The Central Bank of Nigeria had its 304th Monetary Policy Committee, MPC, meeting on Tuesday in Abuja. The Apex Bank usually takes key and crucial monetary policy decisions at this meeting. Two key announcements at the meeting dominated the headlines yesterday. For the first time in a while, the CBN announced a reduction in the monetary policy rate, also known as interest rates.
The regulator reduced the rates by 50 basis points from 27% to 26.5%. The other announcement, which did not draw much attention, is the progress made in the recapitalisation drive of the apex bank, aimed at strengthening commercial banks through an increase in liquidity and capital base.
The rate cut yesterday is the second time the current leadership of the apex bank has announced a reduction in MPR, following a similar 50-basis-point reduction in September 2025 and a hold at the November 2025 meeting.
Cardoso said the decision was based on “a balanced evaluation of risks to the outlook,” which indicates 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.”
While the cut in interest is a welcome development, there are concerns that a 50-basis-point reduction is marginal and is nowhere near what is needed to move the needle economically. The expectation was that given the accelerated reduction in headline inflation, rate cuts should have been significantly higher in order to give the economy the springboard it needed to grow exponentially.
Interest rate at 26.5 per cent is still way too high for a country whose small and medium enterprises are struggling to stay afloat, with many finding it extremely difficult to secure funds to grow and expand their businesses, while many cannot fund their business ideas because of the high interest rate. No commercial bank will give out a loan for less than 30% interest rate. The marginal rate cut and the refusal of the CBN to heavily cut down interest rate and keep it at the level of the single-digit inflation rate also raise fundamental questions about the authenticity of the inflation figures put out by the government.
With the massive gap between inflation and interest rates and the likelihood of the situation remaining the same for the foreseeable future, one may be compelled to ask if the steep downward inflationary trend we’ve witnessed in recent months is spurred by political intrigues rather than material and tangible growth in the economy. The former is what many believe is the case.
On recapitalisation
Cardoso also disclosed that thirteen Nigerian banks are yet to meet their recapitalisation requirement, stating that the 20 banks that have met the minimum capital threshold have successfully raised a total of N4.05 trillion as part of the ongoing recapitalisation exercise,
According to him, the remaining thirteen banks are still working towards compliance but have yet to reach the stipulated threshold, noting that the MPC urged banks to ensure the successful completion of the recapitalisation program.
“Members acknowledged the continued resilience of the banking sector. With regards to the ongoing recapitalisation program. The committee noted that of the 33 banks that have raised additional capital, 20 have met the new minimum capital requirements, reaffirming steady progress to a reboosted and recapitalised financial system,” he said.
Recall that in March 2024 the apex announced a new recapitalisation requirement for Nigerian banks with 31st March 2026 as the deadline.
The disclosure that thirteen banks are yet to meet the minimum capital base required for their category of banking signals the possibility of mergers and acquisitions.
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