The MPC’s 50bps rate cut and what it means for your money

2026-02-26 18:53:29

At the 304th policy meeting held yesterday, the Monetary Policy Committee cut the policy rate by 50 basis points to 26.50% from 27%; it was retained at its 303rd meeting in November last year.

The Committee had cut the rate in September 2025 by 50 bps from 27.50% to 27%.

The Central Bank of Nigeria (CBN) said its decision to cut the MPR was partly driven by improving macroeconomic conditions, including a sustained slowdown in year-on-year inflation.

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Inflation eased to 15.10% in January 2026 from 15.15% in December 2025. The inflation rate is a key factor in assessing what the rate cut means.

That said, the important question now is what this rate cut means for your money.

To answer this, it is useful to look at where investors, especially retail investors, typically channel their money, both from an investment perspective and then deduce the likely impact of the rate cut.

Investors traditionally place their money in savings and fixed deposits with banks, invest in mutual funds, and trade in stocks.

Funds are also channeled into Federal Government securities, such as savings bonds; the primary purchase of Treasury bills might be too big to afford. Investors also placed their money with professionals like mutual funds.

If you have your money in these asset classes, this is what the cut means and how it would affect your money.

Savings and Fixed Deposits

For savings and fixed deposits, the short answer is that your money in these instruments will earn less over time. The CBN weekly banks’ interest rate report already points in that direction.

In July 2025, before the first MPR cut in September, the average savings rate across banks was around 8.26%, while average fixed (time) deposit rates stood at about 12.50%.
Following the rate cut in September and the policy hold in November 2025, these returns had eased by early 2026, with the average savings rate down to about 8.15% and average fixed deposit rates slipping to around 12.02%.

This shows that as policy rates soften, banks gradually adjust deposit pricing downward.

In effect, while the decline may be slow and uneven, the clear implication of the rate cut is that returns on savings and fixed deposits will continue to drift lower.

Treasury Bills and Bonds

For Treasury bills and bonds, the cut will lead to lower yields and higher prices over time.

New issuances will be offered at lower rates, making previously issued securities more sought after and thus pushing their prices higher.

However, if you are already holding these assets, this can be positive, as prices generally rise when interest rates decline. In this sense, the rate cut may increase your money relatively.

Equities Market

For equities, the expected decline in returns in the fixed-income space could prompt investors to migrate to stocks, potentially pushing share prices higher.

In addition, a rate cut typically benefits interest-rate-sensitive sectors such as the Banking, industrial, and consumer goods sectors.

Lower interest rates reduce the cost of funds, which in turn can cut interest expenses and support companies’ bottom lines.

With improved profitability, companies may be in a better position to pay higher dividends and expand their operations.

In this context, a rate cut can increase the value of your money in equities, provided investments are made carefully and selectively.

Companies such as MTN Nigeria, Breweries, BUA Foods, Dangote Cement, and banks are likely to increase your money invested in their stocks.

Fund Managers

If you have money managed by professionals, known as mutual fund managers, depending on the type, the rate cut impact shows differently.

Money market and fixed-income funds may not give you much because of the rate cut as underlying instruments reprice lower. So, your money is likely to decelerate here.
Prior to the cut in rate last year, money market funds on average returned 21% in 2024, but in 2025, they returned about 17% according to SEC weekly valuation reports of the collective investment scheme.
But if it is Equity funds, your money is likely to increase because of the rate cut. This asset class performs better in a lower-rate environment, as the underlying assets, which are stocks, perform better.

Another fund, Real Estate Investment Trust Funds, will likely increase your money if you already have a position. The rate cut will reduce their cost of funds and subsequently boost their bottom line

Bottomline

The rate cut is likely to gradually reduce returns on cash and low-risk investments, while making risk assets and business activity relatively more attractive.

This shifts the focus from simply earning interest to actively thinking about how to preserve and grow wealth in a lower-rate environment.

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