CBN’s MPR cut to 23% sparks mixed reactions from experts

The Central Bank of Nigeria’s decision to reduce the Monetary Policy Rate, MPR, by 350 basis points from 26.5 per cent to 23 per cent has generated mixed reactions among economists, business operators and capital market stakeholders.

CBN Governor, Olayemi Cardoso, announced the decision after the 307th meeting of the Monetary Policy Committee, MPC, in Abuja, saying the adjustment was aimed at resetting the rate in line with prevailing financial market realities.

While some experts described the move as timely and beneficial to the real sector and capital market, others argued that the new rate remained too high to significantly ease the burden on businesses.

The National President of the National Council of Managing Directors of Licensed Customs Agents, NCMDLCA, Lucky Amiwero, said the reduction was insufficient to stimulate businesses and economic activities.

In contrast, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, CPPE, Dr Muda Yusuf, described the 350-basis-point reduction as “a timely reset and a major relief for the real sector.”

The President of the Chartered Institute of Stockbrokers, CIS, Fiona Ahimie, said the reduction to 23 per cent represented a significant development for the capital market and could usher in a new phase of asset repricing.

Professor Uche Uwaleke, President of the Capital Market Academics of Nigeria, said the MPC decision was justified by several improvements in the economy.

“The MPC decision to cut the MPR by 350 basis points is justified by moderating inflation, exchange rate stability, improvement in FX market liquidity, and accretion to external reserves,” he said.

“It is a welcome development, against the backdrop of the recently signed MoU between the Minister of Finance and the CBN governor on fiscal and monetary policies collaboration.”

CBN explains rate adjustment

According to Cardoso, the MPC resolved to “recalibrate the standing facilities’ corridor to +50/-300 basis points around the MPR; retain the Cash Reserves Requirement, CRR, for Deposit Money Banks at 45 per cent, Merchant Banks at 16 per cent and Non-TSA public sector deposits at 75 percent.”

He explained that the MPR reset and recalibration of the policy corridor amounted to “an important operational realignment aimed at strengthening monetary policy transmission and forcing the primacy of the monetary rate.”

The governor insisted that the adjustment did not amount to a shift in the CBN’s monetary policy stance.

He said the new framework was intended to improve the effectiveness of monetary policy operations and support Nigeria’s transition towards an inflation-targeting framework.

Cardoso said: “Members (of MPC) are of the view that the current macroeconomic environment remains supportive of such a recalibration without undermining the disinflation process.

“In arriving at this decision, the committee noted that the observed divergence between the MPR and the prevailing market rates had weakened the effectiveness of monetary policy transmission.

“Members noted that the bank’s ongoing repair of the monetary policy implementation framework, including the adoption of NOFA as a transaction-based operational benchmark, has improved the transparency of money market operations.

“The committee, therefore, considered a reset of the MPR and recalibration of the corridor appropriate to better align the monetary policy implementation framework with market realities.

“This would strengthen policy transmission and restore the MPR as a principal signal of monetary policy. Members emphasized that the recalibration represents an operational realignment of the framework and should not in itself be construed as a change in the underlying policy stance.”

Cardoso said the stability recorded in the market provided an appropriate opportunity for the CBN to make the adjustment.

“We are in a position of stability. The tightening we have done in the past has worked. FX pressure has receded. Capital market growth is because of the FX market stability. Investor confidence has come back. We have nothing to fear. This is a reset and a recalibration. No better time to do it than now when things are stable,” he said.

He added that previous tightening measures had strengthened the resilience of the Nigerian economy, citing moderating inflation, stronger external reserve buffers, improved external-sector fundamentals and increased investor confidence.

“Members observed that the moderation in inflation indicated the effectiveness of previous policy tightening measures, sustained exchange rate stability and improved inflation expectations,” he stated.

Reserves rise to $55.25bn

The CBN governor disclosed that Nigeria’s Gross External Reserves stood at $55.25 billion as of September 18, 2026.

According to him, the figure represents the highest level recorded in 18 years and is enough to finance approximately 11.3 months of imports of goods and services.

Cardoso, who marked his third year as CBN governor yesterday, also highlighted the bank’s reforms, particularly those aimed at stabilising the exchange rate through the unification policy.

He recalled that before his assumption of office, the country was spending about two per cent of GDP on fuel subsidy, while exchange subsidy had risen to as much as three per cent of GDP.

