September 22, 2026/Cordros Report
At its fourth meeting of the year, the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) voted to reduce the Monetary Policy Rate (MPR) by 350bps to 23.00% (previous: 26.50%). The Committee also adjusted the asymmetric corridor around the MPR to +50/–300bps (previous: +50/–450bps). According to the MPC, the decisions form part of an operational realignment aimed at strengthening monetary policy transmission and restoring the MPR’s role as the primary signal of its policy stance. The Committee also noted that the prevailing macroeconomic environment — characterised by moderating inflation, resilient economic growth and relative exchange rate stability — provided room for the recalibration. Meanwhile, the MPC retained the Cash Reserve Requirements (CRR) for Deposit Money Banks (DMBs), merchant banks and non-TSA public sector deposits at 50.0%, 16.0% and 75.0% respectively.
On Domestic Growth: The Committee noted that economic growth remains resilient, with real GDP growth accelerating to 4.43% in Q2-26 (Q1-26: +3.89%) underpinned by improvements in both the oil and non-oil sectors. At the same time, the Committee noted that the Composite Purchasing Managers’ Index (PMI) remained in expansion, rising to 52.7 points in August from 51.1 points in July, with all three sectors recording expansion, reflecting resilient private sector activity.
On Inflation: The MPC highlighted that Nigeria’s headline inflation moderated for a third consecutive month, falling to 15.39% y/y in August 2026 (July: 15.43% y/y). The 12-month moving average also moderated for the 20th consecutive month, to 16.30% y/y in August (July: 16.89% y/y), despite lingering geopolitical tensions in the Middle East and elevated energy prices. The Committee attributed the disinflation to previous policy tightening, greater FX stability and improved inflation expectations, while also highlighting the Presidential Initiative on National Affordable Compressed Natural Gas (CNG) Transit programme, which it expects to reduce transport costs and overall headline inflation. Lastly, the Committee noted the recent policy coordination between the Federal Government and the CBN, including the signing of a Memorandum of Understanding (MoU) on 18 September to strengthen policy harmonisation.
On the External Sector: The Committee highlighted the continued strengthening of Nigeria’s external position, reflected in a Balance of Payments (BoP) surplus and higher external reserves, which it noted had supported exchange rate stability. According to the CBN, the BoP surplus rose to USD3.51 billion in Q2-26 from USD2.38 billion in Q1-26, while the current account surplus increased by 67.9% q/q to USD7.54 billion in Q2-26 (Q1-26: USD4.49 billion). At the same time, the Committee cited improvements in external reserves, which had risen to an 18-year high at USD55.25 billion as of 18 September, equivalent to c.11.3 months of import cover.
On Global Developments: The Committee stated that global growth is projected at 3.0% in 2026E (2025FY: +3.5%), reflecting the effects of ongoing Middle East conflict, persistent policy uncertainty and constrained fiscal space. The MPC also noted that growth prospects remain uneven, with energy-importing countries and low-income economies facing continued pressures from elevated energy costs and weaker fiscal buffers. That said, the slowdown is expected to be partly offset by stronger technology related investment. The MPC noted that risks to global inflation remain tilted to the upside, as lingering supply chain disruptions, elevated crude oil and commodity prices, and increasing trade fragmentation could intensify price pressures. The MPC added that these risks, together with renewed geopolitical tensions, could delay the normalisation of monetary policy.
Cordros’ View
We had expected the MPC to retain the MPR at 26.50%, given elevated inflation risks and the renewed tightening bias among major global central banks. However, the Committee reduced the MPR by 350bps to 23.00%, primarily to align the policy rate more closely with prevailing market conditions and restore the MPR’s role as the principal signal of the monetary policy stance. Although we view the magnitude of the reduction as substantial, the overall tone of the meeting remained cautious, given the potential implications for inflation expectations, exchange rate stability and foreign portfolio inflows. Indeed, the Committee emphasised that the decision did not represent a change in its underlying monetary policy stance, which supports our interpretation that the rate reduction was primarily an operational recalibration rather than the beginning of a broader easing cycle. The Committee also adjusted the asymmetric corridor around the MPR to +50/–300bps (previous: +50/–450bps), narrowing the gap between the MPR and the lower bound. The adjustment should strengthen the transmission of policy decisions to short term market rates and reinforce the MPR’s signalling role. Accordingly, the Standing Lending Facility rate declined to 23.50% (previous: 27.00%), while the Standing Deposit Facility rate fell to 20.00% (previous: 22.00%).
Looking ahead, we expect limited scope for additional policy easing, given the MPC’s cautious tone, elevated global interest rates and the likelihood of a slower disinflation towards the end of the year. Further rate reductions could narrow the interest rate differential with advanced economies, weaken the attractiveness of naira-denominated assets and increase the risk of weaker foreign portfolio inflows and exchange rate pressure.
Market Impact
On Fixed Income: Although the MPC characterised the 350bps reduction in the MPR as an operational recalibration rather than a shift in its underlying policy stance, we expect the decision to exert further downward pressure on fixed income yields, particularly at the short end of the curve. Improved system liquidity, sustained disinflation, and potential offshore demand following Nigeria’s inclusion in the J.P. Morgan Government Bond Index–Emerging Markets universe are also likely to reinforce the downward pressure in yields.
However, the decline may be smaller than the headline rate cut suggests, as market yields had already fallen below the previous MPR, indicating that the adjustment was partly reflected in market pricing. Moreover, the CBN may sustain OMO issuances to absorb excess liquidity and prevent the policy adjustment from being interpreted as an aggressive easing of monetary conditions. The extent of the decline in yields will therefore depend on the government’s borrowing requirements, the scale of CBN liquidity management operations and prevailing system liquidity.
On Equities: Nigerian equities have advanced by 61.1% YTD in 2026, supported by improving macroeconomic conditions, sustained foreign portfolio inflows, stronger domestic participation, solid corporate earnings and positive corporate developments. More recently, sentiment has also been supported by Nigeria’s return to the FTSE Russell Frontier Index Series. Against this backdrop, the MPR reduction could provide an additional catalyst for risk assets by reinforcing the repricing of fixed income instruments and encouraging portfolio rotation towards equities. Lower market yields and financing costs could also support corporate profitability, particularly for more leveraged companies. Nevertheless, given the market’s strong YTD gains, further valuation expansion is likely to depend increasingly on earnings growth rather than continued multiple expansion.
Looking ahead, we expect market performance to be shaped by the extent to which the policy adjustment translates into lower market yields, improved liquidity and reduced corporate financing costs. Continued macroeconomic stability, particularly in inflation and the exchange rate, will also remain important to investor sentiment. Against this backdrop, 2026FY earnings and dividend announcements, foreign and domestic portfolio flows, corporate actions and company-specific developments are likely to be the key drivers of the market performance in Q4-26.
Figure 1: Trend in Monetary Policy Rate, Inflation, NTB, and Bond Yields.
