The Central Bank of Nigeria has cut its benchmark interest rate by 50 basis points to 26.5%, citing easing inflation, improved foreign exchange stability and stronger external reserves, while warning that fiscal pressures could still threaten the outlook.
The decision was announced after the Monetary Policy Committee’s 304th meeting on Feb. 24, 2026, in Abuja. The committee left other key parameters unchanged, retaining the standing facilities corridor at +50 and -450 basis points around the Monetary Policy Rate and keeping the Cash Reserve Requirement for deposit money banks at 45%.
Governor Olayemi Cardoso said the rate cut reflects a gradual decline in inflation but does not signal an end to inflation risks.
“Caution is our watchword in the Central Bank,” Cardoso said at a news briefing after the meeting.
Nigeria’s headline inflation eased to 15.10% in January 2026, down slightly from 15.15% in December 2025, according to data from the National Bureau of Statistics. The central bank said this marked the 11th consecutive month of year-on-year disinflation and the lowest level since November 2020.
Food inflation dropped to 8.89% in January from 10.84% in December, while core inflation slowed to 17.72% from 18.63%, driven partly by moderating prices in communication services. On a monthly basis, inflation fell to negative 2.88%, indicating a short-term decline in prices.
The central bank attributed the disinflation trend to earlier monetary tightening, exchange rate stability, improved food supply and stronger capital inflows.
The committee also highlighted gains in Nigeria’s external position. Gross foreign reserves rose to $50.45 billion by mid-February 2026, supported by higher export earnings, increased remittances and a current account surplus.
Cardoso said improved transparency and policy consistency have boosted investor confidence and helped stabilize the foreign exchange market.
However, the bank warned that risks remain, particularly from increased government spending, including election-related outlays, which could reverse inflation gains.
“If fiscal expansion accelerates, it could increase liquidity and weaken the disinflation trend,” the bank said.
The central bank also pointed to progress in the banking sector, noting that most lenders have met or are close to meeting new capital requirements ahead of a March 2026 deadline. Banks have raised about 4.05 trillion naira ($2.6 billion) in fresh capital, with roughly 72% sourced domestically and the rest from foreign investors.
Cardoso said the financial system remains stable and resilient, with depositor funds in supervised institutions secure. He added that regulators are strengthening oversight of Nigeria’s growing fintech sector, which includes more than 430 licensed operators, and are developing a framework for digital assets.
Finance Minister Wale Edun welcomed the rate cut, describing it as a sign of improving economic conditions and stronger coordination between fiscal and monetary authorities.
He said the move could support investment, improve access to credit and boost job creation, though analysts cautioned that high reserve requirements and structural constraints may limit the immediate impact on lending rates.
The central bank said it expects disinflation to continue in the near term but reiterated its commitment to a cautious, data-driven approach to policy as it balances price stability with economic growth.
