Nigeria’s central bank has lowered the Monetary Policy Rate (MPR) to 23 per cent from 26.5 per cent following the latest meeting of the Monetary Policy Committee.
The CBN Governor, Olayemi Cardoso, disclosed the decision on Tuesday in Abuja after the conclusion of the MPC’s 307th meeting.
The reduction amounts to 3.5 percentage points, or 350 basis points, making it a major adjustment to the benchmark rate.
MPC Approves New 23% Rate
The committee reviewed developments affecting Nigeria’s domestic economy and the wider global economic environment before approving the new rate.
Cardoso said the MPC also assessed emerging risks and their potential impact on the country’s economic outlook.
The governor announced that the committee had decided to reset the MPR at 23 per cent.
The decision came after the MPC maintained the benchmark rate at its two previous meetings.
New Policy Corridor
Alongside the MPR reduction, the CBN adjusted the standing facility corridor to +50/-300 basis points around the 23 per cent benchmark.
The CRR for deposit money banks remains at 45 per cent, while merchant banks will continue to operate with a 16 per cent requirement.
The requirement for non-TSA public-sector deposits remains at 75 per cent.
CBN: Adjustment Supports Policy Transmission
According to Cardoso, the changes are intended to make monetary policy implementation more effective.
He said the MPC viewed the move as an operational realignment rather than a fundamental shift in the underlying policy stance.
The CBN governor said the adjustment would help strengthen the transmission of monetary policy and support the country’s move towards an inflation-targeting framework.
The CBN has previously described inflation targeting as a framework in which monetary policy tools, including interest rates, are used to influence inflation towards an established target.
Why the CBN Adjusted the Framework
Cardoso said the committee considered the prevailing macroeconomic environment supportive of the recalibration.
He added that members had also reviewed the CBN’s continuing efforts to improve the monetary policy implementation framework.
The governor said transaction-based operational benchmarks have helped improve transparency in money-market operations.
He said the new arrangement would bring the monetary policy framework closer to current market realities.
Impact on Businesses and Borrowers
The reduction in the benchmark rate may eventually influence lending conditions, although the effect on individual borrowers will depend on how financial institutions adjust their own rates.
Changes in the MPR can also affect money-market rates and the broader cost of credit.
For businesses, investors and consumers, the impact will therefore depend on how quickly the lower benchmark rate is transmitted through the banking and financial system.
