MediumIV Macro Policy & Sovereign Debt22 September 2026, Tuesday
Central Bank of Nigeria cuts its policy rate by 350 basis points to 23% and narrows the rate corridor to +50/−300 basis points
At its 307th Monetary Policy Committee meeting on 21–22 September, the Central Bank of Nigeria (CBN) cut the policy rate from 26.5% to 23%. Cash reserve ratios were held at 45% and 16%. The decision followed a fall in inflation to 15.39% in August.
According to reports by P.M. News and West African Pilot dated 22 September, the decision announced by Governor Olayemi Cardoso lowered the policy rate by 350 basis points to 23%; West African Pilot wrote that this is the lowest level since February 2024, that the rate stood at 27.5% at the start of 2026 and that a 50 basis point cut was made in February. The committee set the rate corridor at +50/−300 basis points around the policy rate; according to the Tribune, this brings the rate at which banks borrow from the CBN to about 23.5% and the rate on deposits at the CBN to about 20%. The cash reserve ratio was kept at 45% for deposit money banks, 16% for merchant banks and 75% for public sector deposits outside the Treasury Single Account. The Tribune dated the decision 23 September while other sources give 22 September; the meeting was held on 21–22 September.
According to BusinessDay, headline inflation fell to 15.39% in August (July 15.43%, June 15.91%); core inflation eased from 14.97% to 13.29% and monthly inflation from 1.57% to 0.71%, while food inflation stood at 19.57% year on year. On this picture, the gap between the new policy rate and headline inflation is about 7.6 points. In the August Inflation Expectations Survey cited by West African Pilot, 60.9% of respondents expected a cut, 27.4% a hold and 11.7% a hike. The vote split and figures on the committee's assessment of reserves and the exchange rate did not appear in the sources reviewed.
Talay assessment
Bottom line
The 350 basis point cut shows the CBN treating the three-month fall in inflation as lasting and wanting to open up the credit channel. Because the 45% cash reserve ratio has been retained, banks' lending capacity will remain limited; pass-through of the cut to the real economy may be slow. The main risk is a renewed acceleration driven by rising oil prices and food inflation (19.57%).
Likely effects
- Cost of creditPositive1–6 months
The fall in the policy rate and the corridor lowers banks' funding costs; but because the 45% cash reserve ratio restricts free liquidity, pass-through to lending rates may remain partial.
- Naira and portfolio flowsNegativeWeeks
The narrowing of the real rate differential to about 7.6 points may reduce the appetite of foreign portfolio investors drawn by high yields and put pressure on the naira.
- Emerging-market readingUncertain1–6 months
For high-inflation emerging economies such as Türkiye, the Nigerian case offers a reference point for tracking the currency and portfolio costs of large cuts made before disinflation is entrenched.
Possibilities, ranked
- 1Gradual easing continues55%
Inflation keeps falling and the CBN continues cutting in smaller steps at the next meeting, or holds.
Watch: September inflation coming in below 15.39%
- 2Pause in easing30%
Oil and food prices push inflation back up and the CBN holds the rate at 23%.
Watch: Monthly inflation rising above 0.71%
- 3Reversal under currency pressure15%
Portfolio outflows weaken the naira and the CBN compensates by tightening the corridor or the reserve ratio.
Watch: A rapid fall in the official naira rate and extraordinary CBN intervention
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Nigeria policy rate▲ 23% (−350 bp)
- Nigeria August CPI▲ 15.39%