Experts Have Mixed Views on CBN's Interest Rate Decision

As the Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) gets ready to meet, economists have different opinions about what the committee might decide on the benchmark interest rate.

At the end of its 305th MPC meeting, which took place from 19 to 20 May in Abuja, the MPC kept the Monetary Policy Rate (MPR) at 26.5 per cent.

This decision came after a 50-basis-point cut in February. The committee reduced the MPR from 27 per cent to 26.5 per cent after holding it steady at 27 per cent since November 2025.

CBN Governor Olayemi Cardoso explained the May decision. He said the committee chose to keep the benchmark rate steady because inflation has recently risen and there are external pressures.

“The MPC recognises its transitory nature and remains confident that the current macroeconomic environment is sufficiently strong to support a return to disinflation,” Mr Cardoso said.

Data from the National Bureau of Statistics (NBS) shows that Nigeria’s headline inflation increased for the third month in a row, reaching 15.93 per cent in May. This is up from 15.69 per cent in April and 15.38 per cent in March.

The NBS linked the rise to higher food prices, which are affected by increasing global oil prices. These prices rose due to tensions in the Middle East, which disrupted oil shipping through the Strait of Hormuz, an important global oil route.

Nigeria’s inflation had been decreasing through 2025 and into early 2026. But tensions in the Middle East have brought new inflation pressures.

The ongoing conflict involving the United States, Israel, and Iran has pushed up global oil prices. This has also raised costs for transportation, food, and fertilisers.

Even though a ceasefire was reached on 17 June, allowing for negotiations, fighting has continued. This uncertainty has affected global energy markets and shipping through the Strait of Hormuz.

Before the MPC's next meeting on 20 and 21 July, economists who spoke with PREMIUM TIMES shared different views on what the committee might do next.

Different Views

Some believe the policymakers will keep the current benchmark rate. Others think easing inflation and better economic conditions might lead to a monetary easing cycle.

Felicia Awolope, an economist and investment researcher at Meristem Securities Limited, thinks the CBN will keep the benchmark interest rate steady at its next MPC meeting. She pointed to the recent rise in inflation caused by geopolitical issues in the Middle East.

She said the ongoing conflict might keep global interest rates high, which supports the CBN's decision to maintain its current policy.

“Inflationary risks are still very much present, particularly with the ongoing geopolitical tensions in the global space, so that should reduce the likelihood of a cut.

“The fact that global interest rates might also remain higher for longer due to this same price risk also supports a hold stance,” Ms Awolope said.

She added that the committee is unlikely to increase the Monetary Policy Rate (MPR) because current pressures are not expected to push inflation much higher soon.

“I don’t expect a hike because pressures are not expected to escalate inflation figures too significantly in the near term.

“So the MPC is not likely to hike and worsen financing conditions for the real sector. I expect a hold stance,” she added.

Matilda Adefalujo, an investment research analyst at Meristem Securities Limited, agrees. She believes the MPC will keep the MPR at 26.50 per cent for the second half of 2026, saying the CBN will take a cautious approach while watching inflation.

She mentioned that keeping attractive interest rates while global rates may stay high, along with ongoing price uncertainty, supports holding the benchmark rate.

“We expect the MPC to hold the MPR at 26.50 per cent through H2:2026, adopting a cautious wait-and-see stance as it monitors the inflation trajectory.

“The moderate pace of the recent inflation uptick gives the monetary authority room to pause. The need to maintain attractive rates in a potentially higher global interest rate environment reinforces this stance,” she said.

Ms Adefalujo warned that raising borrowing costs too soon could hurt demand in an already struggling economy. High inflation makes cutting rates hard to justify.

“Additionally, a premature hike risks further demand reduction in an already strained environment, while the case for a cut appears unlikely against a backdrop of prolonged elevated inflation,” she said.

But Aliyu Ilias, an economist and development expert, has a different view. He predicts the CBN will cut the MPR by at least 50 basis points at its next meeting.

He believes that improving economic stability allows for easier monetary policy. He added that keeping high interest rates to lower inflation could hurt economic growth.

“The MPC meeting is expected to cut the MPR by at least 50 basis points. This is because there is a gradual easing, and we cannot continue to sacrifice growth to reduce inflation; it appears counterproductive,” he said.

Mr Ilias also raised concerns about how high borrowing costs affect businesses, especially manufacturers and Micro, Small, and Medium Enterprises (MSMEs). He said higher rates could weaken these sectors.

“Industry, manufacturing sector, and MSMEs are weakened with this handling of MPR,” Mr Ilias said.