilities Corridor to +50/-300 basis points around the MPR, from +50/-450 basis points.
Cardoso said the Cash Reserve Requirement, was retained at 45 per cent for deposit money banks, 16 per cent for merchant banks and 75 per cent for non-TSA public sector deposits.
He said the reset of the MPR and recalibration of the policy corridor were intended to strengthen monetary policy transmission and reinforce the MPR as the principal signal of monetary policy.
“The committee decided to reset the MPR and recalibrate the policy corridor as an important operational realignment,” Cardoso said.
He stressed that the adjustment did not constitute a change in the prevailing monetary policy stance but was an operational reset aimed at improving the effectiveness of monetary policy and supporting the transition to an inflation-targeting framework.
Cardoso said the committee took note of the divergence between the MPR and prevailing market rates, which he said had weakened the effectiveness of monetary policy transmission.
He said the CBN’s ongoing repair of its monetary policy implementation framework, including the adoption of the Nigerian Overnight Financing Rate, as a transaction-based operational benchmark, had improved transparency in money market operations.
The governor said the MPC considered the reset appropriate to better align the monetary policy implementation framework with market conditions and restore the MPR as the principal signal of monetary policy.
Cardoso said the committee also observed increasing resilience in the Nigerian economy, reflected in moderating inflation, stronger external reserve buffers, improved external sector fundamentals and increased investor confidence.
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He said the country’s balance of payments surplus rose to 3.51 billion dollars in the second quarter of 2026 from 2.38 billion dollars in the first quarter.
Similarly, the current account surplus increased by 67.92 per cent to 7.54 billion dollars in the second quarter from 4.49 billion dollars in the first quarter.
He said the committee noted progress in the disinflation process, with headline inflation recording three consecutive months of decline despite geopolitical tensions in the Middle East and associated increases in global energy prices.
Meanwhile, a financial expert, Prof. Uche Uwaleke, described the 350-basis-point reduction in the MPR as justified by moderating inflation, exchange rate stability, improved foreign exchange market liquidity and increased external reserves.
Uwaleke, Director of the Institute of Capital Market Studies and President of Capital Market Academics of Nigeria, also described the decision as a welcome development against the backdrop of the recently signed Memorandum of Understanding between the Minister of Finance and the CBN Governor on fiscal and monetary policy coordination.
Speaking on his three years at the helm of the apex bank, Cardoso said the current management had made significant progress in restoring confidence in the CBN and the economy.
He said the bank inherited an environment characterised by repeated naira depreciation, high Ways and Means financing, interventions exceeding N10 trillion and a dysfunctional foreign exchange market with multiple rates.
“At that time, Ways and Means had dropped the economy to a huge leap. We had N23.7 trillion per capita in Ways and Means, and that fuelled the very sorry situation we had with inflation,” he said.
Cardoso said the CBN’s focus since 2023 had been to return the institution to its core mandate of maintaining monetary, price and financial stability.
“Our proudest moments have been in our ability over the years to take the right decisions that have been able to take us back there,” he said.
NAN
