By Bassey Udo
At the end of its 304th meeting held on February 23 and 24, 2026, the 11-member Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) resolved to cut the controlling Monetary Policy Rate (MPR), popularly called lending rate for bank transactions, by 50 basis points, from 27 percent to 26.5 per cent.
Also, the Committee, however, retained the Standing Facilities Corridor around the MPR at +50/-450 basis points, and the Cash Reserve Requirement (CRR) for Deposit Money Banks at 45percent, Merchant Banks at 16 percent, and 75 percent for non-Treasury Single Account (TSA) public sector deposits, as well as liquidity ratio at 30 percent.
The MPR is the controlling rate approved by the CBN for commercial banks’ lending activities for the period, while the CRR is the minimum deposit a commercial bank must hold as reserves in its account with the apex bank.
Aggressive monetary policy tightening as a strategy
At inception of the Olayemi Cardoso management at the CBN in September 2023, the MPC adopted inflation targeting and aggressive monetary policy tightening as a strategy to realise the overall mandate of ensuring monetary and price stability in the financial system.
The last time the Committee decided to tweak its aggressive monetary policy tightening stance and opt to cut the MPR was during its meeting held on September 22 and 23, 2025, when all its 12 members agreed to a 50 basis points reduction from 27.5 percent to 27 percent.
During that meeting, the MPC adjusted the Standing Facilities corridor around the MPR to +250/-250 basis points; adjustment to the CRR for commercial banks from 50 to 45 percent, and retention of the CRR for merchant banks at 16 percent, while introducing a 75 percent CRR on non-TSA public sector deposits.
Prior to that decision, the only other time the MPC sliced the MPR was three years earlier in September 2020, when it reduced the rate by 100 basis points, from 12.5 percent to 11.5 percent.
Since that time, the Committee left the lending rate constant at 11.5 percent till May 2022 when it decided to raise it to 13 percent, followed by a trail of successive upward adjustments that peaked at 27.5 percent in July 2025.
Under the Cardoso as the CBN governor and Chairman of the MPC since September 2023, the Committee has raised the MPR five times; retained the rate four times, and reduced rates twice. Last Tuesday’s reduction of the rate from 27 percent to 26.5 percent was the only other time the Committee would be doing so since September 2025.
The Committee’s inflation targeting and monetary policy tightening policies appear to have been able to realize its objectives of a stable exchange rate, increased capital inflows to the foreign reserves, and surplus current account balance, coupled with the reign of stability in the price of premium motor spirit (PMS), popularly called petrol as well as improvement in food supply.
Each decision to either raise, reduce or retain monetary policy rates appears to have followed a consistent pattern of deliberate, careful, measured and calculated deployment of monetary policy instruments by the MPC to realise a specific objective to either curb inflation or stimulate growth towards maintaining stability in the financial system and the economy.
When the decision is about raising the MPR, the objective is to make loans and credits less attractive, by hiking the cost of borrowing for businesses and individuals, to reduce liquidity in circulation and curb inflation.
This is a part of MPC’s monetary policy tightening strategy aimed at controlling inflation, stabilizing the exchange rate of the Naira, and attracting foreign investment into the country’s economy.
On the other hand, when the MPC decides to cut the MPR, it is obvious the economy requires some incentive to boost growth, through a lower lending rate by commercial banks to encourage more borrowing, promote investments and increased spending at cheaper rates.
Between the two extremes of the policy stance – tightening (to curb inflation), or loosening (to stimulate growth), the MPC maintains the prevailing rates to remain constant to allow the impact of the previous decision to permeate the system.
Relaxing the aggressive tightening stance
During last Monday’s meeting, the CBN governor said MPC’s resolution to cut the MPR by 50 basis points from 27.5 percent to 27 percent; adjust the Standing Facilities corridor around the MPR to +250/-250 basis points; adjust the CRR for commercial banks from 50 to 45 percent, as well as introduce a 75 percent CRR on non-TSA public sector deposits was based on a balanced evaluation of risks to the overall outlook of the economy.
He said the decision suggested that the ongoing disinflation trajectory would continue into the near to medium term, supported largely by the lagged transmission of previous monetary tightening, sustained exchange rate stability, and enhanced food supply.
In reaching the decision, the CBN governor said MPC considered the sustained deceleration in year‑on‑year headline inflation, which attained its 11th consecutive months of decline in January 2026 to 15.10 percent, from 15.15 percent in December 2025, reflecting a moderation across both the food and core components.
While food inflation declined markedly to 8.89 percent from 10.84 percent over the same period as a result improved domestic food supply, sustained exchange rate stability, and favourable base effect, core inflation declined to 17.72 percent from 18.63 percent, driven largely by moderation in the average prices of Information & Communication services.
On month‑on‑month, headline inflation declined to -2.88 percent in January 2026 from 0.54 percent in the preceding month, indicating a continued softening of price pressures, while the Purchasing Managers’ Index (PMI) stood at 55.7 points in January 2026, reflecting continued expansion in economic activities and likely improvement in output in the fourth quarter of 2025.
Cardoso said the declining trajectory in inflation was driven mainly by the continued effects of CBN’s contractionary monetary policy, stability in the foreign exchange market, robust capital inflows, and improvement in the balance of payments, which were further reinforced by relative stability in the prices of petroleum products, particularly petrol, and improved food supply conditions, especially staples.
With significant accumulation of gross external reserves to $50.45 billion as of February 16, 2026, the highest in 13 years, sufficient to provide an import cover of 9.68 months for goods and services, the CBN governor said the MPC noted the remarkable performance of country’s external sector, as a result of the robust accruals to foreign exchange reserves, backed by higher export earnings and increased remittance inflows.
