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The Central Bank of Nigeria (CBN) on Tuesday cut its benchmark interest rate by 350 basis points to 23.0%, marking a significant shift in monetary policy as easing inflationary pressures give policymakers room to support economic growth and credit expansion.

The decision was announced at the end of the Monetary Policy Committee's (MPC) two-day meeting in Abuja.

The MPC reduced the Monetary Policy Rate (MPR) from 26.5% to 23.0%, its first major easing move after an aggressive tightening cycle that had pushed borrowing costs to record levels in a bid to curb inflation and stabilise the naira.

In addition to the rate cut, the committee reset the asymmetric corridor around the MPR to +50 basis points and -300 basis points, while retaining the Cash Reserve Ratio (CRR) for commercial banks at 45.0%, the CRR for merchant banks at 16.0%, and the 75.0% CRR on non-Treasury Single Account public-sector deposits.

The rate decision is expected to be welcomed by businesses and investors who have long argued that elevated borrowing costs were constraining private-sector investment and economic activity. Commercial lending rates have remained among the highest in Africa following successive rate increases implemented since 2022.

The move signals growing confidence within the central bank that inflationary pressures are moderating after months of tight monetary conditions. It also reflects a balancing act between maintaining price stability and supporting economic growth, job creation and access to credit.

Analysts said the magnitude of the cut exceeded market expectations, suggesting policymakers are seeking to provide a stronger stimulus to the economy while keeping key liquidity controls such as the CRR unchanged.

By retaining reserve requirements, the CBN appears to be maintaining a measure of monetary restraint even as it lowers its benchmark lending rate. The approach could help cushion the impact of lower rates on inflation and foreign exchange stability.

The decision comes as Nigeria seeks to sustain economic growth amid persistent cost-of-living pressures, exchange-rate volatility and efforts by authorities to attract investment into key sectors of the economy.

Investors will now watch for guidance from the MPC on the inflation outlook, liquidity conditions and the future path of interest rates. The sharp reduction may also influence yields in the fixed-income market and affect banks' lending behaviour in the months ahead.

The latest decision marks a notable turning point for monetary policy, signalling that the central bank believes the conditions that justified historically high interest rates are beginning to ease, even as inflation remains a key concern for policymakers.