Cardoso says 11-month disinflation, fx stability justify cautious 50bp rate cut

…Fx reserves top $50bn, first in 13 years

…MPC flags election spending as upside risk to outlook

Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), said on Tuesday that members of the Monetary Policy Committee (MPC) opted for a measured reduction in interest rates, following nearly a year of cooling inflation, stronger foreign-exchange buffers, and improving macroeconomic conditions that gave room for cautious easing.

The MPC cut the benchmark rate by 50 basis points to 26.5% at the end of its two-day meeting in Abuja, as policymakers signaled confidence that prior tightening is working.

The committee however retained the asymmetric corridor around the policy rate at +50 to -450 basis points and left the cash reserve ratio unchanged at 45% for deposit money banks, 16% for merchant banks and 75% for non-TSA public sector deposits.

Read also: Naira cools across markets as weekly FX inflows slide

Announcing the decision during a press conference in Abuja, Cardoso said the move reflected confidence that inflationary pressures are steadily receding while risks remain balanced. Eleven members attended the meeting.

“The committee decided to reduce the monetary policy rate by 50 basis points to 26.5%,” Cardoso said.
He added that the decision “was premised on a balanced evaluation of risk to the outlook, which suggests that the ongoing disinflation trajectory would continue.”

Headline inflation eased for an 11th consecutive month in January, slowing to 15.10% from 15.15% in December. Food inflation declined sharply to 8.89% from 10.84%, while core inflation moderated to 17.72% from 18.63%. On a month-on-month basis, prices fell 2.88% in January compared with a 0.54% increase the previous month, underscoring a broad softening in price pressures.

Cardoso attributed the disinflation trend largely to the lagged impact of earlier rate hikes, improved foreign-exchange stability, stronger capital inflows and gains in the balance of payments. Relative stability in petroleum product prices and improved domestic food supply, particularly staples, also reinforced the slowdown.
“These outcomes have indicated that prior tightening has continued to anchor expectations,” he said.

The external position has also strengthened markedly, providing additional support for the rate decision. The governor announced that gross external reserves rose to $50.45 billion as of February 16, 2026, the highest level in 13 years, covering 9.68 months of imports for goods and services. Higher export earnings and increased remittance inflows drove the accretion, bolstering confidence in the foreign-exchange market.

He also indicated that the CBN plans to release a detailed breakdown of reserves in the coming days, while emphasizing ongoing efforts to ensure they continue rising.
“I believe that as long as we are able to continue in this particular manner, you will see a regular accretion to our reserves,” Cardoso said. “So maybe now we are saying that it is the highest in 13 years. Next time, we hope to say it is the highest in 15 years.”

The committee also welcomed Presidential Executive Order 09 redirecting oil and gas revenues into the Federation account, noting its potential to improve fiscal revenue and further boost reserves.

Given the improved macroeconomic backdrop, Cardoso said a moderate easing was consistent with prevailing inflation dynamics, while signaling that policymakers remain vigilant.

However, he cautioned that fiscal risks could dampen the outlook. “Increased fiscal releases, including election related spending, could pose upside risk to the outlook,” Cardoso said.

Read also: FX losses erase insurers’ 2025 profit gains

He also announced that economic activity has shown resilience, with Purchasing Managers’ Index (PMI) standing at 55.7 in January, indicating continued expansion and suggesting improved output in the fourth quarter of 2025.

The banking sector has also remained stable, with key financial soundness indicators within regulatory thresholds. Cardoso announced that of the 33 banks that have raised additional capital under the ongoing recapitalisation program, 20 have met the new minimum requirement.

He reiterated the strategic importance of completing the recapitalisation exercise to strengthen financial system resilience and support sustainable growth.