CBN seen holding rate at 26.5% as 2026 easing outlook dims
Nigeria's central bank is expected to keep its benchmark rate at 26.5% this week, delaying monetary easing as policymakers navigate volatile oil prices and sticky inflation that could push rate cuts into 2026.
The Central Bank of Nigeria begins its 306th Monetary Policy Committee meeting in Abuja on Monday, with leading industry voices forecasting a hold on the benchmark interest rate at 26.5%. The Chartered Institute of Bankers of Nigeria and a former MPC member both urged the committee to maintain the current stance. They argue that recent economic data does not justify a shift in either direction.
Dr. Dele Alabi, president of the Chartered Institute of Bankers of Nigeria, said the central bank needs more time to evaluate the impact of previous measures on price stability. “I expect the MPC to keep the interest rate constant and monitor developments over the next couple of months before considering any adjustment,” he said. This cautious approach follows consecutive increases in headline inflation during March and April.
Global supply shocks are adding weight to the case for a pause. Professor Akpan Ekpo, a former MPC member, warned that escalating tensions between the United States and Iran could drive up crude oil prices and intensify domestic inflationary pressures. However, he characterized these inflationary risks as temporary and cautioned against raising rates in response.
While the immediate expectation is a hold, the longer-term trajectory for Nigerian yields is becoming a point of debate among institutional investors. Standard Chartered Plc. recently pushed back its timeline for monetary easing, projecting that the CBN will not begin cutting rates until 2026.
In an investment note, Razia Khan, Standard Chartered's chief economist for Africa and the Middle East, forecast a total reduction of just 150 basis points next year. This would leave the benchmark rate at 25% by the end of 2026. The bank also raised its average inflation forecast for 2026 to 15.5%, up significantly from a previous estimate of 12%.
For market participants, the divergence between immediate stability and delayed easing highlights the limitations of monetary policy alone in tackling Nigeria's price pressures. The CBN's current strict policy toolkit includes a 45% cash reserve ratio for commercial banks and a 75% ratio for non-TSA public sector deposits. Ekpo advised the federal government to complement these tight monetary conditions by increasing investment in productive sectors and adopting recommendations from the Manufacturers Association of Nigeria to sustain economic expansion.
