CBN Faces Rate Cut Decision as Nigerians Push for Relief

All eyes are on the Central Bank of Nigeria (CBN) as its Monetary Policy Committee (MPC) meets February 23–24 to decide whether to cut the benchmark interest rate or maintain its cautious stance amid shifting macroeconomic signals.

The decision comes at a delicate moment for policymakers, balancing moderating inflation against concerns about liquidity and financial stability.

Analysts say recent data present a stronger case for easing than at the last MPC meeting in November 2025, when the CBN held rates steady.

Headline inflation edged down to 15.1 per cent in January 2026 from 15.15 per cent in December.

The naira has strengthened on improved foreign exchange liquidity, trading below N1,400 per dollar compared with over N1,500 last year.

Business activity also remains resilient. The Purchasing Managers’ Index (PMI) is in expansionary territory, while exchange rate stability and moderating inflation suggest improving macroeconomic conditions.

Against this backdrop, pressure is building for monetary easing.

Nigerians want rate cut

According to the CBN’s January 2026 Household Expectations Survey released on February 20, Nigerians are increasingly prioritising lower borrowing costs over inflation concerns.

The survey shows that 65.0 per cent of respondents prefer lending rates to decline, believing lower rates would be “best” for the economy.

When asked to choose between raising rates to curb inflation or reducing rates even if inflation rises, 50.1 per cent opted for lower interest rates.

The findings underscore mounting strain on households grappling with high credit costs and weakened purchasing power.

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Buying conditions remain subdued as the index for major assets, including houses, vehicles and landed property, is well below the neutral 50.0 benchmark, signalling that most respondents see it as a bad time to make large purchases.

It further shows that investment and appliance purchase indices were similarly negative.

Meanwhile, 44.4 per cent of respondents reported that interest rates on bank loans had risen over the preceding three months.

This aligns with a negative Family Financial Situation Index reading of -8.2, reflecting worsening household sentiment.

Taken together, the data point to a cautious consumer base focused on affordability and access to credit rather than aggressive inflation control.

Analysts project 50 basis points cut

Analysts at United Capital Research expect the MPC to initiate cautious easing with a 50 basis points cut in the Monetary Policy Rate (MPR), bringing it to 26.5 per cent.

In a February 20 Monetary Policy Watch report, the firm cited moderating inflation and improving macro indicators as justification for a measured rate reduction. However, the analysts flagged risks from rising liquidity.

Broad money supply (M3) climbed to ₦124.4 trillion in December 2025 from ₦123.0 trillion in November, a 1.2 per cent month-on-month increase and a 10 per cent rise year-on-year.

While the 10 per cent growth exceeds the average quarterly real GDP growth of 3.78 per cent recorded between Q1 and Q3 2025, it remains below the average quarterly nominal GDP growth of 18.55 per cent in 2025.

The firm argued that liquidity conditions are not inherently inflationary if credit is channelled into productive sectors.

“This would help support ongoing economic recovery and stimulate demand ahead of the electioneering season, without significantly undermining price stability,” they stated.

“We expect the MPC to reduce the MPR to 26.5%, adjust the standing facility corridor around the MPR at +0.5%/-5.5%, increase the CRR on Non-Treasury Single Account (TSA) public sector deposits at 85%,” and keep other parameters unchanged.

The proposed mix, modest easing alongside tighter liquidity controls, reflects what analysts describe as a calibrated attempt to balance growth support with inflation management.

Rewane warns against overheating

Not all economists are convinced that aggressive easing would be prudent.

Chief Executive Officer of Financial Derivatives Company Limited, Bismarck Rewane, warned that cutting rates too sharply could trigger macroeconomic instability.

“There are others who are saying that we need to increase the rate of savings in an economy, therefore increase interest rates.
“There are the foreign portfolio investors who like what they do, the carriage trade, and want to see that it is so.

“So, when you blend all of these interests, you come up with what we can call the national interest at this point in time, so that the economy doesn’t go into overheating, and the prices don’t run away,” Rewane said.

He cautioned that inflation could escalate quickly if mismanaged.

“And we’ve seen what happened in Ghana and what has happened in some other countries. So, I think all of these things will be considered, which we call the major considerations. I’m sure that the central bank will do the needful.

“In other words, ensure that the economy doesn’t go into stagflation or hyperinflation, and the currency maintains stability,” Rewane said.

He added that global monetary conditions, including policy trends in the United States, suggest the CBN is unlikely to rush into a decision simply to align with domestic sentiment.

Emerging markets ease, Fed and ECB hold

The CBN’s decision also comes amid diverging global trends as several emerging-market central banks have begun cutting rates in 2026 as inflation pressures ease.

The National Bank of Ukraine trimmed its policy rate to 15 per cent in January, while the Philippines lowered its benchmark rate by 25 basis points in February.

By contrast, advanced economies have remained cautious as the Federal Reserve held its federal funds rate at 3.50–3.75 per cent in January, maintaining a wait-and-see stance.

The European Central Bank has also kept its key policy rates unchanged as euro-area inflation stabilises near the target.

For Nigeria, the outcome of the February MPC meeting will signal whether policymakers believe the balance of risks has shifted decisively toward supporting growth, or whether inflation and liquidity concerns still warrant restraint.