CBN Boosting Investor Confidence Through Contractionary Monetary Policy Decisions
By Sunday Etuka
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) last Tuesday took a far-reaching decision to further stabilise the nation’s economy.
The Committee rose from its 304th meeting held in Abuja on February 23 and 24, 2026, with a unanimous decision to reduce the Monetary Policy Rate by 50 basis points from 27% to 26.5%.
The MPC also voted on other policy parameters such as the Cash Reserve Ratio (CRR), Liquidity Ratio (LR) and Standing Facilities Corridor.
It retained CRR at 45% for Commercial Banks and retained at 16% for Merchant Banks, retained LR at 30% and retained Standing Facilities Corridor at +50 / -450 basis points around the MPR.
CBN Governor and Chairman of the Committee, Mr Olayemi Cardoso, revealed that the decision was arrived at after reviewing key developments in the global and domestic economies, as well as the outlook.
He explained that the Committee’s decision was 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.
Industry Watchers applauded the rate cut, saying that the decision would bolster investor confidence.
This was also the position of the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun.
Edun said the move reflects rising confidence in Nigeria’s macroeconomic stabilisation and highlights strong coordination between fiscal and monetary authorities as the country transitions from stabilisation to economic consolidation.
He said “for the government, the rate cut lowers borrowing costs and creates fiscal space to accelerate investment in infrastructure, energy, agriculture and social services. For businesses, it improves access to credit, supports private sector investment, and strengthens job creation in the real economy. Importantly, the decision reinforces investor confidence and signals that President Bola Tinubu’s reform programme is delivering results.”
EXCHANGE RATE MANAGEMENT
In reaching this policy decision, the Committee commended the CBN for it contribution to the sustained deceleration of headline inflation year-on-year in January 2026, marking the eleventh consecutive month of decline.
It attributed the downward trajectory in inflation to continued effects of the contractionary monetary policy, stability in the foreign exchange market, robust capital inflows, and improvement in the balance of payments.
The Committee said the momentum was further reinforced by relative stability in the prices of petroleum products and improved food supply conditions, especially staples. Adding that these outcomes have indicated that prior tightening has continued to anchor expectations.
FOREIGN DIRECT INVESTMENT/DIASPORA REMITTANCES
The MPC particularly noted the remarkable performance of Nigeria’s external sector, evidenced by the robust accretion to foreign exchange reserves, supported by higher export earnings and increased remittance inflows. This, according to the Committee, has contributed to greater stability in the foreign exchange market and bolstered investor confidence.
Members also welcomed the newly issued Presidential Executive Order 09 which redirects oil and gas revenues into the Federation Account. The Committee acknowledged the potential impact of this Order in improving fiscal revenue and accretion to reserves. Given these improved macroeconomic conditions, the Committee believed that a moderate easing was consistent with the prevailing inflation dynamics.
BANKING SECTOR
The Committee acknowledged the continued resilience of the nation’s banking sector, with most of the key financial soundness indicators remaining within regulatory thresholds.
With regards to the ongoing recapitalization programme, the Committee noted that of the thirty-three (33) banks that have raised additional capital, twenty (20) have met the new minimum capital requirement, reaffirming steady progress towards a more robust and well‑capitalized financial system.
The MPC reiterated the strategic importance of the recapitalization exercise and urged the Bank to ensure its successful completion. This would reinforce financial system resilience and enhance the sector’s capacity to support sustainable economic growth.
To date, 20 banks have fully met the new minimum capital requirements. A further 13 are at advanced stages of their capital-raising processes and are expected to conclude within the stipulated timeframe. Institutions still finalising their plans are evaluating a range of strategic options, including consolidation where appropriate.
As of 19 February 2026, CBN said the total verified and approved capital raised amounts to ₦4.05 trillion. Of this, ₦2.90 trillion (71.67%) has been mobilised domestically, while US$706.84 million (₦1.15 trillion, 28.33%) represents foreign participation. This balanced mix of domestic and foreign capital indicates broad investor engagement and confidence in the sector.
CONCLUSION
The Committee predicted that the current momentum of domestic disinflation would continue in the near term. This, it premised on the lagged impact of previous monetary policy tightening, sustained stability in the foreign exchange market and improved food supply. However, increased fiscal releases including election-related spending could pose upside risk to the outlook.
