By: Ubong Mkpesit
The Central Bank of Nigeria (CBN) has reduced its benchmark interest rate, the Monetary Policy Rate (MPR), from 26.5 per cent to 23 per cent, as businesses and investors await the impact of the decision on borrowing costs, credit access and economic activity.
The decision was announced on Tuesday by CBN Governor Olayemi Cardoso at the end of the 307th Monetary Policy Committee (MPC) meeting, which was held on September 21 and 22, 2026.
The rate cut represents a 350-basis-point reduction and is the first major downward adjustment after a prolonged period of tight monetary policy aimed at controlling inflation and stabilising the economy.
The MPC also retained the Cash Reserve Requirement (CRR) for financial institutions at existing levels:
45 per cent for Deposit Money Banks
16 per cent for Merchant Banks
75 per cent for non-Treasury Single Account (TSA) public sector deposits
The committee adjusted the Standing Facilities Corridor around the MPR to +50/-300 basis points, while reaffirming its commitment to improving monetary policy transmission.
According to the MPC, the adjustment was informed by recent economic developments, including moderation in inflation, improvement in external sector conditions and stronger economic growth.
The committee noted that headline inflation had eased to 15.39 per cent in August 2026 from 15.43 per cent in July, while Nigeria’s economy recorded 4.43 per cent real Gross Domestic Product (GDP) growth in the second quarter of 2026.
The CBN also cited improved external reserves, which stood at $55.25 billion as of September 18, 2026, as one of the factors supporting the committee’s decision.
The reduction in the MPR is expected to influence interest rates across the economy, although the extent to which businesses benefit will depend on how quickly banks adjust lending rates.
Manufacturers, small businesses and other credit-dependent firms have consistently identified high borrowing costs as a major challenge to expansion, investment and job creation.
A lower policy rate could reduce funding pressure if transmitted effectively through the banking system. However, businesses will be watching whether commercial banks respond with cheaper loans or whether other factors, including credit risk and operating costs, continue to keep lending rates elevated.
For investors, the rate cut could also influence the balance between fixed-income investments and equities, as lower interest rates may affect returns on government securities and market liquidity.
The MPC said it would continue to monitor inflation trends, exchange rate developments, economic growth and other indicators before taking further policy decisions.(Business Chronicle)
