Financial and economic experts have welcomed the Central Bank of Nigeria’s (CBN) decision to reduce its benchmark interest rate from 26.5 per cent to 23 per cent, although several described the 350-basis-point adjustment as unexpected.
CBN Governor Olayemi Cardoso announced the decision on Tuesday after the 307th Monetary Policy Committee (MPC) meeting in Abuja. The move represents a major shift from the prolonged monetary tightening cycle and comes amid a sustained moderation in inflation.
The MPC also recalibrated the Standing Facilities Corridor while retaining existing Cash Reserve Requirement levels for Deposit Money Banks, Merchant Banks and non-TSA public-sector deposits.
The CBN said three consecutive months of declining headline inflation, improved inflation expectations and relative exchange-rate stability provided room for the policy adjustment.
Nigeria’s headline inflation stood at 15.39 per cent in August 2026, according to the National Bureau of Statistics (NBS), down from 15.43 per cent in July.
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Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, said the decision could reflect an attempt by the CBN to address inconsistencies in its monetary policy framework.
He noted that the gap between the 26.5 per cent MPR and 15.39 per cent inflation rate had become difficult to justify, particularly when overnight lending rates were around 19 per cent and Open Market Operations rates about 22 per cent.
“Maybe the CBN too has realised that there are quite a number of disconnects in its policy architecture,” Yusuf said.
He said the CBN’s use of the term “reset” rather than simply “cut” could indicate a broader adjustment to the framework used to determine monetary conditions.
Yusuf said lower interest rates could provide relief for small businesses and retailers by reducing financing costs. However, he cautioned that cheaper domestic yields could also affect portfolio investment flows and foreign-exchange liquidity.
For Jerry Igwilo, Chief Executive Officer of Nisela Capital, the reduction reflects the declining inflation trend and could provide businesses with much-needed financing relief.
“I think the inflation rate has consistently been dropping. So, that will allow them to give our people a little bit of relief,” he said.
Igwilo added that reducing borrowing costs would be important to efforts to expand economic output and support the Federal Government’s ambition of building a $1 trillion economy.
He also suggested that strong demand for recent government bond issuances may have given policymakers confidence that investors would remain active despite lower yields.
Meanwhile, Olubunmi Ayokunle, Head of Financial Institutions Ratings at Augusto & Co, said he was surprised by the scale of the reduction and was still assessing its broader implications.
The rate reset marks a significant change after an extended period of monetary tightening. While analysts expect lower rates to support credit and economic activity, they also caution that the CBN will have to balance growth objectives with inflation control, exchange-rate stability and the need to sustain foreign investment inflows.