When the Monetary Policy Committee met for its 304th session in Abuja, it delivered what several analysts had expected by cutting the Monetary Policy Rate by 50 basis points to 26.5 per cent.

However, the committee kept other key settings unchanged, retaining the standing facilities corridor around the MPR at +50 and -450 basis points and leaving the Cash Reserve Requirement for deposit money banks at 45 per cent.

The CBN’s policy shift rests on one claim and one constraint.

The claim is that disinflation is holding and is being supported by the delayed effect of earlier tightening, exchange rate stability and improving food supply.

The constraint is that the same environment still carries risks, including fiscal releases and election-related spending that could push inflation up again.

CBN Governor Olayemi Cardoso, speaking during a press briefing after the meeting, signalled that the rate cut was not a declaration that inflation risk had ended.

When asked if Nigeria could now “go to sleep on inflation”, he said, “Caution is our watchword in the Central Bank.” Disinflation as key trigger Analysts at Afrinvest earlier noted that Nigeria’s “disinflation trend, alongside sustained accretion to external buffers (foreign exchange reserves up 2.4 per cent since November to $47.8 bn), continued naira appreciation (up approximately 6.7 per cent to N1,355.00/$1.00 in the official market), and stable energy goods prices (notably, PMS), provides the CBN with latitude for policy flexibility.” Nigeria’s headline inflation rate declined marginally to 15.10 per cent in January 2026, down from 15.15 per cent recorded in December 2025, according to the Consumer Price Index report released by the National Bureau of Statistics.

This decline came despite earlier projections by analysts that Nigeria’s inflation could climb to 19 per cent in January.

The NBS report showed that the Consumer Price Index fell to 127.4 in January from 131.2 in December, representing a 3.8-point decrease.

The NBS said the January headline inflation rate was 0.05 percentage points lower than the rate recorded in December.

The inflation figure was the lowest in five years and two months, since November 2020, when inflation stood at 14.89 per cent.

The MPC described January 2026 as the eleventh consecutive month of decline in year-on-year headline inflation.

The disinflation story is clearer when broken down.

Food inflation declined 8.89 per cent in January 2026 from 10.84 per cent in December 2025, which the MPC linked to improved domestic food supply, sustained exchange rate stability and base effects.

The food inflation figure marked the first single-digit reading in 128 months and the lowest since August 2011, when food inflation stood at 8.66 per cent.

Core inflation eased 17.72 per cent from 18.63 per cent, driven largely by a moderation in Information and Communication services.

The MPC also pointed to a short-run indicator.

Month-on-month headline inflation fell to negative 2.88 per cent in January 2026 from 0.54 per cent in December 2025.

A negative monthly reading suggests that the direction of prices in that month was not just slower growth but an outright decline, even if the durability of that pattern still needs to be tested across subsequent prints.

Speaking at the press briefing after the 304th MPC meeting, Cardoso said the continued deceleration in inflation was driven mainly by the “continued effects of the contractionary monetary policy”, foreign exchange market stability, robust capital inflows and improvement in the balance of payments.

He added that these conditions suggested that prior tightening had helped anchor expectations.

While the disinflation was central to why the committee saw room to reduce the benchmark rate, it did not loosen system liquidity aggressively as other parameters were retained.

The MPC flagged fiscal risk as releases from the federation account increase, which could pose upside risks to inflation.

If fiscal expansion accelerates, it can increase liquidity and weaken the disinflation trend, particularly in an economy where supply constraints are common.

In that scenario, the CBN would face a choice between defending disinflation with tighter policy or tolerating higher inflation to protect growth and credit conditions.

This is why the cut looks like an incremental test rather than a clear start of a long easing cycle.

FX stability, reserves and recapitalisation The MPC also linked its disinflation outlook to sustained stability in the foreign exchange market and stronger external buffers.

Cardoso disclosed that gross external reserves rose to $50.45bn, providing import cover of 9.68 months for goods and services.

The CBN tied reserve accretion to both real-economy flows and confidence.

He pointed to higher export earnings and increased remittance inflows as drivers that contributed to foreign exchange stability and investor confidence.

Cardoso also referenced favourable trade developments, a current account surplus, rising non-oil exports and increasing diaspora remittances.....