Adefolarin A. Olamilekan
Arguably, the latest 26.5% Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) interest rate decisions may have cut some analysts off guard in their projections, others predictions may have been cut short, even as other groups may see it has a long over expectation.
For instance, some analysts were of the view that this is the right time for the Monetary Policy Committee (MPC) to cut down the MPR by 100 bps to 26.00 per cent.
Alter the Asymmetric Corridor from +50bps/-450bps to +200/-300bps around the MPR and retain Liquidity Ratio at 30.00 per cent.
Preserve the Cash Reserve Ratio at 45.00 per cent for Deposit Money Banks, 16.00 per cent for Merchant Banks, and 75.00 per cent for non-TSA public sector deposits
Exclusively, going by the trends of economy situation and prevailing disinflation that underpinned current January 2026 headlines inflation at 15.10%, core inflation of 17.72% outside the volatile prices of agricultural produce and energy, and food inflation food inflations also at 8.89%, alongside naira’s relative stability and appreciation against the dollar year-to-date N1,356/$1.
Having said that, the CBN MPC rate was cut by 50 basis points or a maximum of 100 basis points from the 27 per cent it maintained in November 2025.
According to CBN MPC the above action was based on “premised on a balanced evaluation of risks to the outlook, which suggests that the ongoing disinflation trajectory would continue, largely supported by the lagged transmission of previous monetary tightening, sustained exchange rate stability, and enhanced food supply”.
In addition to what the committee refers to as the continued effects of the contractionary monetary policy, stability in the foreign exchange, robust capital inflows, and improvement in the balance of payments”
While all this may sound too technical for average Nigerian comprehension, what the foregoing simply means is that we are enjoying an improving macroeconomic stability, that is now under disinflation that reveals moderate price stability justifying for easing cutting down the rate.
Instructively, this has demonstrated the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC), has now moved away from it earlier, adopting a wait-and-see approach having confidence that the worst of the inflation cycle is not yet behind us.
However, it has to remain cautious and vigilant over what could be potential risks and drivers of imbalance to the accrued improvements of the current macroeconomic variable’s successes.
That is why it is practical on the part of the CBN MPC to warn against “increased fiscal releases, including election-related spending, could pose upside risk to the outlook.”
No doubt, the 2026 budget of ₦58.18 trillion and its capital components of ₦26.08 trillion is government spending for capital raised concerns and even as the 2027 election, political activities and campaign spending worries the CBN.
Sadly, the above scenario is out of control of the CBN and must stand on its Bank’s core mandate of ensuring price stability, at same time proving a well dissected empirical monetary safeguarding policy alongside sound and resilience fiat policy action Nigeria’s financial system.
In addition, it is expected that there is a need to prevent excess liquidity from undermining current macroeconomic progress.
Now that a lot is expected from the CBN rate cut, that should translate to lower lending rates in supporting business credit facilitation, access and growth of banks credit without undermining liquidity and price stability.
Overtime, the high level of lending interest rates in Nigeria is scary to small and large private sector business operators, leading to many of them collapsing, and winding up.
In all the CBN must step up its measured and data-driven fine-tuning of monetary action, deepen its alignment for sustaining improving macroeconomic fundamentals, sustain the declining inflation, rally the rising reserves, enhance the trade balance, and FX stability.
