Nigeria has reduced its benchmark interest rate by 50 basis points, bringing the Monetary Policy Rate down from 27 per cent to 26.5 per cent at the 304th meeting of the Monetary Policy Committee held on 24 February 2026. The decision was announced by the Central Bank of Nigeria following its policy deliberations.
The move follows an earlier reduction in September 2025, when the Committee cut the rate to 27 per cent after an extended period of tightening. The February 2026 adjustment therefore represents a continuation of cautious recalibration rather than the beginning of a new policy direction. While the headline rate was lowered, all other major parameters were left unchanged. The Cash Reserve Ratio remains at 45 per cent for commercial banks and 16 per cent for merchant banks. The Liquidity Ratio was retained at 30 per cent. The asymmetric corridor around the MPR was also maintained at +50 and –450 basis points.
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The retention of these instruments indicates that monetary conditions remain restrictive. Nigeria’s 45 per cent Cash Reserve Ratio for commercial banks continues to rank among the highest globally, ensuring that a significant share of banking sector deposits remains sterilised at the central bank.
Inflation Dynamics and Domestic Pressures
The policy decision comes against a backdrop of elevated inflation. According to the latest data released by the National Bureau of Statistics, headline inflation remains above 20 per cent, with food inflation continuing to account for a substantial portion of overall price growth. Exchange rate adjustments, logistics costs and structural supply constraints have also sustained pressure on consumer prices.
The Monetary Policy Committee has consistently emphasised price stability as its primary mandate. By implementing a modest 50 basis point reduction while retaining other tightening tools, the Bank appears to be testing room for limited rate relief without undermining its anti-inflation stance.
Growth Conditions and Credit Environment
Nigeria’s economic growth remains moderate relative to its demographic expansion. Multilateral projections for Sub-Saharan Africa in 2026 place regional growth at around 3.8 per cent, with Nigeria’s outlook closely tied to oil output stability, fiscal reforms and exchange rate management.
Domestic lending rates remain elevated, often significantly above the policy benchmark due to risk premiums and structural constraints within the banking sector. A 50 basis point reduction in the MPR may not immediately translate into sharply lower borrowing costs, but it signals some easing of monetary pressure.
Maintaining the Liquidity Ratio at 30 per cent and preserving the standing facilities corridor reinforces continued oversight of interbank conditions and short-term liquidity movements.
A Calibrated Approach
The February 2026 decision reflects a controlled adjustment rather than a broad easing cycle. With the policy rate now at 26.5 per cent and liquidity controls firmly in place, monetary conditions remain tight by historical standards.
Future policy decisions will likely depend on sustained moderation in inflation, exchange rate stability and improved supply conditions within the domestic economy. For now, the Central Bank’s position is clear: limited rate relief within an otherwise disciplined and restrictive framework.
