CBN Poised for Largest Rate Cut Since 2020 as It Mops Up $190 Million to Manage Naira Strength
Nigeria's central bank intervened in foreign exchange markets last week, absorbing $190 million to moderate naira appreciation, while economists anticipate the largest monetary policy rate reduction in over five years.
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The Central Bank of Nigeria mopped up approximately $190 million from the foreign exchange market last week in a deliberate move to slow the naira's appreciation against the dollar, according to The Nation Newspaper. The intervention comes as six economists polled by Bloomberg predict the CBN will announce its largest interest rate cut since 2020 at Tuesday's Monetary Policy Committee meeting, signaling a significant shift in the central bank's policy stance.
The dual approach of managing currency strength while preparing to ease borrowing costs reflects the CBN's attempt to balance multiple macroeconomic objectives. The naira has experienced upward pressure in recent weeks, prompting the monetary authority to absorb foreign currency liquidity that would otherwise strengthen the local currency beyond desired levels. At the Nigerian Foreign Exchange Market, the naira maintained stability in early trading on February 24, 2026, as reported by Vanguard News, which attributed the steadiness to "sustained Central Bank interventions."
Currency Management Through Dollar Absorption
The CBN's $190 million purchase from the official window represents a tactical intervention to prevent excessive naira appreciation that could harm export competitiveness and remittance inflows. By removing dollar supply from the market, the central bank effectively reduces downward pressure on the dollar-naira exchange rate. This approach contrasts sharply with the CBN's previous strategy of defending the naira through dollar sales, marking a reversal in market dynamics.
According to The Nation Newspaper, the intervention successfully slowed the pace of naira appreciation at the official window, though specific exchange rate levels were not disclosed in available reports. The Nigerian Foreign Exchange Market has shown relative stability following these interventions, suggesting the CBN has achieved its near-term objective of moderating currency volatility. Currency traders and importers have adjusted their positions in response to the central bank's active presence in the market, with many anticipating continued interventions should appreciation pressures persist.
Anticipated Monetary Policy Easing
The expected interest rate reduction would mark Nigeria's most aggressive monetary easing since 2020, when the CBN cut rates in response to the COVID-19 economic shock. Business Day reported that six economists surveyed by Bloomberg consensus forecast a rate cut at Tuesday's MPC meeting, though the precise magnitude of the reduction was not specified in available source material. The current monetary policy rate stands at elevated levels following a series of hikes implemented to combat inflation and support the naira during periods of currency weakness.
A rate cut would lower borrowing costs for Nigerian businesses and consumers, potentially stimulating economic activity in sectors constrained by high financing expenses. The manufacturing, agriculture, and small business sectors have particularly struggled under the weight of elevated interest rates, which have pushed lending rates above 30 percent at many commercial banks. However, the timing of easing while managing currency appreciation presents a delicate balancing act, as lower rates typically reduce a currency's attractiveness to foreign investors seeking yield.
Policy Coordination Challenges
The CBN's simultaneous pursuit of currency stability and monetary easing highlights the complex trade-offs facing Nigerian policymakers. Lower interest rates could trigger capital outflows as investors seek higher returns elsewhere, potentially reversing recent naira gains and forcing the central bank to deplete foreign reserves through defensive interventions. The success of this dual strategy will depend on several factors, including global oil prices, diaspora remittance flows, and investor confidence in Nigeria's economic reform agenda.
Market participants will scrutinize Tuesday's MPC statement for guidance on the central bank's forward policy path and its assessment of inflation risks. The CBN has previously emphasized price stability as its primary mandate, making any rate cut contingent on evidence that inflationary pressures have sufficiently moderated. Recent improvements in foreign exchange liquidity and food supply chains may have provided the central bank with room to ease without reigniting price pressures that peaked above 30 percent year-on-year in 2024.
The coordination between exchange rate management and interest rate policy will remain critical as Nigeria navigates the remainder of 2026, with both domestic growth imperatives and external balance considerations shaping the CBN's decision-making framework.