The Central Bank of Nigeria (CBN) has reaffirmed its commitment to bringing inflation down to single digits, with Governor Olayemi Cardoso warning that the recent reduction in the benchmark interest rate should not be interpreted as an abandonment of the bank’s price-stability objective.
Cardoso said the decision to reduce the Monetary Policy Rate (MPR) from 26.5 per cent to 23 per cent was aimed at correcting a disconnect between the benchmark rate and prevailing market interest rates.
He made the remarks during an investor engagement on the sidelines of the 2026 International Monetary Fund (IMF) and World Bank annual meetings in Bangkok, Thailand.
The CBN’s latest adjustment represents a reduction of 350 basis points. However, Cardoso said the move was driven by the need to improve the effectiveness of monetary policy transmission rather than introduce a conventional shift towards easier monetary conditions.
Why the CBN adjusted the rate
According to the governor, market interest rates had fallen below the MPR, weakening the benchmark’s ability to guide financial-market conditions.
Under normal circumstances, changes in a central bank’s policy rate are expected to influence the cost of borrowing and the returns available on savings and investments. When market rates move out of line with the benchmark, that relationship can become less effective.
Cardoso said improved performance in the money market following earlier policy measures had created conditions for the realignment.
The adjustment is therefore intended to make the benchmark more relevant to actual market conditions and restore its influence over borrowing costs and economic activity.
Single-digit inflation remains the goal
Despite the reduction, Cardoso maintained that the CBN remains focused on reducing inflation to single-digit levels.
The objective is significant for households and businesses because persistent inflation erodes purchasing power, increases operating expenses and makes long-term financial planning more difficult.
Lower inflation could improve the ability of consumers to manage household budgets and help businesses forecast costs. However, the pace of improvement depends on several factors beyond the policy rate, including food supply, transport costs, exchange-rate movements, energy prices and fiscal conditions.
The governor acknowledged that he could not provide a definite timeline for achieving single-digit inflation.
Asked when the target would be reached, Cardoso said: “The answer is we don’t know.”
His response highlights the uncertainty surrounding the inflation outlook, even as the CBN maintains its stated objective.
What the rate decision means for borrowers
The reduction in the MPR does not automatically guarantee cheaper loans for households and businesses.
Commercial banks determine lending rates based on several factors, including their funding costs, credit risks, liquidity conditions and operating expenses. The extent to which the policy adjustment reaches borrowers will depend on how these factors evolve.
Businesses will therefore be watching whether the rate realignment improves access to credit, particularly for working capital, production, agriculture and investment.
For policymakers, the challenge is to improve the functioning of the financial system without undermining the progress made towards price stability. The CBN’s position is that correcting the relationship between the policy rate and market rates can strengthen monetary transmission while keeping inflation control at the centre of its strategy.
