Overview
At the conclusion of its 304th meeting on February 23–24th, 2026, the Central Bank of Nigeria’s Monetary Policy Committee (MPC) reduced the Monetary Policy Rate (MPR) by 50 basis points to 27.00% from 26.50%, making it the second easing since the aggressive tightening cycle peaked in mid-2025.
Key Decisions
• Reduce the MPR by 50bps to 26.50%
• Retain the asymmetric corridor at +50/-450 around the MPR.
• Retain the CRR of Deposit Money banks to 45%.
• Retain the CRR of Merchant Banks at 16%
• Retain 75% CRR for Non-TSA public sector deposits.
Why the CBN opts to cut rate
The Monetary Policy Committee (MPC) reduced the policy rate by 50 basis points, marking a deliberate recalibration of monetary policy in response to shifting macroeconomic conditions. This decision follows a sustained easing of inflation, a slowdown in growth, strengthened external buffers, and a less restrictive global monetary environment.
Following the inflation rebasing in 2025 to reflect current economic conditions,headline inflation declined to 15.10% in January 2026. The moderation reflects the combined effects of prior monetary tightening, foreign exchange reforms, and improved food supply after the harvest season. Core inflation has also eased, lowering the risk that the recent policy rate cut will disrupt the disinflation trajectory.
Other policy parameters remained unchanged. The MPC maintained the asymmetric corridor at +50/-450 basis points around the Monetary Policy Rate (MPR), as well as the Cash Reserve Ratio and liquidity ratio.
This indicates a calibrated easing strategy rather than a full shift to an accommodation stance, aiming to contain excess liquidity risks that could emerge from potential fiscal expansion or election-related spending, while safeguarding the gains in price stability
and banking system resilience.
Domestic factors provided additional support for easing. Exchange rate stability, resilient non-oil sector growth, rising external reserves, and improved domestic food supply reinforced the disinflation trajectory. The MPC judged that the cumulative tightening from previous cycles continues to anchor inflation expectations, although it cautioned that significant fiscal expansion could reintroduce demand-side pressures.
Overall, the MPC’s action reflects a controlled policy recalibration, balancing the need for economic support with the continued priority of price stability, exchange rate resilience, and financial system stability.
Naira and Foreign Reserve Resilience Supports CBN’s Calibrated Easing
Nigeria’s foreign exchange (FX) dynamics have shifted significantly over the past twelve months, with recent naira stability
and modest appreciation supporting broader macroeconomic adjustment. Under Governor Olayemi Cardoso at the Central Bank of Nigeria (CBN), policy reforms implemented between 2023 and 2024 are delivering measurable outcomes in currency stability, reserve accumulation, and investor confidence.
Key structural reforms, including the unification of the exchange rate framework, enhanced transparency in FX allocations, tighter surveillance against speculative activity, and deliberate liquidity management, have reduced market distortions. When combined with sustained monetary tightening, these measures have improved price discovery and restored credibility to the Nigerian Autonomous Foreign Exchange (NAFEX) Market.
The naira has appreciated by roughly 5.42% in the official market (as of 23rd of Feb 2026), trading within a narrow band
of ₦1,340–₦1,349/$. On a week-onweek basis, gains hovered around 0.7% in some period.
Reduced volatility reflects improved supplydemand balance, supported by FX inflows from foreign portfolio investors, exporters,
and remittances. Calibrated interventions by the CBN have absorbed excess liquidity while preserving market-driven price formation.
This convergence is a critical signal of market credibility. Reduced spreads weaken the incentive for speculative capital flows and
reinforce the formal FX window as the dominant market for transactions, supporting foreign portfolio inflows.
External buffers have strengthened.
According to the governor, recent gross external reserves have reached $50.45 billion, a 13-year high and an increase
from the $45–46 billion range recorded in early 2026, providing 9.68 months of import cover for goods and services.
Collectively, the naira’s appreciation, FX window convergence, disinflation to 15.10%, and reserve build-up signal a transition from
stabilisation to consolidation in the FX market.
