CBN cuts benchmark rate to 23% as businesses await cheaper credit
The Central Bank of Nigeria has reduced its benchmark interest rate by 350 basis points to 23 per cent, saying the move will improve monetary-policy transmission. Businesses welcome the prospect of lower borrowing costs, but analysts say the impact will depend on bank lending rates, inflation and currency conditions.
The Central Bank of Nigeria has cut its benchmark interest rate by 350 basis points to 23 per cent, offering businesses the prospect of cheaper credit after more than two years of monetary tightening. The Monetary Policy Committee approved the reduction at its 307th meeting on September 22, lowering the Monetary Policy Rate from 26.5 per cent. It was the second reduction this year, following a 50-basis-point cut in February.
The committee also narrowed the Standing Facilities Corridor to plus or minus 50 and 300 basis points around the MPR. It retained cash reserve requirements at 45 per cent for deposit money banks, 16 per cent for merchant banks and 75 per cent for non-Treasury Single Account public-sector deposits. CBN Governor Olayemi Cardoso described the decision as a reset and recalibration rather than simply a major injection of new monetary stimulus.
The central bank said the policy rate had become disconnected from money-market conditions. The Financial Markets Dealers Association said the Nigerian Overnight Financing Rate had traded broadly around 22 per cent since its introduction in April 2026, while the MPR remained at 26.5 per cent. Cardoso said the divergence had weakened the transmission of monetary policy.
The CBN said inflation and other economic indicators had improved. Headline inflation fell to 15.39 per cent in August from 15.43 per cent in July, while food and core inflation also declined. Real GDP growth rose to 4.43 per cent in the second quarter from 3.89 per cent.
The bank also cited a second-quarter balance-of-payments surplus of $3.51bn, stronger current-account performance and external reserves of $55.25bn as evidence of improved conditions. Dr Muda Yusuf of the Centre for the Promotion of Private Enterprise said high financing costs had constrained investment, production, working capital and job creation. He said the cut could improve business cash flows, but the benefits would depend on whether commercial lending rates actually fall.
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