Encouraged by Disinflation, FX Stability, Others, CBN Cuts MPR to 26.5% from 27%

• Cardoso: gross external reserve peaked at 13-year-high of $50.45bn as of February 16, says Executive Order 09 will boost accretion to reserves

•Declares 20 banks have met new capital thresholds with N4.05trn raised

• CBN mops up $190m to tame Naira rally

• NECA, CPPE, Uwaleke hail contractionary monetary policy shift

James Emejo in Abuja, Nume Ekeghe and Dike Onwuamaeze in Lagos

Central Bank of Nigeria (CBN), yesterday, resolved to reduce the Monetary Policy Rate (MPR), the benchmark interest rate, by 50 basis points to 26.5 per cent, from 27 per cent.

CBN, however, retained the Standing Facilities Corridor (SFC) around the MPR at +50/-450 basis points, and left the Cash Reserve Requirement (CRR) for Deposit Money Banks (DMBs), Merchant Banks (MBs), and non-TSA public sector deposits unchanged at 45 per cent, 16 per cent, and 75 per cent, respectively.

MPR is the rate at which the central bank lends to commercial banks, and often determines the cost of borrowing in the economy.

Addressing journalists after the two-day meeting of the Monetary Policy Committee (MPC) in Abuja, CBN Governor, Mr. Olayemi Cardoso, also announced that the country’s gross external reserves rose significantly to $50.45 billion as of February 16, 2026, the highest increase in 13 years. Cardoso added that this offered an import cover of 9.68 months for goods and services.

The CBN governor disclosed that of the 33 banks that raised additional capital in the ongoing recapitalisation exercise, 20 met the new minimum capital requirement, reaffirming steady progress towards a more robust and well-capitalised financial system.

According to him, total verified and approved capital raise stood at N4.05 trillion as of February 19, 2026, out of which N2.90 trillion or 71.67 per cent was mobilised domestically, while $706.84 million (N1.15 trillion), representing 28.33 per cent was mobilised through foreign participation.

The CBN governor stated that the balance represented a mix of domestic and foreign participation and signalled broad investor engagement and confidence in the financial sector.

Cardoso said the committee’s decision to cut interest rate was premised on a balanced evaluation of risks to the inflation outlook, which suggested that the ongoing disinflation trajectory would continue, largely supported by the lagged transmission of previous monetary tightening, sustained exchange rate stability, and enhanced food supply.

CBN’s interest rate cut drew accolades from Nigeria Employers’ Consultative Association (NECA) and Centre for the Promotion of Private Enterprise (CPPE), which commended the decision of MPC.

NECA and CPPE, in separate press statements, also called on the apex bank to provide stronger support for the real economy, urging the federal government to also imbibe fiscal discipline.

Director-General of NECA, Mr. Adewale-Smatt Oyerinde, emphasised that the marginal reduction in the benchmark interest rate represented a cautious but noteworthy signal that monetary authorities were beginning to respond to the sustained pressures facing businesses and the productive sector.

Chief Executive Officer of CPPE, Dr. Muda Yusuf, also commended CBN for its measured and data-driven policy adjustment, saying this policy direction is appropriate and growth-supportive.

Equally reacting to MPC’s decision, professor of Capital Market, Professor Uche Uwaleke, described the MPR cut as “prudent, credibility-building, and consistent with a central bank that wants to consolidate macroeconomic stability”.

Uwaleke said a sustained disinflation will guarantee further interest rate reduction by CBN

He told THISDAY, “I consider the 50-basis point cut as a signal. If disinflation continues for another two to three months and external conditions remain stable, we could see further gradual cuts. But the era of aggressive easing is unlikely unless inflation falls much faster or growth weakens sharply.

“So overall, I would describe the 50-basis point cut as prudent, credibility-building, and consistent with a central bank that wants to consolidate macroeconomic stability.

“It is a transition from tightening mode to calibrated easing mode, and that distinction is very important for market confidence.”

The latest developments came as the apex bank intervened in the foreign exchange market last week, mopping up about $190 million to moderate the rapid appreciation of the naira at the official window.

