CBN Cuts Benchmark Rate to 23% in Surprise 350bps Move
By Aboki Forex —
The Central Bank of Nigeria on Tuesday, September 22, lowered its benchmark lending rate by 350 basis points to 23%. The cut surprised analysts, as all seven economists polled had expected the Monetary Policy Committee to leave the rate unchanged at 26.5% for the third straight policy meeting.
Governor Olayemi Cardoso said the reduction was “an operational reset to enhance the effectiveness of monetary policy and support the transition to an inflation-targeting framework”.
Why the CBN cut
Cardoso told a press conference that the MPC noted market rates had diverged from the benchmark lending rate, making policy less effective. He said the move was aimed at strengthening monetary policy transmission.
“Members observed that the moderation in inflation indicated the effectiveness of previous policy tightening measures, sustained exchange rate stability and improved inflation expectations,” Cardoso said.
Headline inflation in Africa’s most populous nation has eased slightly since the last policy meeting in July. But the central bank faces risks that the trend may soon stall because domestic fuel prices have surged to record highs.
Analysts expected caution
Analysts had thought the CBN would choose a cautious approach, given risks from fuel and food prices. Instead, the MPC opted for a surprise cut at a time when cost-of-living pressures remain a major concern.
Nigeria holds a general election in January. Cost-of-living pressures are expected to be high on the agenda as President Bola Tinubu seeks re-election.
What it means
The rate cut could signal a shift in the CBN’s policy stance as it tries to make its benchmark rate more relevant to market rates. For businesses and consumers, the key question is whether lower rates will feed through to borrowing costs while inflation risks from fuel and food prices remain.
The CBN said previous tightening supported exchange rate stability and improved inflation expectations. The cut now tests whether market rates will align with the benchmark rate while fuel and food price risks remain.