Nigeria’s Central Bank Resets Policy Rate to 23%, but Warns Tight Conditions Will Persist

Nigeria’s central bank has lowered its monetary policy rate from 26.5% to 23%, a substantial 350-basis-point move that Governor Olayemi Cardoso insists should be read as a reset of the policy signal rather than a declaration that tight money is over.

The Monetary Policy Committee announced the decision at the end of its 307th meeting in Abuja on Tuesday. The Central Bank of Nigeria identifies the meeting and governor’s briefing; Punch reported the detailed decision and Cardoso’s remarks.

The committee narrowed its standing facilities corridor to 50 basis points above and 300 below the benchmark. It kept the cash reserve requirement at 45% for deposit money banks, 16% for merchant banks and 75% for non-Treasury Single Account public-sector deposits. Those reserve settings indicate that banks are still operating under significant liquidity constraints.

Why a lower rate may not mean cheap credit

Cardoso said the gap between the headline policy rate and actual interbank rates had grown too wide, weakening the benchmark as a guide to market borrowing costs. He described the decision as a recalibration intended to restore the rate’s signalling role. Businesses and households should therefore avoid assuming bank lending rates will immediately fall by 3.5 percentage points.

The committee had held the benchmark at 26.5% in May and July following a smaller February reduction. August headline inflation was reported at 15.39%, down slightly from 15.43% in July; food inflation remained much higher at 19.57%. Inflation slowing is welcome, but prices rising more slowly are still rising.

Cardoso pointed to stronger foreign-exchange conditions and external reserves of $55.25 billion as of 18 September. He also warned that Middle East tensions and election-related spending could revive inflation pressure. The policy debate now turns to transmission: whether the new benchmark moves interbank conditions and, eventually, the price of credit in the real economy without reigniting inflation or pressure on the naira.

The next MPC decision and incoming inflation data will show whether this was a one-off adjustment or the beginning of a sustained change in rates. For now, the governor’s message is explicit: the numerical cut should not be mistaken for an unrestricted easing of financial conditions.

Featured photograph: Curiousreader1000 / Wikimedia Commons, CC BY-SA 4.0. Archive portrait from 2019; it does not show the September 2026 policy meeting. Original file; site display may crop the preview.