He argued that the economy could not sustain a combined subsidy burden of five per cent of GDP, saying the reforms undertaken by his administration helped avert a major economic crisis.

CPPE welcomes reduction

Yusuf described the rate cut as a timely response to changing economic conditions.

“The adjustment is timely, given the improving inflation trajectory and the growing costs of an excessively restrictive monetary environment,” he said.

He noted that the previous MPR of 26.5 per cent had become increasingly misaligned with inflation of about 15.4 per cent and prevailing money-market rates of around 20 per cent.

“There had also been a widening misalignment between the MPR of 26.5%, inflation of about 15.4%, and prevailing money-market rates of around 20%. This weakened the signalling function of the policy rate and raised concerns about the effectiveness of monetary policy transmission.

“The reduction of the MPR to 23% should, therefore, be viewed not merely as monetary easing, but as an important realignment of the policy rate with prevailing macroeconomic and financial-market conditions.”

Yusuf said the decision could particularly benefit the real sector, where expensive credit had constrained investment, production, working capital and employment.

“For many businesses, commercial lending rates have remained at levels that are difficult to reconcile with productive investment, particularly in manufacturing, agriculture, construction, logistics and other sectors with relatively long investment cycles and tight margins.

“The policy adjustment, therefore, offers an opportunity to reduce the cost of capital, improve business cash flows, stimulate investment and strengthen the productive capacity of the economy,” he stated.

He, however, warned that the outcome would ultimately depend on how effectively the rate reduction is transmitted to businesses and the wider economy.

Amiwero says rate remains too high

Amiwero took a different position, arguing that the 23 per cent rate was still too high to provide substantial relief to businesses.

“It is still high. When you look at the economy, they have removed subsidies and they have removed the floating currency. What is the bargaining power of anybody today? We go to the Central Bank; we go to any bank to borrow money. You cannot survive,” he said.

He maintained that borrowing costs remained a major obstacle to businesses and that the new policy rate would continue to limit access to credit.

Amiwero also pointed to poor infrastructure, including inadequate electricity and roads, as additional factors driving up business costs.

“How do you run your business when there is no light and no good roads?” he queried.

He urged the government and the CBN to take further measures to ensure that businesses could obtain affordable credit and compete effectively.

He also raised concerns about exchange-rate policies and their impact on businesses involved in international trade.

CIS sees capital market implications

Ahimie said the reduction in the MPR would have immediate implications for the fixed-income market as investors adjusted to the prospect of lower interest rates.

She said government-security yields could moderate, particularly on the shorter end of the yield curve.

“The more interesting implication, however, is the potential shift in investor allocation. With returns on Treasury bills and other short-term instruments gradually reducing, investors may begin to look further along the risk spectrum for returns. This could support demand for longer dated bonds and equities, particularly companies with strong earnings visibility and the capacity to benefit from lower financing costs,” she said.

She added that lower rates could support the equities market by improving the valuation of future corporate cash flows while reducing financing costs and supporting credit growth.

However, she said the effect would differ across sectors.

“The banking sector, for instance, could face a mixed outcome. Lower lending rates could stimulate loan growth and economic activity, but faster repricing of loans than deposits could put pressure on banks’ net interest margins.

“The eventual effect on earnings will depend heavily on the pace of balance-sheet repricing and the response of credit demand.”

Ahimie also highlighted the foreign portfolio investor dimension, saying lower domestic yields could reduce the relative attraction of naira-denominated fixed-income investments.

“However, the impact on foreign flows will depend not only on interest rates but also on exchange-rate stability, inflation, external reserves and investors’ assessment of Nigeria’s broader macroeconomic outlook which has been great so far,” she said.

Jeremiah describes cut as aggressive response

The Chief Investment Officer of VNL Capital Asset Management, Dr Ubah Jeremiah, described the 350-basis-point reduction as an indication of what he termed an aggressive attack on economic misery.

“This is a genuine surprise. Consensus was positioned for a cautious 50–100bps cut, so a 350bps reduction to 23.00% is a strong signal that the CBN is reading the domestic macro picture inflation trajectory, naira stability, and reserve accretion with more confidence than the market priced in. This can be seen as the CBN’s aggressive attack on Nigeria’s economic misery,” he said.

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