The local currency had recorded a strong rally in previous sessions but pared gains in the last three trading days, closing weaker on Friday.

A market analyst told THISDAY that the sustained appreciation could have triggered profit-taking by foreign portfolio investors in the fixed-income market, with potential sell-offs expected to heighten dollar demand.

However, in arriving at its policy decision, MPC took into account the sustained deceleration in year-on-year headline inflation in January 2026, marking the 11th consecutive month of decline.

The committee stated that headline inflation (year-on-year) eased to 15.10 per cent in January 2026, from 15.15 per cent in December 2025, reflecting a moderation across both the food and core components.

Food inflation declined markedly to 8.89 per cent, from 10.84 per cent, over the same period, supported by improved domestic food supply, sustained exchange rate stability, and favourable base effect.

Similarly, core inflation declined to 17.72 per cent, from 18.63 per cent, driven largely by moderation in the average prices of Information and Communication services.

Month-on-month, headline inflation declined to -2.88 per cent in January 2026, from 0.54 per cent in the preceding month, indicating a continued softening of price pressures.

The committee said the downward trajectory in inflation was driven mainly by the continued effects of the contractionary monetary policy, stability in the foreign exchange market, robust capital inflows, and improvement in the balance of payments.

It stated that the momentum was further reinforced by relative stability in the prices of petroleum products and improved food supply conditions, especially staples, adding that these outcomes have indicated that prior tightening has continued to anchor expectations.

Cardoso, however, cautioned that while the outlook indicated that the current momentum of domestic disinflation will continue in the near term, increased fiscal releases, including election-related spending, could pose upside risk to the outlook.

MPC particularly highlighted the remarkable performance of the external sector, evidenced by the robust accretion to foreign exchange reserves, supported by higher export earnings and increased remittance inflows. It said this had contributed to greater stability in the foreign exchange market and bolstered investor confidence.

Cardoso, who read the committee’s communique, also welcomed the newly issued Presidential Executive Order 09, which redirected oil and gas revenues into the Federation Account.

He said, “The committee acknowledged the potential impact of this order in improving fiscal revenue and accretion to reserves.

“Given these improved macroeconomic conditions, the committee believed that a moderate easing was consistent with the prevailing inflation dynamics.

“Members acknowledged the continued resilience of the banking sector, with most of the key financial soundness indicators remaining within regulatory thresholds.”

MPC restated the strategic importance of the recapitalisation exercise, and urged CBN to ensure its successful completion, as this would reinforce financial system resilience and enhance the sector’s capacity to support sustainable economic growth.

Cardoso stated that the outlook indicated that the current momentum of domestic disinflation will continue in the near term.

He said, “This is premised on the lagged impact of previous monetary policy tightening, sustained stability in the foreign exchange market, and improved food supply.

“However, increased fiscal releases including election-related spending could pose upside risk to the outlook.

MPC reaffirmed its commitment to an evidence-based policy framework firmly anchored on the central bank’s core mandate of ensuring price stability, while safeguarding the soundness and resilience of the financial system.

Commenting on the reserve’s accretion, Cardoso said, “Now, we will in the fullness of time be saying something in the next few days or so. We’ll be breaking down the net reserves figure to give you a better feel for how that has moved over the past few years.

“We have seen very positive signals with respect to the way the macros are developing. There have been favourable trade developments. The current account is in healthy surplus and, of course, the non-oil exports have also gone up respectively.

“Also, something I talk about all the time, which is the issue of the diaspora remittances, which again is going up very much.

“Of course, with all this, and underpinning all this, quite frankly, is market confidence. Without market confidence, no matter what you do, you will find you will significantly sub-optimise.

Cardoso added, “We, over the period of time, have embarked on a great number of international forums where we have gone out, told our story, we have made promises, ensured that we stuck to those promises and were as transparent as we could in order to engender positive market sentiment and have economic actors believe in the framework in which we were setting out for the future of the foreign exchange system.  So, that all, I believe, has paid off quite well.

