CBN “resets” MPR by 350 basis points to 23%, biggest cut since 2006

The Central Bank of Nigeria (CBN) has “reset” the Monetary Policy Rate (MPR) by 350 basis points to 23%, following the 307th meeting of the Monetary Policy Committee (MPC) in Abuja.

CBN Governor Olayemi Cardoso announced the decision following the meeting, which had 11 members in attendance.

The decision effectively reduces the benchmark interest rate from 26.5% and marks the second rate reduction this year. It also takes the MPR to its lowest level since February 2024, when it stood at 22.75%.

CBN Explains 23% MPR Reset

Cardoso said the committee decided to “reset” interest rates to 23% following increased disinflation and improving macroeconomic stability. He stressed that the decision was a recalibration and did not constitute a change in the CBN’s monetary policy stance.

The MPC also reset the corridor around the MPR at +50 basis points/-300 basis points, while retaining the Cash Reserve Requirement (CRR) for commercial banks at 45%.

The committee retained the CRR for merchant banks at 16% and maintained the 75% CRR on non-TSA public sector deposits.

• “The simultaneous moderation across major inflation components provides stronger evidence that underlying price pressures are easing rather than reflecting temporary movements in individual components.”
• “Simultaneous strengthening of output and moderation in inflation is particularly significant. The coexistence of accelerating economic activity and broad-based disinflation suggests that recent macroeconomic adjustment is becoming more balanced, providing greater scope to recalibrate the monetary policy framework without abandoning the commitment to price stability.”

The committee noted that inflation moderated for the third consecutive month to 15.39% in August 2026, while Nigeria’s real GDP growth improved to 4.43% in the second quarter of 2026. It also cited a composite Purchasing Managers’ Index (PMI) of 52.7% as further evidence of stronger economic activity.

CBN Targets Market Rate Disconnect

The decision to describe the move as a “reset” rather than a “cut” suggests that the CBN is seeking to align its benchmark MPR more closely with rates obtainable in the fixed-income market. While the apex bank had kept the MPR at 26.5% for most of the year, the interbank rate and Standing Deposit Facility (SDF) rate were around 22%.

The CBN said the recalibration is intended to improve monetary policy effectiveness and support the transition to an inflation-targeting framework.

• “The MPC emphasized that the recalibration of the corridor does not constitute a change in the current monetary policy stance, but rather an operational reset to enhance the effectiveness of monetary policy and support the transition to an inflation targeting framework,” Cardoso said.
• “There is a clear disconnect between CBN’s Monetary Policy Rate (MPR) and effective market rates. The MPR was 26.5% while the interbank rate stood around 22%, same as the standing deposit facility rate. Thus, the MPR became the de jure rate with the SDF rate as the de facto.”

Nigerian banks have for long adopted the SDF rate for pricing financial transactions rather than relying solely on the MPR. The CBN said this resulted in weak transmission of monetary policy decisions to the real sector, creating the need for the recalibration.

Biggest Rate Cut Since 2006

The 350-basis-point reduction is the biggest reduction in Nigeria’s benchmark interest rate since December 2006. The latest decision also follows the MPC’s July 2026 meeting, when the benchmark rate was retained at 26.5%.

The size of the latest adjustment is significant when compared with previous major interest rate reductions by the CBN.

• In December 2006, under then-CBN Governor Charles Soludo, the benchmark rate was reduced by 400 basis points, from 14% to 10%, the largest reduction among the periods cited.
• The CBN followed with another 200-basis-point reduction in June 2007.
• The most recent comparable aggressive reduction before the latest decision occurred in July 2009, when rates were cut by 200 basis points.

The latest 350-basis-point adjustment therefore represents the biggest reduction since the 400-basis-point cut of December 2006 and exceeds the 200-basis-point reductions recorded in 2007 and 2009.