By Dayo Omoogun
The resolutions of the Central Bank of Nigeria at its Monetary Policy Committee Meeting of Tuesday February 24, 2026 marks a clear shift in strategy compared to what had obtained for some time now. The Committee chose the path of growth departing from just stabilisation as it lowered the Monetary Policy Rate by 50-basis-points from 27.0% to 26.5%.
Since the constitution of the current Committee, yesterday’s was one of the few instances when the full complement of 12 members were not in attendance as one member was unavoidably absent. For very discerning observer this is a critical measure of the importance the members attach to the assignment. There is no downplaying the fact that commitment is critical to achievement of purpose and this Committee scores high on this parameter.
Other key decisions taken by the Committee is to Retain the Standing Facilities Corridor around at +50/-450 basis points, retain the Cash Reserve Requirement (CRR) for Deposit Money Banks at 45.00 per
cent, Merchant Banks at 16.00 per cent, and 75.00 per cent for non-TSA public sector
deposits.
The current stance of the Committee indicates a preference for a measured approach of the growth pathway as opposed to an aggressive run. As usual many analysts are divided on this- some, for instance, are of the view that this is the right time for the Monetary Policy Committee (MPC) to cut down the MPR by 100 bps to 26.00 per cent. The point remains though that this Committee is one that has shown consistency in maintaining guarded stances and is not given to rocking the boat to gain public validation. The message is clear – though we are confident we refuse to be complacent.
Explaining the rationale for the decisions, the Governor of the Central Bank, Dr Yemi Cardoso, said, it was “premised on a balanced evaluation of risks to the outlook, which suggests 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.”
Indeed there is no gainsaying the fact that
headline inflation has now declined for 11 consecutive months, dropping to 15.1% in February, the lowest level since early 2024. From all indications, it is the major plank that supports the cut. This trajectory is expected to continue and it is commendable evidence of the Committee’s good judgement thus far.
Nigeria’s gross external reserves rose to $50.45 billion (as of Feb 16), the highest in 13 years, providing a comfortable hedge against slipping of the Naira. It is definitely an important factor in reaching this decision to cut the MPR.
Also, the committee believes that the aggressive tightening from 2024 and 2025 has finally permeated the system, allowing for a breather.
By cutting the rate, the CBN is signaling that it is time to bring down interest rates. They believe the lagged effects of previous hikes are kicking in..
The widened asymmetric corridor of +50/-450 basis points is an enabler for lending. By significantly lowering the rate at which the CBN pays banks for their “idle” deposits (the lower bound), the CBN is making it less attractive for banks to keep money with the apex bank.
The essence is to motivate banks to engage with the private sector for better returns, potentially increasing credit flow to businesses. In addition to this, borrowing costs are expected to dip. The only snag here is that banks are often slower to cut lending rates than they are to raise them. On the whole however, this is surely good news for all borrowers but it should make a hit with the real sector.
More specifically, for Investors with fixed-income yields such as Treasury bills and Bonds, returns may likely face gradual decline. It might be advisable to lock in long-term rates to preempt unfavourable returns in case more cuts occur within the year.
For consumers,there shouldn’t be anything to worry about as the Naira is expected to remain relatively stable in the short term because the rate cut was modest enough not to trigger a massive flight of capital.
The future may deliver a mixed bag of realities. The cutting of rates is a demonstration of the apex bank’s belief that the, “inflation monster” has been restrained, if not fully caged. What will naturally follow is a psychological shift in the market, meaning that businesses that were previously hoarding cash due to high costs may start opting for expansion again.
The cut is designed to lower borrowing costs. so we expect to see more “growth-oriented” credit flowing into the real sector in the coming months; specifically infrastructure, agriculture, and energy.
Despite the rate cut, the MPC kept the Cash Reserve Ratio (CRR) high at 45%. It is a reflection of the bank’s consciousness to not cross from confidence to complacency
The CBN is making sure that there is no relapse into the unsavoury era of inflation. It will not be surprising there if for the rest of 2026, there is a resort to tightening of liquidity for banks. Indeed, it may not be out of place.
With the huge external reserves of over 50 billion dollars which translates to nearly 10 months of import cover, the Naira’s exposure to volatility is greatly minimised. For businesses, this means being able to plan long-term imports without fearing a sudden currency crash.
There are concerns that as the nation prepares for another general elections more government spending may trigger a lot of liquidity in the system. Coupled with the effect of this lowering of rates, analysts worry that an unhealthy level of liquidity may ensure in the next few months to one year.
The MPC deserves their flowers for effectively taming the inflation monster. We must not forget so soon that inflation was over 30 percent in our recent history.