While the adjustment is encouraging, its durability will depend on continued policy discipline, fiscal coordination, and sustained
inflow momentum. Any abrupt fiscal expansion or disruption to capital flows could test the resilience of the gains achieved.
Market Implication
On the equities front, the Nigerian Exchange (NGX) All-Share Index has been in a strong bullish phase, surging notably in recent weeks, with year-to-date gains exceeding 20%. The rate cut is expected to support and potentially accelerate market momentum. Lower benchmark rates reduce corporate borrowing costs, relieve pressure on earnings, particularly in interest-sensitive sectors such as manufacturing and consumer goods and enhance equity valuations by making stocks more attractive relative to fixed-income instruments.
In the fixed-income space, bond and treasury bill yields are poised for downward pressure. The cut signals a recalibration of monetary conditions, aligning policy more closely with already softening market rates (e.g., treasury bill yields had trended lower in recent auctions amid strong demand and liquidity).
Government borrowing costs should ease modestly, benefiting fiscal space and reducing debt service burdens.
Broader implications include a potential boost to private-sector credit growth and economic activity, as lower lending rates encourage investment in real sectors such as agriculture, SMEs, and infrastructure.
However, the CBN remains cautious. Governor Olayemi Cardoso emphasised a data-driven approach and vigilance against upside risks from fiscal expansion or external shocks, signalling that the easing cycle will remain calibrated rather than aggressive.
Recapitalisation and Policy Synergy
The CBN’s 50-basis-point cut to the MPR, bringing it to 26.50% in February 2026, is a deliberate and measured easing designed
to support the ongoing bank recapitalisation without undermining progress on inflation control, naira stability, or reserve accumulation. The move complements the ongoing bank recapitalisation exercise, even as only 20 of Nigeria’s 33 deposit money
banks (DMBs) have met the new minimum capital requirements set in March 2024, according to the CBN governor.
Under the recapitalisation framework, international banks must reach ₦500 billion, national banks ₦200 billion, and regional banks ₦50 billion in paid-up capital by March 31, 2026. The drive aims to strengthen banks’ shock-absorption capacity, expand credit to productive sectors, and position the banking system to support Nigeria’s goal of a trillion-dollar economy.
Stronger capital bases will allow banks to lend more aggressively once compliance is achieved. The MPR cut supports this transmission by lowering borrowing costs, particularly for SMEs, agriculture, manufacturing, and infrastructure. In effect, monetary easing and recapitalisation work in tandem to boost credit capacity while stimulating economic activity.
The MPC retained key safeguards: the asymmetric corridor (+50/-450 bps), Cash Reserve Ratio (45% for DMBs), and liquidity
ratio (30%). These measures ensure that the easing is controlled, preventing excess liquidity from triggering inflationary
pressures or destabilising the financial system even as banks prepare to expand lending.
Bottom Line
The Central Bank of Nigeria (CBN) cut the Monetary Policy Rate (MPR) by 50bps to 26.50%, a move that reflects a calibrated
easing aligned with sustained disinflation (headline inflation at 15.10%), FX stability, reserve accumulation ($50.45 billion as of
mid-February), and ongoing bank recapitalisation.
The rate cut reinforces momentum by lowering corporate borrowing costs and improving relative equity valuations. In fixed income, bond and treasury yields face downward pressure, easing government borrowing costs and supporting fiscal space.
The MPC retained the asymmetric corridor (+50/-450 bps), high CRR (45%), and liquidity ratio (30%) to control excess liquidity and prevent inflationary spillovers. The easing balances growth support with price stability and banking sector resilience, signalling confidence in macro progress while maintaining flexibility against fiscal or external risks.
The rate cut represents a measured, strategic recalibration: it strengthens credit transmission, consolidates FX and reserve gains, supports recapitalised banks, and sustains market momentum, all while preserving disinflationary progress and financial stability.
