When the Central Bank of Nigeria’s Monetary Policy Committee met recently, it made a decision that showed the country’s inflation outlook is getting better.
After months of aggressive tightening, the committee lowered the Monetary Policy Rate by 50 basis points to 26.5%, while keeping other key policy parameters unchanged.
This followed eleven consecutive months of declining inflation and improving foreign exchange stability, factors the committee noted as evidence that earlier policy measures were beginning to yield results.
The decision was announced at the end of the 304th Monetary Policy Committee (MPC) meeting held on February 24, 2026, at the CBN headquarters in Abuja. It was the committee’s first meeting since November 2025.
Alongside the rate cut, the MPC retained the asymmetric corridor around the Monetary Policy Rate at +50/-450 basis points.
Cash Reserve Requirements were left unchanged at 45% for deposit money banks, 16% for merchant banks and 75% for non-TSA public sector deposits.
The decision comes as inflation shows signs of easing. According to the National Bureau of Statistics (NBS), headline inflation slowed to 15.10% year-on-year in January 2026, the eleventh consecutive month of decline.
The CBN said food and core inflation also moderated during the period.
The committee noted that the Purchasing Managers’ Index stood at 55.7 points in January, indicating continued expansion in economic activity.
On external buffers, the CBN said gross reserves climbed to $50.45 billion, a 13-year high.
However, figures published on the apex bank’s website showed reserves at $48.90 billion as of February 20, 2026.
The difference highlights recurring gaps between quoted and published reserve data.
Here are five key lessons from the February MPC meeting:
1. Tight Monetary Policy Is Beginning to Pay Off
The rate cut shows that the CBN believes its earlier tightening cycle is working. After months of raising rates to curb inflation, price pressures are now easing.
The MPC made it clear that the moderation in inflation reflects the delayed impact of previous policy moves. Monetary tightening usually takes time to filter through the economy. The latest data appears to have given policymakers enough confidence to ease slightly without abandoning caution.
2. Exchange Rate Stability Gave the CBN Room to Cut
The CBN linked its decision to improved foreign exchange conditions. Stronger FX liquidity, rising capital inflows and steady remittances have helped stabilise the naira and strengthen reserves.
The bank said the current reserve position provides 9.68 months of import cover, offering a cushion against external shocks. That buffer appears to have reduced the risk that a rate cut would trigger fresh currency pressure.
Going forward, the direction of interest rates will likely remain closely tied to exchange rate stability.
3. Food Supply Improvements Are Supporting Disinflation
Nigeria’s inflation basket is heavily weighted toward food. The CBN noted that improved supply of key staples such as rice, maize, millet and soybeans, along with relative stability in fuel prices, has helped moderate food inflation.
This underlines a huge point, that interest rates alone cannot solve inflation in a food-driven economy. Agricultural output, logistics, storage and energy pricing all play a role. Monetary policy works best when supply-side conditions improve at the same time.
4. Bank Recapitalisation Is Essential to Growth Plans
The MPC also reviewed progress on the banking sector recapitalisation exercise. According to the communique, 33 banks have raised additional capital, and 20 have met the new minimum capital requirement.
Among those that have met the threshold are Zenith Bank, United Bank for Africa, First Bank of Nigeria, Fidelity Bank and Guaranty Trust Bank.
The CBN said the stronger capital base will improve banks’ ability to support lending and economic expansion. With the federal government targeting a $1 trillion economy in the coming years, a well-capitalised banking system is seen as essential for effective credit transmission.
5. Risks Balancing Requires Vigilance, Not Complacency
Despite the easing move, the MPC struck a cautious tone. It warned of potential inflationary pressures from increased fiscal spending and global uncertainties, including protectionist trade policies.
The modest 50 basis point cut, rather than a larger adjustment, reiterated that. The committee said it would remain data-driven, with the next meeting scheduled for May.
For markets and policymakers, the message is clear: the rate cut is conditional. A return of inflationary pressures could quickly halt further easing.
Outlook
The CBN projects average inflation for 2026 at 12.94%, driven largely by lower food prices and an expected reduction in average petrol pump prices.
The bank said continued exchange rate stability, improved food supply and the delayed impact of earlier tightening should support further disinflation in the near term. However, increased fiscal releases, including possible election-related spending, pose upside risks.
The February 2026 MPC meeting points out a careful pivot rather than a full policy reversal. Borrowers get modest relief, but monetary conditions remain tight.
The path to single-digit inflation, the CBN noted, will require discipline on both monetary and fiscal fronts.
