CBN slashes benchmark rate by 350bps to 23%, surprising markets
CBN Governor Olayemi Cardoso announced a 350 basis point cut to the Monetary Policy Rate, lowering it from 26.5% to 23% at the end of the 307th MPC meeting on Tuesday. This marks the first major rate reduction in nearly two decades and came despite expectations that rates would stay unchanged.
Analysts welcomed the move as a potential boost for businesses and economic activity, especially for SMEs and retailers facing high borrowing costs. However, they cautioned that lower rates could dampen foreign exchange inflows and affect investor sentiment, noting existing disconnects between the MPR and market rates like overnight lending (~19%) and OMO rates (~22%).
The cut aligns with declining inflation, which fell to 15.39% in August 2026 according to NBS, down from 23.14% a year earlier. The CBN described the move as a "reset" of its policy framework rather than a conventional cut.
Will businesses access cheaper credit quickly enough to spur investment, or will the FX risks outweigh the growth benefits?