The International Monetary Fund has endorsed the Central Bank of Nigeria’s decision to cut its benchmark interest rate to 23 per cent, saying the move is justified by progress in taming inflation, although monetary policy remains tight.
Director of the IMF’s African Department, Zeine Ould Zeidane, said Nigeria had made significant gains in reducing inflation after a period of elevated price pressures and high real interest rates.
Speaking at a press briefing during the ongoing IMF-World Bank Annual Meetings in Thailand, Zeidane said the CBN was right to begin normalising interest rates without abandoning its fight against inflation.
He said the September adjustment should not be mistaken for a broad shift towards an accommodative monetary policy, as the overall stance remains restrictive.
“The stance itself remains a tight one,” Zeidane said, adding that the CBN’s decision was appropriate under the prevailing economic conditions.
He stressed that monetary policy must continue to respond to incoming economic data, with the priority remaining the reduction of inflation towards the central bank’s target.
The IMF’s endorsement provides international backing for the CBN’s decision to lower borrowing costs after a prolonged period of monetary tightening.
However, the Fund cautioned that central banks must remain vigilant against inflation risks. Its latest regional assessment indicated that further monetary tightening might still be necessary in many African economies, adopting a firmer position than its April assessment.
For Nigeria, this means further interest rate adjustments will depend on whether inflation continues to moderate and whether the progress recorded so far can be sustained.
At its September Monetary Policy Committee meeting, the CBN cut the Monetary Policy Rate by 350 basis points, reducing it to 23 per cent from 26.5 per cent.
The decision surprised many market participants who had expected the committee to retain the benchmark rate amid concerns about inflation and price stability.
The MPC also recalibrated the Standing Facilities Corridor while retaining existing Cash Reserve Requirement levels for deposit money banks, merchant banks and non-Treasury Single Account public sector deposits.
The rate reduction marked a shift after an extended period of tight monetary policy aimed at containing inflation and stabilising the economy.
Nigeria’s headline inflation rate eased marginally to 15.39 per cent in August 2026 from 15.43 per cent in July, according to the National Bureau of Statistics.
The decline extended the disinflation trend for a third consecutive month, strengthening the case for a measured adjustment in monetary policy.
However, the small month-to-month reduction also highlights the need for caution, as inflation remains a key consideration for the CBN.
“The central bank will need to weigh the benefits of lower borrowing costs against the risk of renewed price pressures, ensuring that any further adjustment is supported by sustained improvements in inflation and broader economic conditions,” said an Abuja-based economist, Nonso Iheoma.