CBN Cuts Interest Rate to 26.5% as Inflation Slows

The Central Bank of Nigeria (CBN) has reduced its benchmark interest rate by 50 basis points to 26.5%, signalling growing confidence that inflationary pressures are easing and economic stability is gradually improving.

The decision was announced on Tuesday by CBN Governor, Olayemi Cardoso, following the conclusion of the Monetary Policy Committee’s (MPC) 304th meeting held on February 23 and 24, 2026.

The rate cut marks the first reduction since September 2025, when the Monetary Policy Rate (MPR) was lowered to 27%. Since then, the committee has maintained the rate across three consecutive meetings, reflecting a cautious stance amid persistent inflation and foreign exchange volatility. With the latest adjustment, the MPR now stands at 26.5%, a move aimed at supporting economic recovery while maintaining price stability.

All 11 members of the MPC attended the meeting, underscoring the importance of the decision as Nigeria navigates a delicate balance between controlling inflation and stimulating economic growth. Alongside the rate cut, the committee retained other key monetary policy parameters.

The asymmetric corridor around the MPR remains at +50 and –450 basis points, while the Cash Reserve Ratio (CRR) was held at 45% for deposit money banks and 16% for merchant banks. The liquidity ratio was also left unchanged, maintaining the central bank’s broader monetary framework.

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Inflation decline and improved external conditions drive the decision

The MPC’s decision comes against the backdrop of improving inflation data and stronger external sector performance. According to recent figures from the National Bureau of Statistics, Nigeria’s headline inflation rate declined slightly to 15.10% in January 2026, down from 15.15% recorded in December 2025. The Consumer Price Index also fell significantly, dropping to 127.4 in January from 131.2 in December, indicating easing price pressures across key sectors of the economy.

Cardoso said the committee was encouraged by clear signs that inflation is gradually moderating, largely due to the cumulative impact of previous interest rate hikes and structural improvements in the economy. He noted that stability in the foreign exchange market, increased capital inflows, improved export earnings, and higher diaspora remittances had all contributed to strengthening the country’s external position.

In addition, improved food supply conditions and relatively stable fuel prices have helped ease cost pressures on households and businesses, further supporting the disinflation trend. The MPC also observed improvements in Nigeria’s balance of payments position, which has helped boost investor confidence and stabilize financial markets.

The committee further welcomed recent fiscal reforms, including the federal government’s executive directive requiring oil and gas revenues to be paid directly into federation accounts. According to the MPC, this measure is expected to improve government revenue transparency, strengthen external reserves, and enhance overall macroeconomic stability.

Analysts say the interest rate cut reflects the central bank’s cautious optimism that Nigeria’s economy is gradually transitioning from a phase of aggressive monetary tightening to a more balanced policy environment. While the reduction may help ease borrowing costs for businesses and consumers, the CBN is expected to remain vigilant to ensure inflation continues on a downward path.

The latest move signals a shift toward supporting economic growth while preserving financial stability, as policymakers attempt to sustain recovery momentum and reinforce confidence in Nigeria’s economic outlook.