CBN Slashes Interest Rate to 23% in Biggest Cut of This Cycle

The Central Bank of Nigeria has cut the benchmark interest rate by 350 basis points to 23 per cent from 26.5 per cent. It is the biggest rate adjustment in the current monetary policy cycle.

Governor Olayemi Cardoso announced the decision on Tuesday at the end of the Monetary Policy Committee's 307th meeting in Abuja. He said easing inflation and improved foreign exchange conditions gave the committee room to move.

"The Committee decided as follows: reset the monetary policy rate at 23 per cent," Cardoso said.

Other Decisions From the Meeting

The committee recalibrated the standing facilities corridor to +50 and -300 basis points around the MPR.

It left the Cash Reserve Requirement unchanged. Deposit money banks stay at 45 per cent, merchant banks at 16 per cent, and non-Treasury Single Account public sector deposits at 75 per cent.

The MPC also said it would contain liquidity pressures linked to the election period, keeping a close watch on how money supply moves through the system.

Why the Committee Moved

The cut follows a slowdown in inflation and better conditions in the foreign exchange market. Those two factors, according to the committee, created the space for a looser stance after a long stretch of tight policy.

The 350 basis point reduction is the sharpest single adjustment in the present cycle, which makes it a signal rather than a small tweak. The central bank is still holding a firm grip on cash reserves and the corridor around the MPR, so the easing comes with buffers attached.

What It Means for Borrowers and Businesses

Banks price loans off the MPR. A lower rate should, in time, pull down the cost of credit for businesses and consumers, though the spread between the policy rate and what lenders actually charge has remained wide.

For the naira, the direction of travel matters. Rate cuts normally narrow the gap between naira and foreign currency returns, but the committee tied this move to a steadier exchange rate, which suggests it is not treating the currency as a free pass to ease further.

Fixed income investors should expect yields on Treasury bills and bonds to adjust to the new corridor. The next MPC meeting will show whether the committee sees room for another cut or pauses to watch how the liquidity picture develops.