CBN cuts interest rate the second time in five months

Nigeria’s central bank has cut its benchmark interest rate for the second time in five months, trimming the Monetary Policy Rate (MPR) by 50 basis points to 26.5% as inflation shows further signs of cooling.

Governor Olayemi Cardoso announced the decision on Tuesday at the end of a two-day Monetary Policy Committee (MPC) meeting in Abuja, signalling growing confidence among policymakers that price pressures are moderating.

“The committee’s decision was premised on a balanced evaluation of risks to the outlook, which suggest that the ongoing disinflation trajectory would continue,” Cardoso said at a press conference.

He cited the lagged impact of earlier monetary tightening, relative exchange rate stability and improved food supply as key factors helping to ease inflationary pressures.

Nigeria’s headline inflation slowed to 15.10% year-on-year in January 2026, marginally down from 15.15% in December, according to the latest data from the National Bureau of Statistics. While the decline is slight, it reinforces expectations that the central bank may be entering a cautious easing cycle after months of aggressive rate hikes.

The latest cut follows a previous reduction in September 2025, when the MPR was lowered to 27% from 27.5% — the first rate cut since August 2020, when policymakers eased borrowing costs to cushion the economic fallout from the COVID-19 pandemic.

Between 2020 and 2025, the CBN largely pursued a tightening stance, raising rates repeatedly to combat persistent inflation and stabilize the naira amid foreign exchange volatility.

Despite the rate cut, the MPC left other key monetary parameters unchanged. The asymmetric corridor remains at +50/-450 basis points around the MPR. The Cash Reserve Ratio was retained at 45% for Deposit Money Banks and 16% for Merchant Banks, while the Liquidity Ratio stays at 30%.

The cautious approach underscores the bank’s attempt to balance support for economic growth with its core mandate of price stability.

Analysts say the easing move could bolster fixed income markets. Coronation Merchant Bank noted in a research brief that further rate moderation could lift bond prices. “If there is a cut, we anticipate continued yield moderation in the fixed income space, making current holdings more valuable for investors,” the firm said.

For businesses and borrowers, the cut may gradually ease financing conditions, though the high policy rate signals that monetary conditions remain tight by historical standards.

With inflation still in double digits, the central bank appears to be signalling a measured recalibration rather than a wholesale policy shift — one that hinges on whether the downward inflation trend proves durable in the months ahead.