“Given these improved macroeconomic conditions, the Committee believed that a moderate easing of the rates was consistent with the prevailing inflation dynamics,” the CBN governor said.
Market reacts, as experts urge caution
Hours after the MPC decision, investors in the Nigerian Exchange (NGX)
reacted negatively, resulting in the NGX closing the red, down by 0.91% to N124.83trillion, with investors 2.8 percent loss of N1.141 trillion at the close of business, while Naira slipped to N1,410 to the dollar in the parallel market, amid massive offloading of consumer goods and insurance stocks.
Some experts and analysts say they are yet to come to terms on whether the improvements in macroeconomic conditions were indicators of a shift of the economy on the path towards real recovery, while others are of the view that these might be just fragile moments of fleeting stability.
Yet, there are some economists who believe the decision of the MPC to cut the controlling lending rate is evidence of the growing confidence by the managers of the economy that they may have turned the bend, leaving behind the worst experience.
For Adetilewa Adebajo, a Lagos based Investment Banker, Economist & CEO, CFG Advisory, the macroeconomic indicators are ticking up, with inflation easing and the reserves peaking at above $50.4billion.
This, he pointed out, that the economy has reached the point of inflection, to be able to translate the reforms by the government into policies towards sustainable growth and productivity for the benefit of the people.
For the people to feel the impact of the reforms, he said the economy, which is currently growing above five percent, has to grow at an average rate of 8 to 10 percent on a sustainable basis to be better for a population of over 200 million people.
For another Lagos based analyst and Chief Executive of Financial Derivatives Company Limited, Bismarck Rewane, despite declining headline inflation for 11 consecutive months since March 2025, most people appear not to feel the impact, because their purchasing power has been eroded by shrinking incomes value, and high transportation cost as a result of high cost of fuels.
He said although the CBN, through the MPC, is adopting a cautious approach in its monetary policy intervention to give the real sector the capacity to borrow at a cheaper rate and invest to stimulate growth in the economy, there was need for proper coordination between fiscal, monetary, investment and industrial policies, particularly with the recent launching an industrial policy by the government. permeate
For the Chief Economist, SPM Professionals, Dr Paul Aladje, despite the deceleration in inflation rate to 15.1 percent, people are not seeing a commensurate reduction in prices of commodities in the market
For any improvement in the macroeconomic indicators to be meaningful, its impact must be visible in the lives of the people,” he said.
Members of the organised private sector (OPS) were cautiously optimistic in the embrace of the MPC decision, being the first cut in a long stretch of tightening cycle.
The Director-General/CEO of the Nigeria Employers’ Consultative Association (NECA), Adewale-Smatt Oyerinde, saw the MPC decision as a positive signal for growth, describing it as a necessary step that should, however, be embraced with caution.
Others expressed doubts that the rate cut would immediately result in lower borrowing costs as anticipated, as they pointed out that lending conditions by banks were still not favourable to most businesses.
The DG of the Lagos Chamber of Commerce and Industry (LCCI), Chinyere Almona, applauded the MPC decision to cut interest rates, noting that the move signals improving economic stability, adding that many believe the policy direction could ease borrowing costs, boost productivity, and enhance confidence in Nigeria’s financial markets.
She said the decision marked a significant shift from the aggressive tightening monetary policy to stabilization, anchored on disinflation, exchange rates convergence and improving supply side conditions.
The LCCI said it expects to see improved policy predictability, strengthened real returns expectations and support for medium term investment planning.
With increased foreign exchange liquidity, she said the CBN weekly injection of $150m into the FX market would be sustained, to enable it support imports, and maintain FX market price stability.
The overall impact, she pointed out, is that the cost of goods and services would come down, resulting in good living for the citizens
With a lot of money expected in circulation in the run up to the 2027 elections, with the combined impact of the coming into effect of the Executive Order 9 recently issued by President Bola Tinubu to redirect oil and gas revenues to be paid directly into the Federation Account, most analysts emphasized discipline in the management of the expected excess funds by the managers of the economy.
Building resilience against the future
Perhaps, one of the most significant markers of the endorsement of the CBN interventions in the financial sector was the report that as of February 19, 2026 the total verified and approved capital raised so far by the banks under the recapitalization programme stood at about ₦4.05 trillion.
The CBN governor who said about ₦2.90 trillion, or 71.67% of the total verified and approved capital was mobilised from domestic sources, and about $706.84 million, estimated at about ₦1.15 trillion, or 28.33%, from investors abroad, described the balanced mix between domestic and foreign investors as a reflection of the growing confidence of investors to participate in the nation’s banking sector.
Apart from a total of 20 commercial banks that have fully met the new minimum capital requirements stipulated under the recapitalization programme, the CBN governor said 13 other banks at advanced stages of their capital-raising processes were in the frame to conclude their recapitalization arrangements before the expiration of stipulated regulatory timetable ending on March 31, 2026.
These banks, Cardoso said, were finalising their strategies and assessing a variety of options they consider viable for realising their business objectives, including consolidation of their potentials with other partners.
Cardoso expressed delight that most of the measures adopted by the CBN, principally bordering on monetary policy tightening, have started yielding fruits, adding that for the recent stability in the foreign exchange market to be sustained and deceleration in inflation rate would require the existing balance between the fiscal and monetary policies to be maintained.
On building a resilient foreign exchange market going forward, the CBN governor said the apex bank has been able to remove all the bottlenecks, ensured market efficiently and transparency, by allowing innovation, strengthening surveillance, and eliminating bad actors from the system as well as allowing all players know the rules and stick to them.
Eliminating multiple exchange rate windows and clearing the backlog of foreign exchange payments, he said, has established consistency over the past few months, adding that as long as these would continue, there would be regular accretion to the nation’s foreign reserves.
