CBN Reduces Interest Rate by 50 Basis Points to 26.50%

By Adedapo Adesanya

The Central Bank of Nigeria (CBN) has cut the interest rate by 50 basis points to 26.50 per cent from 27 per cent.

Nigeria’s apex bank announced this during its two-day 304th Monetary Policy Committee (MPC) meeting, which concluded on Tuesday in Abuja.

This comes after the country’s interest rate cooled in January to 15.10 per cent from 15.15 per cent, according to the National Bureau of Statistics (NBS), strengthening the case for a reduction.

The CBN Governor, Mr Yemi Cardoso, said all members of the MPC unanimously agreed upon the decision.

“The committee decided to reduce the monetary policy rate by 50 basis points to 26.50 per cent,” he said.

Mr Cardoso stated that the liquidity ratio was maintained at 30 per cent, and the standing facilities corridor was adjusted to +50 to -450 basis points around the monetary policy rate.

He said the committee retained the Cash Reserve Ratio (CRR) at 45 per cent for commercial banks and 16 per cent for merchant banks, while the 75 per cent CRR on non-TSA public sector deposits was equally maintained.

The CBN uses the MPR, which works as the benchmark interest rate, to manage inflation, macroeconomic stability, and liquidity.

Last November, the MPC retained the Monetary Policy Rate (MPR) at 27.00 per cent. The last time the apex bank cut interest rates was in September last year, to 27 per cent from 27.50 per cent after a series of easing in inflation.

Market analysts had argued for higher interest cuts due to results seen in the CBN’s inflation targeting framework. Meanwhile, some say the 50 basis points reduction will offer a temporary reprieve as inflation heads for a single-digit target in the coming months.