The Central Bank of Nigeria (CBN) has reset its benchmark interest rate to 23 per cent as part of an operational overhaul aimed at strengthening the transmission of monetary policy to the economy.
CBN Governor Olayemi Cardoso announced the decision on Tuesday after the two-day Monetary Policy Committee (MPC) meeting.
He said the reset was necessary because the gap between the Monetary Policy Rate (MPR) and prevailing market rates had weakened the effectiveness of the central bank’s policy signals.
The MPR is the benchmark interest rate used by the CBN to influence borrowing and lending rates across the economy.
A basis point is one-hundredth of a percentage point, meaning the new 23 per cent rate represents a 350-basis-point reduction from the previous 26.5 per cent.
However, Cardoso stressed that the adjustment should not be interpreted as a change in the CBN’s monetary policy stance.
“The committee emphasised that the recalibration of the corridor does not constitute a change in the current monetary policy stance, but rather an operational reset to enhance the effectiveness of monetary policy and support the transition to an inflation targeting framework,” he said.
The MPC also reset the standing facilities corridor to +15/-300 basis points around the MPR.
The corridor determines the range within which the CBN’s lending and deposit facilities operate around the benchmark rate.
READ ALSO:
- Five Key Issues Cardoso Addressed After July MPC Decision
- Businesses Still Face Costly Credit Despite CBN’s Inflation Gains
- Access Bank Repays $500m Eurobond From Own FX Liquidity
- CBN Rate Hold: Nigerians Face Prolonged High Borrowing Costs – Experts Warn
Targets stronger link between policy and market rates
Cardoso said the MPC observed that the divergence between the MPR and prevailing market rates had weakened monetary policy transmission, which refers to the process through which CBN decisions influence money-market rates, bank lending and, ultimately, economic activity and inflation.
He said the CBN’s ongoing reforms to its monetary policy implementation framework, including the adoption of the Nigerian Overnight Financing Average (NOFA) as a transaction-based operational benchmark, had improved transparency in money-market operations.
The MPC therefore considered the reset of the MPR and recalibration of the policy corridor necessary to bring the framework closer to actual market conditions and strengthen the role of the MPR as the main signal of monetary policy.
The committee retained the Cash Reserve Requirement (CRR) 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.
CRR is the proportion of deposits banks are required to keep with the CBN instead of lending out.
The decision came against the backdrop of improving economic indicators, including slower inflation, stronger external reserves and higher economic growth.
Headline inflation fell to 15.39 per cent in August from 15.43 per cent in July, while food inflation declined to 19.57 per cent from 20.31 per cent. Core inflation, which excludes some volatile items, also moderated to 13.92 per cent from 14.97 per cent.
Month-on-month headline inflation slowed to 0.71 per cent in August from 1.57 per cent in July, indicating a slower pace of price increases during the month.
The MPC said the continued decline in inflation, sustained exchange-rate stability and improved inflation expectations showed that previous monetary policy measures were beginning to have an effect.
The committee also pointed to stronger external-sector conditions, as Nigeria recorded a balance of payments surplus of $3.51 billion in the second quarter of 2026, compared with $2.38 billion in the first quarter, while the current account surplus rose by 67.92 per cent to $7.54 billion from $4.49 billion.
Gross external reserves stood at $55.25 billion as of September 18, enough to finance about 11.3 months of imports of goods and services, according to the governor.
Real Gross Domestic Product (GDP), which measures the total value of goods and services produced in the economy, grew by 4.43 per cent in the second quarter, up from 3.89 per cent in the first quarter.
The CBN also said the banking sector had become stronger following the recapitalisation programme, with higher capital buffers expected to improve banks’ resilience and capacity to finance long-term projects.
The MPC said these developments created sufficient room for the operational reset of the monetary policy framework while maintaining its focus on achieving lower and more stable inflation.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X