The Central Bank of Nigeria cut the Monetary Policy Rate by 350 basis points to 23 per cent on September 22, 2026, marking a shift in monetary stance after a period of firm restraint. The decision was described by the CBN as an operational recalibration rather than a change in underlying policy direction.
The effective impact of the cut is more modest than the headline figure suggests. With the banking system holding surplus liquidity, overnight rates had already gravitated towards the floor of the policy corridor. The adjustment to the corridor, from plus 50 and minus 450 basis points to plus 50 and minus 300 basis points, lowered the Standing Deposit Facility from 22 per cent to 20 per cent, a decline of 200 basis points. According to Cordros Research, the overnight rate closed the week to September 25 at 20.77 per cent, showing the market had already moved in that direction.
Real interest rates remain restrictive by historical and regional standards. In August 2025, when the MPR stood at 27.5 per cent against headline inflation of 23.14 per cent according to National Bureau of Statistics data, the backward-looking real rate was about 4.4 percentage points. Today's MPR of 23 per cent sits against headline inflation of 15.39 per cent, yielding a real rate of about 7.6 points. Applied to a standard Taylor rule using a neutral real rate of 2 to 4 per cent and the CBN's signalled 6 to 9 per cent inflation target, the new rate sits within an illustrative range of roughly 17 to 24 per cent, towards the cautious end.
The timing reflects confidence that disinflation is sustainable. NBS data show core inflation moderated for three consecutive months, from 16.82 per cent in May to 13.29 per cent in August, with core prices declining slightly on a monthly basis in August. The CBN's September Inflation Expectations Survey, published after the decision, found that households and firms assessed future inflation considerably less adversely than current inflation, with the expectations index at 25.1 points against 43.1 for perceptions.
Private sector credit remains weak in real terms despite improvement. CBN money and credit statistics show private sector credit rose for a third consecutive month in August to 84.55 trillion naira, but its nominal annual growth of 11.4 per cent remains below headline inflation, meaning credit to the private sector is still contracting in real terms. With real GDP growing by 4.43 per cent, the rate adjustment supports a nascent recovery in lending. The CBN retained the Cash Reserve Requirement at 45 per cent for deposit money banks, sequencing price-based adjustment before potential liquidity normalisation.
For borrowers and businesses, the cut eases debt-service burdens and may gradually lower lending rates as banks adjust their pricing, though the full transmission will depend on their funding structures and risk assessments. Savers face lower returns on deposits as the adjustment filters through the system.