The Central Bank of Nigeria (CBN) held steady on policy on Tuesday, keeping the monetary policy rate at 26.5% as officials said the economy is showing signs of resilience even as global risks from renewed Middle East hostilities threaten to push up energy and food prices.
Speaking to reporters after a two‑day Monetary Policy Committee meeting, Olayemi Cardoso, CBN governor, said the decision to hold rates was a cautious, data‑driven choice designed to anchor inflation expectations while giving policymakers time to assess the impact of recent external shocks.
The MPC also maintained the standing facilities corridor at +50 to -450 basis points around the MPR and left cash reserve requirements unchanged at 45% for deposit money banks, 16% for merchant banks and 75% for non‑TSA public sector deposits.
“Given elevated global uncertainty and domestic inflation dynamics, a steady policy stance allows us to monitor incoming data and act if conditions warrant,” Cardoso said.
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The MPC emphasised that, although headline inflation moderated marginally in June, upside risks persist from higher global commodity prices and supply disruptions tied to geopolitical tensions.
Official data show headline inflation easing slightly to 15.91% year‑on‑year in June from 15.93% in May, marking the end of a three‑month uptick. Core inflation moderated more notably — down to 15.92% from 16.82% — which the central bank attributed largely to relative exchange rate stability. But food inflation climbed to 17.52% from 16.96%, blamed on supply bottlenecks in major producing areas and elevated transport costs.
The mixed inflation picture lies at the heart of the MPC’s dilemma, according to Chuks Ude, an Abuja-based financial analyst. “Core moderating while food inflation rises creates an uneven outlook for households and complicates the policy trade‑off,” Ude told BusinessDay immediately after Cardoso’s policy announcement.
The committee signalled it remains prepared to tighten further should inflationary pressures intensify, but for now preferred to keep policy settings unchanged to preserve financial stability.
According to Ude, the central bank’s decision to pause on further tightening signals a preference to balance inflation control with support for nascent growth, but any sustained rise in global energy prices or a large pass‑through to domestic food prices could prod the MPC back into action.
On growth, the committee noted the non‑oil sector has continued to prop up the economy. Real GDP expanded 3.89% in Q1 2026, down slightly from 4.07% in the prior quarter, with telecommunications, finance, trade and transport cited as key contributors.
The oil sector slowed sharply — growing 2.57% in Q1 after a 6.79% jump in Q4 2025 — amid maintenance outages at facilities. Still, the composite Purchasing Managers’ Index ticked back into expansionary territory at 50.1 in June, up from 49.6 in May.
External buffers also improved, the committee said. Gross external reserves rose to $52.52 billion as at mid-July, up from $50.47 billion at end‑May, a gain the CBN attributed to crude‑related receipts and third‑party inflows.
That level of reserves was judged by Cardoso as sufficient to finance roughly 11 months of imports — well above the conventional three‑month benchmark.
While the central bank lauded fiscal‑monetary coordination and recent government reforms — including a boost to crude oil production and progress on banking sector recapitalisation — it urged sustained policy alignment to amplify the benefits.
The MPC singled out Executive Order 9 and other structural efforts as important complements to monetary policy that could help broaden revenue sources and strengthen fundamentals.
Looking ahead, the MPC warned of a fragile global outlook, citing projections for global growth to slow to about 3% in 2026 from 3.5% the prior year, with inflation risks skewed to the upside on account of rising oil and commodity prices, supply‑chain disruptions, and climate shocks that could further strain food supplies.
The committee said it remains ready to respond to “evolving macroeconomic conditions” to preserve price and financial stability.