Financial and economic experts have described the Central Bank of Nigeria’s (CBN) decision to reduce its benchmark interest rate from 26.5% to 23% as a welcome but unexpected move, marking the first major reduction of its kind in nearly two decades.
The decision, announced by CBN Governor Olayemi Cardoso at the end of the 307th Monetary Policy Committee (MPC) meeting on Tuesday, saw the apex bank cut the Monetary Policy Rate (MPR) by 350 basis points despite widespread expectations that rates would remain unchanged.
While analysts welcomed the move as a potential boost for businesses and economic activity, some cautioned that it could create new risks for foreign exchange inflows and investor sentiment.
Experts who spoke with Nairametrics expressed a mix of optimism and caution following the MPC’s decision, with many describing the scale of the reduction as unexpected.
Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), said the move may reflect the CBN’s recognition of inconsistencies within its monetary policy framework.
Yusuf also pointed to overnight lending rates of around 19% and Open Market Operations (OMO) rates of about 22%, arguing that these levels highlighted a disconnect between the MPR and other market rates.
According to him, the CBN’s decision to describe the move as a “reset” rather than a conventional rate cut suggests that underlying issues within the policy architecture may have been addressed.
Yusuf welcomed the reduction in borrowing costs, particularly for small and medium-sized enterprises (SMEs) and retailers, but warned that lower rates could affect portfolio investment flows and foreign exchange liquidity.
Jerry Igwilo, Chief Executive Officer of Nisela Capital, described the reduction as a significant adjustment and linked it to Nigeria’s declining inflation trend.
He noted that central banks typically make policy decisions within the context of inflation targets and future expectations reflected in the yield curve.
According to him, lower interest rates could help support the federal government’s ambition of building a one-trillion-dollar economy by easing financing constraints on businesses.
He also suggested that strong demand for recent government bond issuances may have given the CBN confidence that investors would continue to participate even at lower yields.
The Head of Financial Institutions Ratings at Augusto & Co, Olubunmi Ayokunle, also expressed surprise at the decision, noting that he was still evaluating its implications shortly after the announcement.
Prior to the latest decision, Nigeria maintained one of the highest benchmark interest rates globally when adjusted for inflation.
Alongside the reduction in the MPR, the MPC recalibrated the Standing Facilities Corridor while retaining existing Cash Reserve Requirement (CRR) levels for Deposit Money Banks, Merchant Banks, and non-TSA public sector deposits.
According to the governor, these conditions provided support for the committee’s latest policy decision.
The move signals a notable shift in the CBN’s monetary policy stance after an extended period of aggressive tightening aimed at restoring price stability.
The rate cut comes as inflation continues to ease across the economy. According to data released by the National Bureau of Statistics (NBS), Nigeria’s headline inflation rate declined to 15.39% in August 2026.
The continued decline in inflation provided important context for the MPC’s decision, although analysts say the CBN will need to carefully manage potential risks to foreign exchange inflows as it balances growth objectives with macroeconomic stability.