“Now, of course, there will always be risks to any outlook. We cannot underestimate the potential global shocks that could come our way. Nobody has a crystal ball. We can only project into the future. But who knows what global tensions there will come in and affect us in a way that we never anticipated. Oil prices, how those oil prices play out, we can only project.”

He also said, “Importantly, of course, is pre-election spending, and that also, if not properly contained, can destabilise the stability we’ve accomplished. And fiscal deficits, we are in a new year, and I know that that is something that is being looked at, very carefully. And from our side, we have got to make sure that we are consistent with our policy formulation and that there are no policy somersaults.”

Oyerinde said the reduction reflected a gradual shift towards supporting economic growth without undermining price stability.

He, however, reiterated that the overall policy stance still remained tight due to the retention of the Cash Reserve Ratio (CRR) at 45 per cent for commercial banks, the maintenance of the liquidity ratio at 30 per cent, and the asymmetric corridor around the MPR.

According to him, with a substantial portion of bank deposits still sterilised, the capacity of financial institutions to expand credit to the real sector may remain constrained in the near term.

Oyerinde stated that the “decision reflects a careful balancing act aimed at moderating inflation while avoiding excessive strain on businesses already grappling with high operating costs, exchange rate volatility, and weakened consumer demand”.

He stressed that for the modest easing in policy rate to have meaningful impact, “it must be complemented by coordinated fiscal and structural reforms that address supply-side constraints, improve infrastructure, and enhance productivity.”

He urged financial institutions to ensure that the slight reduction in the MPR was gradually reflected in lending conditions for manufacturers, SMEs, and other productive enterprises.

Oyerinde affirmed that while MPC had not fully relaxed its tightening stance, the reduction in MPR signalled cautious optimism.

He added that sustained improvements in inflation trends, exchange rate stability, and investor confidence will be critical in determining the scope for further monetary easing that supported growth, investment, and employment generation in the Nigerian economy.

In his own reaction, Chief Executive Officer of CPPE, Dr. Muda Yusuf, commended CBN for its measured and data-driven policy adjustment, saying the policy direction is appropriate and growth-supportive.

Yusuf said, “The easing reflects strengthening macroeconomic performance such as declining inflation, growing reserves, improving trade balance, and enhanced FX stability.”

He, however, said two critical issues must be addressed for the benefits of monetary easing to be fully realised.

The issues, according to him, were strengthening monetary transmission to ensure lower lending rates for the real sector and advancing credible fiscal consolidation to safeguard macroeconomic stability.

“If supported by structural reforms and disciplined fiscal management, the current policy direction could unlock a stronger investment cycle and more durable economic growth,” he said.

Yusuf said the easing was underpinned by notable macroeconomic progress, such as sustained disinflation, improved external reserves, relative exchange-rate stability, which had helped anchor inflation expectations, improving balance of trade position.

He stated, “These indicators collectively signal strengthening macroeconomic resilience. The CBN’s decision demonstrates responsiveness to data and reinforces policy credibility. The CPPE commends the monetary authorities for consolidating stability gains while cautiously pivoting toward growth.”

According to Yusuf, the rate cut would send a positive signal to investors and the business community.

He said, “Given the significant cost pressures businesses have faced over the past two years — energy, logistics, exchange rate volatility, and high interest rates — even modest monetary accommodation provides psychological and financial relief.

“However, the real impact will depend on transmission effectiveness” because the major concern remains the weak transmission mechanism between monetary policy adjustments and actual lending rates in the real economy.”

He said “strengthening policy transmission should be a priority”.

Yusuf stated, “This may require complementary measures to ease liquidity constraints, improve credit-risk frameworks, and reduce distortions in government domestic borrowing patterns. Monetary easing must reach the real economy to deliver meaningful growth outcomes.”

He stated that while monetary policy was moving in the right direction, fiscal vulnerabilities had remained significant, adding, “Without fiscal consolidation, monetary easing could be undermined by continued fiscal pressures and crowding-out effects in the financial system. Policy coordination between fiscal and monetary authorities is therefore essential.”